Good post-listing gains along with MF inflows into equity indicate robust risk appetite
The performance of companies that listed in 2015 on the bourses is only likely to accelerate listing as a rising number of companies register with the Securities and Exchange Board of India for an initial public offer.
Of nine listings that happened in 2015, six companies have not only outperformed the benchmark indices but also the broader market indices such as the CNX Midcap and the CNX Small cap.
In 2015 so far, while the CNX Nifty and the S&P BSE Sensex are up only 0.3 per cent and 1 per cent respectively, the CNX Midcap and the CNX Small cap have jumped 8.6 per cent and 3.5 per cent respectively. The S&P BSE IPO index is up 11 per cent in the same period.
On the other hand, these six companies have broken all the records with return in the range of 13-79 per cent.
“The IPOs have done well because pricing of the issues was realistic, the sector is doing well and companies have good fundamentals,” said Alex Mathews, head-research, Geojit BNP Paribas .
The success of any IPO is dependent on the market fancy for the industry to which the companies belong, the timing of the IPO, pricing, and good management, he added.
The second reason for good returns registered by the newly listed companies is the increasing risk appetite of Indian investors for equity since gold and real estate are not doing well.
Despite the global macro environment being wobbly and fraught with shaky events, inflows into domestic equity funds have been robust.
According to SEBI data, while inflows from foreign institutional investors have slowed down in 2014, inflows into equity from mutual funds have picked up.
In 2015 so far, FIIs’ equity investments at Rs. 38,749.48 crore was a little over what they put in 2014.
Mutual fund investments in equity have, in fact, shot up 61.3 per cent in the similar period.
Companies which have seen higher oversubscription during their IPOs such as Syngene International, VRL Logistics and Indo Wind were the ones giving higher returns post-listing.
This is due to higher demand post-allotment of shares wherein a high oversubscription results in the individual investor getting relatively fewer shares.
Manpasand Beverages and PNC Infratech, however, were exceptions.
Many brokerages did not strongly recommend subscribing to the Manpasand Beverages’ IPO but the company’s share prices have gained partly due to steady demand for FMCG stocks.
However, PNC Infratech has been recommended by brokerages post-listing.
While Angel Broking advised buying the company’s shares on July 1 with target price of Rs. 445, IDFC Securities rated PNC Infratech as an ‘outperformer’ on August 7 with a target price of Rs. 582, which is a further 15.4 per cent upside from Thursday’s levels.
“PNC has rich experience in construction of road and airport runway projects. PNC’s BOT portfolio of eight projects is fully funded and offers high predictability of cash flows as it is largely operational,” it said.