The Indian primary market has seen a resurgence with four mainboard initial public offerings (IPOs) launched this week, aiming to collectively raise Rs 6,688 crore. This follows two recent listings, Borana Weaves and Belrise Industries, which together raised Rs 2,295 crore. Despite this surge in activity, investor enthusiasm has been subdued, with listing gains falling short of expectations. Notably, the grey market premium (GMP), an indicator of investor sentiment, has remained lackluster for most issues.
Among the biggest players, Schloss Bangalore (The Leela Hotels), Aegis Vopak Terminals, and Belrise Industries are together seeking to raise Rs 8,450 crore, almost 95% of the Rs 8,983 crore being targeted across the market. Yet, Belrise’s listing failed to deliver a significant pop, and both Schloss Bangalore and Aegis Vopak have experienced weak subscription levels in their early bidding days. Smaller IPOs like Scoda Tubes and Prostarm Info Systems have also seen declines in their GMPs, indicating reduced investor confidence.
High Valuations and Market Jitters Dampen Interest
Market experts attribute the tepid response to a mix of high valuations, uncertain market conditions, and a general lack of upside potential in current initial public offerings (IPOs). Kranthi Bathini, Director of Equity Strategy at Wealthmills Securities, emphasized that most IPOs launched in the past three years are now trading below their listing prices, leading investors to adopt a more cautious and selective approach.
“Investors now prefer to buy from the secondary market after the selling pressure is over and at more reasonable valuations,” Bathini explained. He noted that while the business models of some IPOs are strong, they offer little short-term profit potential, which deters listing-day investors seeking immediate returns.
Mahesh M Ojha, AVP-Research at Hensex Securities, echoed similar sentiments. “Valuations in the current crop of IPOs are steep, leaving no room for investors to benefit on listing. With quality companies already available in the secondary market at better valuations, initial public offerings (IPOs) lose their appeal,” he said.
Falling Grey Market Premiums Reflect Investor Apathy
Declining GMPs for major initial public offerings (IPOs) further confirm the current disinterest. The premiums for Schloss Bangalore and Aegis Vopak have dropped to just Rs 1, signaling the likelihood of a flat listing. Both issues are set to close for bidding today. Similarly, Prostarm Info Systems’ GMP has fallen from Rs 25 to Rs 19, while Scoda Tubes has dropped from Rs 22 to Rs 18. Prostarm’s issue concludes on May 29 and Scoda Tubes’ on May 30.
Astha Jain, Senior Research Analyst at Hem Securities, noted that without momentum in the secondary market, the primary market is unlikely to perform strongly. “The overall market has been stagnant, and recent weak listings like Borana and Belrise have further shaken investor confidence,” she said.
As macroeconomic and market uncertainties persist, analysts suggest that initial public offerings (IPO) enthusiasm may remain muted unless market conditions improve and valuations become more attractive for investors seeking both short- and long-term gains.
Visit more of our blogs! Business Viewpoint Magazine.
