The Impact of Weak Broader Equity Markets on IPO Performance
The current state of the broader equity markets is casting a shadow over the primary markets, leading to a notable decline in subscription numbers for public issues and disappointing listing gains for new initial public offerings (IPOs). As investors grow cautious amid market volatility, the effects are becoming increasingly evident in the performance of recent IPOs, particularly those from small and medium enterprises (SMEs).
Dull Openings and Subscription Rates
On Friday, February 28, the primary market witnessed the lackluster debut of another SME IPO, Balaji Phosphates Ltd. This IPO opened to a tepid response, with only 18% of the issue subscribed on its first day. The retail segment saw a slightly better performance at 21% subscription, while the Non-Institutional Investors (NIIs) segment managed to secure 27%. This sluggish interest reflects the broader trend of investor hesitance in the current market climate.
Balaji Phosphates Ltd is aiming to raise ₹50.11 crore through this 100% book-built issue, which includes a fresh issuance of 59.40 lakh shares worth ₹41.58 crore and an offer-for-sale (OFS) of 12.18 lakh shares totaling ₹8.53 crore. The bidding for this IPO will close on March 4, with share allotment expected to be finalized on March 5, and shares scheduled to list on the NSE Emerge platform on March 7.
Shreenath Paper Products IPO: A Mixed Bag
In contrast, the IPO of Shreenath Paper Products Ltd, which closed on the same day, exhibited a more favorable outcome. This ₹23.36-crore SME IPO was nearly 2 times oversubscribed by the end of its subscription period. The retail portion was particularly strong, being subscribed over 3 times, while the NIIs segment saw a 52% subscription rate. Shares are being offered at ₹44 each, with a lot size of 3,000 units. The allotment of shares is anticipated on March 3, and they are set to list on the BSE SME platform on March 5.
Allotment Updates and Investor Expectations
Investors are also awaiting the allotment status for the ₹31.70-crore BSE SME IPO of Nukleus Office Solutions Ltd, which is expected to be announced by the end of the day. This issue, which was open for bidding from February 24 to February 27, was booked approximately 1.3 times. The stock is scheduled to list on the BSE SME platform on March 4, and investors can check the allotment status through the official BSE website or the IPO’s registrar, Bigshare Services Pvt. Ltd.
Disappointing Listings of New SME Stocks
The listing performance of newly launched SME stocks has also been underwhelming. Swasth Foodtech India Ltd, which had an IPO that was oversubscribed 7.8 times, made a disappointing trading debut. The stock opened at ₹94, matching its IPO price, but quickly fell 5% to hit the lower circuit limit of ₹89.3. This stark contrast between subscription enthusiasm and actual market performance raises concerns about investor sentiment.
On a more positive note, HP Telecom India Ltd had a decent start on the NSE Emerge platform, with its shares opening at ₹115.05, reflecting a 6.5% premium over its IPO price of ₹108. The ₹34.23-crore IPO was booked nearly 2 times during its subscription period from February 20 to February 24.
Conclusion
The current trends in the IPO market highlight the challenges posed by weak broader equity markets. Investors are becoming increasingly cautious, leading to lower subscription rates and lackluster listing performances for new IPOs. As the market continues to fluctuate, it remains to be seen how upcoming IPOs will fare and whether investor confidence can be restored. For those interested in tracking IPO listings and upcoming offerings, further information can be found here.