The primary market on Dalal Street is once again seeing robust participation from investors, with a strong listing and multi-fold subscription to IPOs. But is it enough to start to chase every decent IPO that comes your way?
Dalal Street is again abuzz with primary market activity and new listings, and experts have their fingers crossed, wondering if it is too soon to call it a comeback. If investor participation is a sign, the initial share sales of Syrma SGS — an engineering and designing firm — and Dreamfolks — an airport service aggregator — have seen multi-fold subscription.
The stock of Syrma SGS Tech — whose IPO concluded last week with a subscription of almost 33 times the shares on offer — made a decent debut on the Street.
Is a big comeback in the making in the IPO market?
"The return of activity in the primary market all depends on sentiment in the secondary market. People are looking for listing gains. The Syrma listing did very well. Such gains will bring IPOs back," market veteran Ajay Bagga told CNBCTV18.com.
The two main-board IPOs come at a time when Indian equity benchmarks have steered clear of the correction zone following weeks of what many experts call one of the slowest bear markets of all time.
"Secondary markets have once again begun to rise, and select IPOs have got a great response from investors. If these IPOs get listed at a good premium to the issue price, and we see a series of such IPOs, investors can return to IPOs in a big way in the second half of 2022," said Deepak Jasani, Head of Retail Research at HDFC Securities.
The return of sustained buying by foreign institutional investors is powering the secondary market after 10-odd months of selling.
FIIs have so far in August made net purchases worth Rs 18,472.1 crore of Indian shares, according to provisional exchange data.
"Fund raising is down sharply globally... We are seeing the same. The secondary market needs to stabilise for IPOs to gather steam," added Bagga.
What has dented the appeal of IPOs lately?
"We have seen a lull in IPOs after the second half of 2021 and to some extent in the first half of 2022 if one excludes LIC and Delhivery. Aggressive pricing of new-age companies, subdued capital markets and poor listing of many IPOs were the main reasons for this. Also, the promoters wanted to wait for better times to get a better valuation of their companies," Jasani told CNBCTV18.com.
Indian shares ended a near one-sided rally — which lasted 18 back-to-back months — in October 2021, as FIIs turned net sellers of Indian shares. This was followed by two mega IPOs within six months that failed to receive the kind of response won by a slew of blockbuster public offers in the recent past.
Other analysts are not so convinced about calling it a revival of investor sentiment in IPOs.
"Some of the recent IPOs have done well since listing, but the disastrous performance of new-age digital IPOs like Paytm and Zomato, and the poor performance of LIC since listing have impacted IPO sentiments," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He feels that investors will get choosy about new IPOs for now, with only "reasonably priced good" ones likely to do well.
"If we track the current grey market scenario, there appears to be good momentum in the primary market after a dull first half of 2022, but it would still be prudent to watch a couple of listings going ahead,"Abhay Doshi, Co-Founder of Unlisted Arena — a portal that tracks grey markets and deals in unlisted securities — told CNBCTV18.com.
"Grey market relies on sentiments. A stable broader market will aid primary market momentum," he said.