In the year 2016, IPO market in India gained lot of traction. A total of 27 IPOs got listed in the last year. This gives a figure of about one IPO every two weeks. 2016 was undoubtedly the year of IPOs & the IPO market staged a strong comeback with many investors coming back to the primary market. Overall IPO review of issues listed in 2016 from the point of listing gains & returns both from the perspective of a short term investor and a long term investor would be interesting.
IPO market in India is characterized by two different categories of investors. First category prefers to sell on Day one of listing whether in profit or loss. Second category prefers to invest for a longer period. The first category also includes people who sell in grey market or sell application form before listing (Kostak) and have either less faith in stock markets or are risk averse. It also includes very small retail investors who occasionally apply for some profit. There is separate class of HNIs who take finance from Banks & apply for listing gain, but that is not the focus of this review.
Following 27 IPOs got listed in 2016. The IPO performance with respect to price on listing day and price as on 6/01/2017 is tabulated. Further as a random analysis, assuming one had got at least one minimum lot in each of these IPOs, Profit/Loss if one had sold on the Listing day or held till date is also indicated.
All figures in Rs.
| IPO Name | Issue Price | 1 Lot | Listing Date | Listing Price | Price on 6/1/17 | P/L if sold on Listing | P/L if held | Amount for 1 Lot | +ve listing | ‘+ve till date | % Return on 6/1/17 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Laurus Labs | 428 | 35 | 16-12-16 | 480.4 | 471.9 | 1834 | 1537 | 14980 | Yes | yes | 10.26% |
| Sheela Foam | 730 | 20 | 09-12-16 | 1032 | 968 | 6040 | 4760 | 14600 | Yes | yes | 32.60% |
| Varun Beverages | 445 | 33 | 08-11-16 | 459.5 | 411.7 | 479 | -1099 | 14685 | Yes | No | -7.48% |
| PNB Hsg Finance | 775 | 19 | 07-11-16 | 891.15 | 812.3 | 2207 | 709 | 14725 | Yes | yes | 4.81% |
| Endurance Technologies | 472 | 30 | 19-10-16 | 646 | 561.65 | 5220 | 2690 | 14160 | Yes | yes | 18.99% |
| HPL Electric & Power | 202 | 70 | 04-10-16 | 189.3 | 102.1 | -889 | -6993 | 14140 | No | No | -49.46% |
| ICICI Prudential Life | 334 | 9 | 29-09-16 | 297.55 | 331 | -328 | -27 | 3006 | No | No | -0.90% |
| GNA Axles | 207 | 70 | 26-09-16 | 245.05 | 198.3 | 2664 | -609 | 14490 | Yes | No | -4.20% |
| L&T Tech. Services | 860 | 16 | 23-09-16 | 869 | 812.25 | 144 | -764 | 13760 | Yes | No | -5.55% |
| RBL Bank | 225 | 65 | 31-08-16 | 299.4 | 355.65 | 4836 | 8492 | 14625 | Yes | yes | 58.07% |
| S.P Apparels | 268 | 55 | 12-08-16 | 288.75 | 346.2 | 1141 | 4301 | 14740 | Yes | yes | 29.18% |
| Dilip Buildcon | 219 | 65 | 11-08-16 | 251.5 | 229 | 2113 | 650 | 14235 | Yes | yes | 4.57% |
| Advanced Enzyme | 896 | 16 | 01-08-16 | 1178.1 | 1871.9 | 4514 | 15614 | 14336 | Yes | yes | 108.92% |
| L&T Infotech | 700 | 20 | 21-07-16 | 697.6 | 687.87 | -48 | -243 | 14000 | No | No | -1.73% |
| Quess Corp | 315 | 45 | 12-07-16 | 503.1 | 667.5 | 8465 | 15863 | 14175 | Yes | yes | 111.90% |
| Mahanagar Gas | 421 | 35 | 21-06-16 | 520.3 | 842.45 | 3476 | 14751 | 14735 | Yes | yes | 100.11% |
| Parag Milk | 215 | 65 | 19-05-16 | 247 | 263.1 | 2080 | 3127 | 13975 | Yes | yes | 22.37% |
| Ujjivan Fin. Services | 210 | 70 | 10-05-16 | 231.55 | 332.4 | 1509 | 8568 | 14700 | Yes | yes | 58.29% |
| Thyrocare Tech. | 446 | 33 | 09-05-16 | 618.1 | 693.9 | 5679 | 8181 | 14718 | Yes | yes | 55.58% |
| Equitas Holding | 110 | 135 | 21-04-16 | 135.2 | 148.2 | 3402 | 5157 | 14850 | Yes | yes | 34.73% |
| Infibeam Incorp. | 432 | 34 | 04-04-16 | 445.75 | 1198.15 | 468 | 26049 | 14688 | Yes | yes | 177.35% |
| Bharat Wire Ropes | 45 | 300 | 01-04-16 | 45.4 | 74 | 120 | 8700 | 13500 | Yes | yes | 64.44% |
| Healthcare Global Ent. | 218 | 65 | 30-03-16 | 171 | 244 | -3055 | 1690 | 14170 | No | yes | 11.93% |
| Quick Heal Tech | 321 | 45 | 18-02-16 | 253.85 | 255.95 | -3022 | -2927 | 14445 | No | No | -20.26% |
| Teamlease Services | 850 | 15 | 12-02-16 | 1032 | 898.1 | 2730 | 722 | 12750 | Yes | yes | 5.66% |
| Precision Camshafts | 186 | 80 | 08-02-16 | 177.45 | 163.95 | -684 | -1764 | 14880 | No | No | -11.85% |
| Narayana Hrudayalaya | 250 | 60 | 06-01-16 | 336.95 | 339.2 | 5217 | 5352 | 15000 | Yes | yes | 35.68% |
| Totals | 56312 | 122487 | 377068 |
- A Total of 27 IPOs got listed in the year 2016 i.e. on an average one IPO every fortnight.
- The highest gain/return(Not annualized) has been in IPO of Infibeam Incorporation (117.35 %) , followed by Quess corporation (111.9%),, Advanced enzyme Technologies (108.92%) and MahaNagar Gas (100.11%). These IPOs appreciated more than 100% from their issue price.
- The worst performers were led by IPO of HP Electric & Power(-49.46%), followed by Quick heal technologies(-20.26%), Precision camshafts(-11.85%) and Varun Beverages(-7.48%).
- Out of these 27 IPO, 8 numbers are trading in -ve zone. These are HP Electric & Power,Quick heal technologies, Precision camshafts, Varun Beverages, L&T Technology Services, GNA Axles, L&T Infotech, ICICI Prudential life. GNA Axles after a +ve listing slid into -ve territory and so has been the case with Varun beverages and L&T Technology Services. Health care Global enterprises is the only IPO which after a listing below issue price has gained subsequently. This indicated that IPOs that open in -ve zone mostly fail to pick thereafter too.
- Many small retail investors rotate their money by applying for IPOs and selling on Listing. Assuming such investor had got one allotment (minimum lot) in each IPO and had sold the same on listing day he would have earned a profit of Rs. 57,201/- on these deals in the year 2016. In such case, his overall investment amount or the amount blocked would be quite lower as not more than 3 IPO’s come together i.e. in range of Rs. 50000/-. Thus investors rotating their money by applying through multiple Demat accounts (Family or Demat Accounts of others opened for this purpose only) may have earned good returns.
- On the other hand, a Long term investor, if had got an allotment of minimum one lot in each IPO and held on to them would today be sitting on a profit of Rs. 1,29,480/- on an investment of Rs. 362928/- in these IPOs thus yielding a gain of around 36% (Not annualized).
- Thus while a retail investor in IPOs can undertake any of these two strategies and more often takes a mix of these two strategies, a better strategy for investors with reasonable funds would have been to hold the IPOs and even a blind application for each and every IPO would have yielded 36% gain to them in the previous year whereas the markets have remained relatively sluggish in the same period. An informed investor in addition would have avoided IPOs like HPL electric, Varun Beverages and held on to promising ones thus enhancing his returns further.
- In this period under review the NIFTY which stood at 7963.3 on Ist Jan 2016, closed at 8243.8 on 6 Jan 2017 implying a increase of 3.52%
- Thus investors investing on a long terms basis in IPOs in general got much better return on the investment made in IPO than the overall secondary market return and the difference is significant.
- Based on above tabulated data, there is strong case for investors with reasonable funds to wait and hold the IPO allotment unless they get totally overpriced or there are some -ve developments. Also the returns from IPO market appear to be better and more predictable and better than investment in secondary market alone. Even Secondary market operators can gain significantly by not ignoring the IPO market.