Priyanka Tiwari
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Suspense crime, Digital Desk : India's primary market is currently facing a curious conundrum: despite overwhelming investor interest and high subscription rates for Initial Public Offerings (IPOs), the highly anticipated "listing gains" are notably shrinking. This trend is causing investors, especially those looking for quick profits, to re-evaluate their strategies.
In the first quarter of the current fiscal year (Q1 FY25, April-June), India witnessed a robust pipeline of 26 IPOs, collectively raising approximately Rs 7,200 crore. These offerings saw staggering demand, with an average oversubscription rate of an impressive 50 times. However, the excitement often ended there. The average listing gain for these companies has significantly dipped to just 19 percent.
This marks a notable decline when compared to previous fiscal years. In FY24, while 76 IPOs raised a substantial Rs 61,900 crore, their average listing gain stood at a healthier 29 percent. Looking further back, FY23 saw 37 IPOs raising Rs 38,000 crore with an average gain of 32 percent, a figure matched by FY22's 40 IPOs which collectively raised Rs 59,400 crore. The current quarter's 19 percent average gain signals a clear shift in the market dynamics.
Several factors appear to be contributing to this 'IPO Paradox'. Many investors flock to IPOs hoping for quick profits on listing day, driven by past successes. However, companies themselves might be pricing their IPOs more aggressively now, leaving less "on the table" for immediate gains. Furthermore, a cooling secondary market sentiment, along with a noticeable drop in Grey Market Premium (GMP) – an unofficial indicator of an IPO's expected performance before listing – suggests that the euphoria is fading. This indicates that the market is becoming more discerning, urging investors to focus on the long-term fundamentals of a company rather than just speculative short-term gains.
For retail investors, this shift means a crucial re-evaluation of their IPO investment strategy. The current trend indicates a maturing IPO market where due diligence and a focus on intrinsic value are becoming paramount over chasing fleeting listing day surges.
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