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Big IPOs With The Worst Debut Day Performance


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From Paytm To Reliance Power: Big IPOs With The Worst Debut Day Performance

Paytm shares closed 27% beneath the difficulty worth on itemizing day.

Were you stunned with Paytm’s inventory market debut? 

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India’s largest IPO until date closed 27% beneath the difficulty worth on itemizing day. It impacted sentiment in all the inventory market.

Paytm’s flop present shouldn’t come as a shock to you as this isn’t the primary time a high-profile IPO has eroded buyers’ wealth on itemizing day. There have been a number of such IPOs prior to now.

Let’s check out the mega IPOs with the worst debut day efficiency. We have thought of IPOs with challenge dimension of greater than Rs 1,000 crore.

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#1 One 97 Communications (-27.2%)

Shareholders of One 97 Communications, the operator of main digital funds platform Paytm, had been caught in a whole bear lure on itemizing day. 

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Shares of Paytm began their journey with a 27.2% fall over its IPO worth final week on Thursday. Shares hit the decrease circuit at round 3:00 pm, and buying and selling within the inventory was halted.

This selloff worn out round Rs 40,000 crore of investor wealth on the primary day. Interestingly, that is greater than all the market cap of firms like TVS Motors, Tata Communication, MRF, and Oberoi Realty.

That’s not all.

Paytm shares are once more caught up within the selloff as we speak. They are down over 12%.

Due to this large selloff, the markets regulator is now planning to query the funding banks that dealt with Paytm’s IPO. The regulator will search their views on why the inventory tanked on the itemizing day.

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It additionally plans to look at if any feedback made by the corporate officers or the bankers might have misled buyers.

The weak itemizing was on the playing cards as market specialists had been already cautious on Paytm’s excessive valuation, muted investor response, and loss-making enterprise. But such a giant fall was sudden.

But regardless of the dip, the corporate clocked a valuation of over Rs 1 lakh crore.

#2 Coffee Day Enterprises (-17.6%)

Shares of Coffee Day Enterprises closed down practically 18% at Rs 270, towards its challenge worth of Rs 328 on debut. 

Coffee Day Enterprises, which runs Cafe Coffee Day (CCD) retailers, had raised Rs 1,150 crore via its IPO. The challenge was subscribed 1.64 occasions at a worth band of Rs 316-328 per share.

In March 2015, the agency had mobilised Rs 100 crore in a pre-IPO funding from Nandan Nilekani and Rare Enterprises (promoted by Rakesh Jhunjhunwala), amongst others.

At a press convention forward of its IPO, V G Siddhartha was requested why its provide worth was decrease than a personal placement just some months earlier. He replied that he needed to go away some cash on the desk for retail and institutional buyers.

In 2020, buying and selling in Coffee Day shares was suspended for not complying with itemizing norms pertaining to submission of quarterly monetary outcomes. Shares resumed to commerce this 12 months 26 April onwards.

Since itemizing, shares of the corporate have been on a downtrend and have hardly traded many occasions above its challenge worth.

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#3 Reliance Power (-17.2%)

Big IPOs don’t assure massive returns. We noticed this within the case of Paytm.

But an analogous occasion occurred manner again in 2008 when Reliance Power got here out with its mega Rs 11,560 crore IPO.

Due to huge demand, the difficulty worth for the Anil Ambani-owned Reliance Power IPO was mounted on the higher band of Rs 450 for non-retail, and Rs 430 for retail buyers.

What’s more is that the difficulty was bought out throughout the first minute of its opening on 15 January 2008. The IPO had obtained a file bids over 5 lakh, price Rs 7.5 lakh crore, and the difficulty was subscribed greater than 72 occasions.

The inventory made its debut on the bourses on 11 February 2008. It briefly rallied to Rs 599 on debut, however ultimately settled the day at Rs 372, down 17.2% from the difficulty worth.

This IPO was launched at a time just like as we speak. Demat account openings had been at a excessive and folks poured their cash to spend money on the IPO.

At a time when brokers had been satisfied and gave thumbs as much as Reliance Power’s IPO, Equitymaster was within the minority to provide a adverse view on this IPO, and, boy, had been we proper!

When the markets crashed, the inventory misplaced 70% of its worth in eight months!

#4 ICICI Securities (-14.4%)

ICICI Securities, which was India’s largest broking agency when it listed in 2018, made a weak market debut itemizing at Rs 435, a 16.4% low cost to the difficulty worth of Rs 520. It closed decrease by 14.4%.

The Rs 4,020 crore IPO didn’t excite buyers and received a poor response as the difficulty noticed solely 78% subscription on the ultimate day of the bidding course of.

Post undersubscription, the corporate reduce its IPO dimension to Rs 3,500 crore.

#5 Cairn India (-14.1%)

Cairn India got here out with its Rs 8,620 crore IPO between 11 December and 15 December 2006. It obtained a mute response. 

The IPO failed to draw sufficient non-institutional and retail particular person buyers. Thanks to certified institutional buyers, the difficulty received subscribed 1.14 occasions.

The firm made its debut with the inventory itemizing at a 12% low cost to the difficulty worth of Rs 160 and ultimately closing 14% down at Rs 137.50.

Shares of Cairn India have stopped buying and selling since 2017, when the oil producer merged into its debt-ridden guardian Vedanta.

#6 UTI AMC (-14%)

Last 12 months in October 2020, UTI Asset Management Company (AMC) made a tepid debut on the bourses, itemizing at a reduction of 14% towards the difficulty worth of Rs 554.

The IPO was price Rs 2,160 crore, bought within the Rs 552-554 worth band between 29 September to 1 October.

It obtained bids for shares 2.31 occasions of what was on provide.

The weak itemizing was on anticipated traces resulting from tepid response to IPO and steady outflow within the mutual fund trade at the moment.

#7 Kalyan Jewellers (-13.4%)

Kalyan Jewellers made a debut on the bourses this 12 months in March. The inventory received listed at Rs 73.90 on BSE, a 15.1% low cost to its challenge worth of Rs 87. It settled 13.4% decrease.

The Rs 1,180 crore challenge was bought between 16 March and 18 March 2021 and was subscribed 2.61 occasions. 

The market was not significantly enthusiastic about this IPO as the corporate had a weak stability sheet and poor capital allocation.

#8 Indus Towers (-13.1%)

Indus Towers (erstwhile Bharti Infratel) backed by billionaire Sunil Mittal, dived 13% in its buying and selling debut after elevating about US$760 m in 2012.

The firm raised over Rs 4,120 crore within the greatest IPO in two years. The IPO was subscribed 1.3 occasions.

Why Equitymaster is a Contrarian when it Comes to IPOs …

When it involves IPOs, Equitymaster has not simply been a worth investor but in addition an outright contrarian.

Right from Reliance Power IPO in 2008 to SKS Microfinance IPO in 2010 to the IPOs of Coffee Day Enterprises and InterGlobe Aviation (subscription required), our views had been part of minority.

The motive?

We don’t deal with an IPO as something purchase yet one more inventory that buyers might think about for long run funding. So there is not any motive for us to compromise on the moat, administration high quality, and valuations of the corporate.

That just isn’t how everybody else seems at IPOs. Most individuals search for itemizing positive aspects.

(This article is syndicated from Equitymaster.com)


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