Welcome to the third chapter in the series titled “New Year, New India”. In this chapter, we will talk about the much-anticipated initial public offerings (IPOs) lined up this year.
We are certain, you quickly want to pen down the names of companies or unicorns geared to hit the primary market this year. We will come to that but before that let’s look at what set the year 2021 apart in terms of IPOs.
It Rained IPOs in 2021
No doubt, the Indian stock markets had a major bull run in 2021, owing to which both the Nifty and Sensex reached fresh all-time highs. Though there was a downfall towards the end of the year, the benchmark indices closed more than 20% higher from the levels they started the year.
Along with the secondary market, the primary market was buzzed with increased retail investor participation, ample liquidity, FPIs inflow etc. Over 60 companies launched their IPOs in the calendar year 2021, raising over Rs. 1.19 trillion. It is ~4.5x the money 15 IPOs raised in 2020.
Further, the year gave rise to innovative deas getting listed. When we write innovative ideas, we refer to New Age Tech-Based companies and new industries that listed on the stock markets this year. Zomato, Nykaa, PolicyBazaar and Paytm are these new-age unicorn companies that went public in 2021.
An article in the economic times reads… “… in the world of New Age Companies going for listing, there is optimism. The kind of optimism that has never been seen in young companies backed by ad-venture capital. This is new India, and the world of startup listings is fairytale capitalism.”
Before the pandemic, there were only two food joints or restaurants listed on the bourses – Westlife Development which operates McDonald’s in India and Jubilant FoodWorks which serves Domino’s Pizza. Five more food-based companies have entered the markets this year.
The gaming industry debuted on the markets this year with a popular game developer Nazaara getting listed. Earlier, Delta Corp would come close to the niche. However, the company only operated Casinos and hotel joints.
BSE IPO Index
Did you know there is an index that gauged IPO performance in India?
2021 was a fabulous year for IPOs and the BSE IPO index is proof of that. Over the last year, the BSE IPO index grew 55.61% compared to Sensex ~24%. This means that the IPOs that came last year, beat the 30 companies of SENSEX.
Over the past four years, the S&P IPO Index grew at ~20% CAGR, while Sensex gained at a CAGR of 12%. Much of these gains can be attributed to the current IPO boom.
However, not all IPOs had bumper listings. Some gave over 100% returns from their IPO prices, while others gave negative 50% returns from the issue prices.
Paras Defence, MTAR Technologies, Laxmi Organic, and Nureca are some of the companies that jumped over 100% from their issue prices last year. Suryodaya small finance bank, CarTrade Tech, One97 Communications, IRFC, and Fino Payments Bank are some companies that gave lackluster returns.
Who’s coming this year, issue size and the sector they belong to?
Should you invest in all of them?
In one of our earlier articles we wrote, that the more sugar you have, the higher your sugar levels, which can be bad for your health. In the same way, the more IPOs you invest in, the higher the chances of investing in poor-quality stocks. Such investments are bad for your financial health.
You can avoid this pitfall if you follow three simple steps before shortlisting an IPO to invest
- Make a research-based choice
- Choose the right IPO to invest
- Look beyond the IPO price.
You can read the full article here.
P.S.: We provide business analysis to our customers whenever a company decides to go public.
That’s it from us today. If you’ve liked this article, share it with your friends.
*Disclaimer: The information mentioned in this email is for educational purposes. Please do not consider it a recommendation to buy/sell/hold from Research & Ranking.