about 1 month ago
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“Arrey Paytm ne party bigaad daala!!!!”

That’s what almost everyone is saying on the Street. It brings to mind Honey Singh singing, “Aunty police buladegi” with Paytm being the police who spoilt the rave party of IPOs.

The few listings over the past few days have been poor. Tega Industries was the last bumper listing as such - the stock made a fantastic debut on 13th Dec, listing at Rs.753 on the BSE v/s IPO price of Rs.453, a whopping 66% premium. Even today’s intraday low is at Rs.545.55, well over the IPO price.

Last week, Rategain Travel Technologies had a discounted listing at Rs.364.80 v/s IPO price of Rs.425/share and it is today quoted at around Rs.335 levels.

Today, Shriram Properties had a poor listing; as against the IPO price of Rs.118, the stock got listed at Rs.94 on the BSE, a discount of over 20% and it ended the day at Rs.99.

Tomorrow we will see the listing of MapmyIndia and on Wednesday we will see Metro Brands getting listed, which just about “managed” to sail through. Medplus Health will get listed on Thursday, 23rd and Data Patterns on Friday, 24th. It is literally one new listing on every single day of this week and we need to wait and see if the poor moods in the secondary market spills over into the primary market.

While analysts will say that it is the “quality” of the issue which now matters more, the truth is that sentiments over rule everything else, even logic and pricing. Paytm did spoil the party in the sense that the mad rush to buy any and every IPO stopped – people are now actually asking about the company before rushing in for listing gains.

Warren Buffett at a Hathaway AGM reiterated his revulsion for IPOs. When questioned about how people have struck it rich in some of the IPOs in USA, Buffett said, “You don’t have to really worry about what’s really going on in IPOs. People win lotteries every day but there's no reason to let that affect your investing strategy at all. You have to find what makes sense and follow your own course.”

If one looks at the IPOs the way Buffett does, it makes perfect sense to stay away. These are all mostly Offer for sales. This means that the promoters and anchor investors are selling a part of their stake. They decide the price, they decide when to sell and they cash out. So how do we, the retail investor gain? Unlike in the secondary market, the price of a stock is decided by the demand and supply and in that way is fairer.

Pricing has and will always continue to remain the one big decisive factor. For the past few years, it is high pricing which killed the IPO market; it singularly eroded investor profits and thus the confidence. Every issue which comes out today has pricing which outdoes the fundamentals of the company. After the high price of the IPOs there is virtually no gain left on the table for the investors. It is more prudent to buy the stock after it has got listed as very soon, after listing, many PE funds and HNIs make an exit, bringing down the price. Yes, PE funds and bigwig investors have become mere props to lure investors to the IPO and they in turn make a quick buck.

This week will see a flurry of listing and based on sentiments and subscriptions; it looks like ‘woebegone’ will largely be the theme.

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