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Half of FY20 IPOs hold head above water in this selloff, some remain multibaggers

Out of the 15 stocks that got listed in FY 2019-20, seven are still trading above issue prices.

, ETMarkets.com|
Last Updated: Apr 20, 2020, 01.46 PM IST
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Most recent debutant, SBI Cards, has lost over one-fourth of its value in a month.
While the coronavirus outbreak destroyed a huge amount of wealth on Dalal Street, 50 per cent of market debutants of FY20 managed to hold their heads above water and traded at prices that were at a decent premium to their listing prices.

Out of the 15 stocks that got listed in FY 2019-20, seven are still trading above issue prices. A couple of them have even retained their multibagger status, whereas others managed to post decent returns even after giving up some of the gains.

The benchmark equity indices retreated over one-fourth from their peak values and even the bluest of blue chips struggled to hold the fort, having lost 30-40 per cent of their worth.

“These are fundamentally strong companies and are expected to do well post the Covid-19 scenario. Investors will find value in such stocks,” said Pankaj Bobade, Head of Fundamental Research at Axis Securities.

IRCTC was listed on October 14, 2019. The stock posted over 120 per cent gains over issue price of Rs 320 on the day of listing and then surged over 525 per cent to hit a peak price of Rs 1,995. Even after the recent market crash, the stock is up over 320 per cent.

B2B e-commerce company IndiaMART InterMESH debuted on the bourses in July, 2019. It surged up to 200 per cent after listing and now trades 130 per cent above its listing price of Rs 973.

“Companies that have an online presence have benefitted in this lockdown. Going forward also, retail customers would prefer to engage online,” said Jaikishan Parmar, Senior Equity Analyst, Angel Broking.

Among others, Neogen Chemicals (up by 87 per cent), Affle India (up by 84 per cent), Metropolis Health Care (up by 42 per cent), Polycab India (up by 36 per cent) and Vishwaraj Sugar Industries (up by 10 percent) have managed to deliver positive returns since their market debut.

“It is clearly reflecting a market preference for tech-based businesses. Among the IPOs that came in FY20, IRCTC gained 324%, Affle India 80% and IndiaMart InterMESH 130% from IPO rate,” Parmar pointed out.

The performance of the remaining IPOs has been muted. Most of them belong to the BFSI segment. Some of them had decent listing, but the selloff has resulted in huge price correction.

Most recent debutant, SBI Cards, has lost over one-fourth of its value in a month. Among others, CSB Bank (40 per cent down), Spandana Sphoorty (37 per cent down) and Ujjivan Small Finance Bank (16 per cent down) have taken a hard knock.

Stocks like Prince Pipes and Sterling and Wilson Solar have tanked up to 85 per cent while PSU scrip Rail Vikas Nigam is down over 2 per cent.

Analysts said some of these companies have high unsecured advances, hence, the current lockdown is expected to deteriorate their asset quality, which will increase provision expenses and impact return ratios sequentially.

“IPOs of financial firms got higher valuations due to healthy growth rate and stable asset quality. However, quality growth will be not possible now and asset quality will weaken. Hence, the current prices are factoring in that scenario," said Parmar.

Others said the primary market is a function of the secondary market. If the latter performs well, only then can one see a revival in the former. A lot depends on the risk appetite of investors, who are currently looking for safe-harbour investments.

"We may not see many IPOs in the first two quarters of FY21. Investor sentiment is jittery now. Conditions will become conducive for IPOs only when stability and risk appetite return. However, nothing can be said firmly in the current situation," said Bobade.
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