How IPOs fared in the first half of 2021?
The table below captures the gist of the IPO performance in the first half of 2021.
|Company Name||IPO Closes||IPO Price||Subscription||Issue Size||CMP (Rs.) #||Gains to Date|
Let us first take a macro view of the IPO story. A total of 23 companies came out with their IPOs and also got listed during the first six months of 2021. We are excluding two companies from this list. We are excluding Antony Waste Management, which listed on 01-Jan but the IPO was completed in the previous year. Similarly, India Pesticides closed its IPO on 25 June but it will get listed only in the month of July. Barring these 2 companies, all the other IPOs have been included. These 23 companies raised a total sum of Rs.33,166 crore between them, giving hopes that 2021 could be an all-time record year for IPOs.
There is an important aspect here. A total of 17 out of these 23 IPOs happened in the Mar-21 quarter. If you leave out the Power Grid Infrastructure INVIT, there was a virtual drought of IPOs for 75 days between end-March and mid-June. That was because of lack of clarity on the new merchant banking norms proposed by SEBI, which have since been put off. In short, this entire IPO story actually happened in a span of about three-and-half months.
How IPOs performed in terms of post-listing performance?
Out of the 23 IPOs issued and listed in the first half of 2021, a total of 19 IPOs gave positive returns, while two IPOs gave moderately negative returns. Only Kalyan Jewellers (-10.29%) and Suryoday SFB (-27.23%) have significantly underperformed since listing. That can be classified as a significantly superior performance, especially considering market volatility.
Let us look at the positive side of the star performers among IPOs. Out of the 19 IPOs that delivered positive post-listing returns, Nureca topped the chart with 298.25% followed by Easy Trip 110.67%, MTAR Technologies 97.22%, Stove Kraft 89.81% and Barbeque Nation 76.80%. Out of the 19 positive return IPOs, 8 IPOs gave returns in excess of 50% while 13 IPOs gave returns of over 20%. Remember these are not annualized returns; just point-to-point returns.
Did oversubscription impact post-listing performance? Not exactly! For example, top performer Nureca was subscribed 39.93 times while there were 6 IPOs with over 100 times subscription. If you look at the top-5 return generating IPOs, Stove Kraft was oversubscribed just 18.03 times and Barbeque Nation just 5.98 times. Macrotech, which scraped through with 1.36X subscription, gave an impressive 40.43% returns, despite a tepid listing. The link between oversubscription and post listing performance is, at best, tenuous.
How did IPOs perform as an asset class?
That is hard to say, but we can consider a proxy here. Assume that an investor had allocated an equal sum of money in all IPOs. What would have been the returns in the IPO portfolio? A passive strategy of just investing in these IPOs would have generated an IPO asset class return of 20.59%. During the same period, Nifty gave a return of 12.44%. You would have certainly come out looking smarter investing in IPO as an asset class in the first half of 2021.