IPOs become cash cow for investors in 2019 with 70% trading above issue price

IPOs become cash cow for investors in 2019 with 70% trading above issue price

The initial public offers of Affle (India) Ltd and other companies give smart returns to investors in 2019, soaring about 49 percent

The primary market seems to have emerged as the cash cow for investors in 2019, amid high volatility in the secondary market. Reports reveal that 70 per cent of the new entrants trade well above their issue prices, with returns of up to 95 per cent to investors. A number of factors, including trade conflict between the US and China, slowdown in the economy, poor investor sentiment and pullout of funds by foreign investors have been attributed to the market volatility, experts said. This is in addition to the fact that there is always demand for good initial public offerings (IPOs).

Out of 11 companies that got listed in 2019 in India, at least eight have registered smart gains ranging from 7 to 95 per cent against their issue price, while the remaining three firms have failed to attract investors and are quoting below their issue price, according to an analysis of the stock performance of the newly-listed firms.

IndiaMART InterMESH, which made its stock market debut in July, has seen the steepest rally in its share price and is trading 95 per cent higher than the IPO price on the BSE. Neogen Chemicals follows IndiaMART InterMESH, providing 76 per cent per cent return. In contrast, three companies — MSTC, Sterling & Wilson Solar and Xelpmoc Design and Tech – have failed to give positive returns.

Over the past one year, markets have not been upbeat due to several factors so there has been a negative sentiment among investors. In such a situation, IPOs are very well priced, giving good opportunity to investors. However, when markets are upbeat, IPOs are generally very aggressively priced,” said Narendra Solanki, Head Fundamental Research (Investment Service) – AVP Equity Research, Anand Rathi Shares and Stock Brokers.

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