NEW DELHI: After a dream debut, shares of recently listed blockbuster initial public offerings (IPOs) are facing severe selling pressure on the street and changing hands well below first-day gains.
Shares of Vibhor Steel Tubes, which gave the second highest listing day gain (193% over its issue price) of all time, have nosedived from Rs 442 (day 1 closing price) to Rs 245 (last trading price), a sharp drop of 45% in just about 20 days.
Similarly, shares of BLS E-Services, which gave the sixth-highest listing day gain (175%) of all time, have cracked from Rs 371 to Rs 296 in little over a month. The IPOs of Vibhor Steel Tubes and BLS E-Services had received a thunderous response from investors and were booked 320 times and 162 times, respectively.
The sudden turn in fortune comes as investors are dumping small and midcap stocks over stretched valuation concerns. Nifty Smallcap 100 index has crashed 5% in the past one week while Nifty Midcap 100 is down by more than 2%.
The correction also comes at a time when market regulator SEBI is probing irregularities in the IPO process of several companies, especially ones where subscription numbers were high.
Prashanth Tapse, Sr VP Research analyst at Mehta Equities, said that the fear surrounding SEBI inspections, especially in light of recent scrutiny on IPO processes, is prompting investors to book profits, leading to fresh selling pressure in recently listed IPOs. Out of the approximately 18-19 IPOs this year, about 6 are trading below their issue price, while others are trading above but still below their listing day highs.
“This trend is primarily driven by investors attempting to secure gains amidst stretched valuations and a broader selloff in Mid & Small cap stocks. While SEBI’s focus on irregularities mainly targets SME IPOs, the apprehension extends to main board IPOs, causing investors to opt for profit-taking and a safety-first approach,” added Mehta. The BSE SME IPO index, which tracks the performance of recently listed small and medium enterprises stocks, crashed 5% on Tuesday after SEBI chairperson Madhabi Puri Buch on Monday said that the market regulator has noticed signs of “manipulation” in the SME segment.
Investors’ concerns are such that even a Tata Group stock is facing selling pressure. Shares of Tata Technologies which closed its first trading day on 30th November 2023 at Rs 1,314 apiece, up 163% over its issue price, are now trading at Rs 1,067 level. Investors are also dumping shares of last week’s listed Cos such as Exicom Tele-Systems and Mukka Proteins.
Shares of blockbuster IPOs under pressure
Vibhor Steel Tubes
Listing Day closing price: Rs 442
Last Trading Price: Rs 245
BLS E-Services
Listing Day closing price: Rs 371
Last Trading Price: Rs 296
Tata Technologies
Listing Day closing price: Rs 1,314
Last Trading Price: Rs 1,067
Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers, said that what we are seeing is a combination of multiple factors at play.
“Firstly, the ipo market was recently very exuberant and some companies have listed with more than reasonable valuation multiples. Secondly, the steps taken by various regulators to reduce excess leverage in the markets have also some impact although it is still too early to call," he said.
"Thirdly, with financial year end we have advance tax related liquidity mismatch in short term and that is also having some impact. Lastly, with no major triggers in near term, the markets are more or less following global cues so we have seen some profit booking there hence all these events joining together is having some negative impact in short term,” stated Solanki.