IPOs outperform benchmark indices in FY17

15 out of 21 IPOs during the year have gone up more compared to Sensex

The BSE IPO index, a gauge for measuring the performance of newly listed companies, has gained 35 per cent so far in this financial year. In comparison, the benchmark Sensex has gone up 16 per cent during the same period. In other words, investors buying shares of new entrants have fared better than those relying on the blue-chip Sensex in the current financial year. 

Companies with at least a Rs 100 crore free-float market capitalisation are added to the BSE IPO index on the third day of the listing and remain part of the index for two years. The sharp gains in the BSE IPO index this year denote that companies have not just done well on the listing day but given market-beating returns after the listing.

Investment bankers say this trend augurs well for the primary market. The impressive post-listing performance, coupled with encouraging responses to recent IPOs, such as Avenue Supermarts and Music Broadcast, will prompt more companies to hit the market.

Already two companies — CL Educate and Shankara Building Products — have announced their IPOs. Investment bankers say the pipeline is fairly strong for the next fiscal as well.

“This fiscal was positive for IPOs as we saw good-quality companies with strong financials and efficient business models hitting the market. This is one of the reasons why a majority of the newly listed companies gave good returns. This trend is likely to continue in the near to medium term as we have some good companies lined up for IPOs,” said Subhrajit Roy, executive director, Kotak Investment Banking.

So far in 2016-17, 21 companies listed on the bourses, and of those 15 have outperformed the Sensex. Companies listed this fiscal year are up an average of 40 per cent over their issue price return.

Of the companies that have listed during the current financial year, four — Quess Corp, RBL Bank, Ujjivan Financial Services and Mahanagar Gas — have yielded three-digit returns. On the other hand, HPL Electric and Power was the worst-performing stock because its shares slipped 47 per cent since the listing.

Some big-ticket IPOs of 2016-17 failed to put up a good showing after the listing. For instance, ICICI Prudential Life, which was the biggest IPO in six years, have failed to yield impressive returns to date. Its shares are trading 12 per cent higher than the issue price. Shares of L&T Technology Services have lost 9 per cent since its listing.

IPOs in this fiscal year have mobilised around Rs 28,000 crore, these include the two recently-concluded IPOs and another two launching next week.