Is IPO euphoria fading? GMPs of recent issues slide ahead of listing

A correction in the secondary market along with a disappointing performance by the recently listed initial public issues (IPOs) has dented the grey market premiums for the shares of companies that are up for listing over the next few days.

In the past few weeks, the benchmark indices have corrected somewhat amid concerns over rising Covid cases and a spike in bond yields which has dampened the risk appetite for investors, according to analysts.

As per grey market watchers, the premium for Anupam Rasayan, whose shares are set to debut on the bourses tomorrow, has slipped by over 75 per cent to Rs 70 from Rs 300 two weeks ago. The IPO was subscribed 44 times. It is expected to list at a 13 per cent premium over the issue price of Rs 555.

Similarly, Laxmi Organics which received 107 times bids also saw its premium in the grey market plunged by nearly 30 per cent to Rs 70 from Rs 100 it commanded last week. The stock is expected to list on Thursday, March 25 at a premium of 54 per cent.

The same trend was witnessed in the market last week when shares of Easy Trip made their debut on the bourses. A great disparity was seen between Easy Trip's grey market and listing prices and this, as per Umesh Paliwal of Unlisted Zone has forced investors to moderate their expectations in regards to listing gains.

The stock was quoting at a premium of 70 per cent a day ahead of its listing yet it debuted at only 13.5 per cent. Given the company's presence in the hospitality and tourism sector, Paliwal also blames resurgent Covid fears as an important factor that could have impacted the performance of the company.

Currently, the stock has tumbled further and is quoting below its issue price of Rs 187 to Rs 184, off 21 per cent from its high of Rs 233.15 touched on March 19, its debut day.

This seems to be the case for many other IPOs that got listed this year. Out of nine listings, seven are trading below their listing prices.

"Recent trends suggest that IPOs gains are fizzling out after a day or two, indicating that the euphoria in the IPO market could be settling down. Hence, investors should apply for IPOs that have a good margin of safety," said Manan Doshi, co-founder at UnlistedArena.com.

He added that while some of the companies that are up for listing in the next couple of days have good growth prospects, their lofty valuations have discounted that and hence the fall in their premiums.  

The IPO of Anupam Rasayan was valued at 80x and 69x EPS for FY20 and annualized FY21, respectively, which as per Vikas Jain of Reliance Securities aggressively priced.

Analysts also flagged valuations as expensive for Laxmi Organics, Craftsman Automation and Kalyan Jewellers.

Shares of Craftsman Automation were commanding a premium of just 2 per cent or Rs 30 over the issue price while those of Kalyan Jeweller traded at a discount of Rs 1.50, indicating a tepid listing for the two.