Collateral Damage! IPO-bound companies tumble up to 50% in unlisted market

The share prices of companies pipelined to float their issues in the primary markets have eroded nearly half of investors’ wealth in the unlisted market.

Dinesh Gupta, Co-founder, UnlistedZone said, “After burning their hands in unlisted markets, courtesy Paytm and AGS Transact, investors have turned sceptical over new-age companies.”

API Holdings, the parent company of medtech player Pharmeasy, has tumbled about 50 per cent to Rs 65-70 from Rs 130-135 earlier. The company has already filed DRHP for Rs 6,250 crore IPO.

Shares of other new-age companies like Mobikwik have dropped from Rs 1,300-1,400 to Rs 800 levels taking a 45 per cent hit, while the price of Fino Paytech has declined about 40 per cent to Rs 240 from Rs 400.

Another IPO bound company, Sterlite Power Transmission, has seen its shares fall to Rs 1,100 from Rs 1,650 earlier. The company has received Sebi’s nod to float an IPO.

Other companies like Le Travenues Technology (Ixigo), Lava International, HDB Finance Services, Studds Accessories and Fincare Small Finance Bank have tumbled between 25 per cent and 30 per cent in the unlisted space.

Sunil Chandak, Equity Strategist at Gennext Investrade said expensive pricing triggered the meltdown in the new-age companies, particularly fintech players. Easy money in the unlisted market is not possible now, he added.

That said, Chennai Super Kings (CSK) has emerged as the sole exception as its shares have gained in the pre IPO market following the IPL auction and the upcoming season, which is scheduled to kick off from the last week of March.

LIC IPO

Dealers in the unlisted space are divided over forthcoming LIC IPO. They believe investors will wait for the state-run insurer’s valuation before putting their money on the company.

Gupta said that LIC IPO will have a negative impact on the IPO-bound companies as the mega issue is likely to pump out a large chunk of funds from the markets.

On the contrary, Chandak expects LIC IPO to be a big morale booster for the primary markets. “The reasonable valuations, discount for retailers and strong listing may revive IPO market attraction.”

In line with Chandak’s views, Narottam Dharawat of Mumbai based Dharawat Securities said the IPO of LIC will be a big positive for both unlisted and listed space as it will mark the entry of a new breed of investors.

Several reports suggest that nearly one crore Demat accounts are expected to be opened before the mega issue of insurance behemoth.

“Investors should see the silver lining in this,” he added. “The new investors will broaden the market breadth which is a good sign for the market. If they make good money from LIC, the sentiments for other issues will improve.”