Is the IPO Party Over for 2024? 40% of New Entrants Underperform Post-Listing - Read Now
Nearly 40% of 2024 IPOs are now trading below their issue prices following a market correction. Factors like aggressive IPO pricing, market volatility, and FPI withdrawal have impacted IPO returns, leading to lower-than-expected listing performances.
2024 was expected to be a record year for IPOs (Initial Public Offerings), with over 75 companies raising more than Rs 1.2 lakh crore from the market. However, the post-listing performance of many of these IPOs has been far from stellar. Data shows that nearly 40% of companies that debuted this year are currently trading below their issue prices, a trend that has caused alarm among investors and market analysts.
This significant dip comes after a market correction that began in October, which has affected both primary and secondary market sentiment. Investors who once jumped into IPOs with the hope of gaining quick profits are now rethinking their strategies, as a growing number of newly listed companies are seeing their stock prices fall.
The Impact of Market Volatility
The market volatility that began in October 2024, largely driven by falling global stock indices and rising US bond yields, has led to a sharp downturn in India’s stock market. The benchmark indices, Nifty and Sensex, have dropped by more than 10% since October, with mid-cap and small-cap indices (BSE MidCap and BSE SmallCap) also losing significant ground. This sharp market correction has made it difficult for many IPOs to sustain the high levels they achieved on their listing day.
Investors who were once optimistic about making big gains from newly listed companies are now facing losses, as stocks of many companies are trading well below their issue prices. This trend has raised questions about whether the IPO market is losing its charm or if the recent slump is just a temporary phase.
A Deep Dive into 2024 IPO Performance
The performance of IPOs in 2024 has been a mixed bag. While some companies saw spectacular listing-day gains, these were often short-lived. Many companies that surged in the initial hours of trading are now struggling to stay above water.
For example, ECOS India Mobility & Hospitality, which saw a 33% surge on its debut, is now trading 1% below its issue price. Similarly, Apeejay Surrendra Park Hotels and Saraswati Saree Depot, which both saw impressive gains of over 30% on listing day, have since fallen by 4% and 25%, respectively.
Other companies like Northern ARC Capital and Ola Electric Mobility, which gained 23% and 20% on their listing days, are now trading 10% lower than their issue prices. The steep fall in these stocks has caused a wave of concern among investors, many of whom had invested heavily in the IPOs, hoping for quick returns.
Biggest Losers in 2024 IPO Market
Among the biggest losers in the 2024 IPO market are Popular Vehicles & Services, which listed at a 6% discount to its issue price and is now trading down by over 46%. Capital Small Finance Bank and Akme Fintrade India, both of which listed at a premium, have seen their stock prices drop by 38% and 32%, respectively.
Other notable underperformers include Western Carriers (down 31%), R K Swamy (down 29%), Deepak Builders & Engineers India (down 26%), and Saraswati Saree Depot (down 25%). These companies have not only failed to maintain their listing gains but have also fallen significantly below their issue prices, further dampening investor sentiment.
Why Are IPOs Struggling in 2024?
Several factors are contributing to the poor performance of IPOs in 2024. One of the primary reasons is the overall market volatility. Since September, the Indian stock market has been in a correction phase, with both the Nifty and Sensex experiencing significant drops. The decline has been attributed to various factors, including rising US bond yields and the reversal of Foreign Portfolio Investors (FPI) activity.
FPIs, which have been a significant source of capital inflows into the Indian stock market, have started withdrawing from both primary and secondary markets. This shift is largely due to the increasing appeal of US markets, which have become more attractive in light of rising bond yields. The withdrawal of FPIs has created a liquidity crunch in the Indian stock market, contributing to the fall in IPO prices.
In addition, many IPOs have been priced aggressively, leading to high expectations that were not met once the stocks started trading. High valuations combined with weak market sentiment have led to muted demand for newly listed stocks, further contributing to their post-listing struggles.
The Impact of IPO Pricing and Subscriptions
The IPO pricing of many companies has been another factor in the underperformance of their stocks. According to experts, many IPOs were priced at a premium, but the post-listing market conditions have not supported such valuations. Aggressive pricing, combined with subdued demand from investors, has resulted in weak subscription levels for many IPOs.
As market sentiment continues to remain bearish, subscription demand has been lower than expected. Many investors, fearing further losses, have decided to stay away from both primary and secondary markets. This shift in investor behavior is reflected in the lower-than-expected subscriptions seen in the last few months.
Looking Ahead: Is There a Silver Lining?
While the performance of IPOs in 2024 has been disappointing for many, there are a few companies that are still trading above their issue prices. Entero Healthcare, Vraj Iron & Steel, and Arkade Developers are some of the exceptions, with their stocks trading marginally higher than their issue prices. These companies have managed to maintain their appeal in the market, despite the overall downturn.
However, the road ahead remains uncertain for most IPOs. With the market still in correction mode and investor sentiment at a low, it is unclear whether these stocks will be able to recover their losses in the near future. For now, investors remain cautious, and the IPO market will likely continue to face challenges in the coming months.