Eight out of nine IPOs trade at higher than issue price

Snowman Logistics’ initial public offering (IPO) has seen its sharpest listing gain in four years. Good issues with attractive pricing and strong corporate performance have seen follow-up buying after listing, say analysts.

Contrary to the popular belief that the primary markets have remained comatose for the past few years, investors have actually showed an appetite for good issues that have been priced attractively. The listing of Snowman Logistics at the bourses on Friday is a case in point.

Investors who subscribed to the IPO have been rewarded handsomely with the stock listing at a premium of 62 per cent and trading nearly 70 per cent higher on the first day of listing.

In the past two years, excluding follow–on offers, book building and SME (small and medium enterprises), nine stocks got listed at the bourses, of which eight are trading at a premium to their issue price.

K Subramanyam, assistant vice–president (institutional research) at Asit C Mehta Securities, says: “At the end of the day, the quality of the issue and the pricing does matter. At times, the offers are priced aggressively and there is no follow up in terms of corporate performance. As a result, investors end up losing money.”

In percentage terms, Snowman Logistics is the first company in the past four years that has recorded a strong gain on the listing day. Against the Issue price of Rs 47, the stock raced to Rs 79.80 after listing at Rs 76 on the National Stock Exchange (NSE). The company raised nearly Rs 200 crore from the IPO.

  “We have been in a bull market for the past few months and most stocks, including the ones that debuted at the bourses, have seen a healthy rally as a result. This phenomenon is quite typical of a bull market rally. The risk appetite of investors has substantially increased and retail investors generally prefer to come back into the markets via the IPO route,” says Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.

Earlier, Gravita India had listed at Rs 219, a 75 per cent premium against its issue price of Rs 125 in November 2010. The stock is currently trading at Rs 89 on the NSE. In September 2011, PG Electroplast listed at Rs 200, a five per cent discount against its issue price of Rs 210, almost doubled at the end of day by closing at Rs 412. However, the stock is currently trading at Rs 107, well below its issue price.

In May 2014, amusement park operator Wonderla Holidays listed with a 32 per cent premium at Rs 165 against its issue price of Rs 125 a share. Since its listing, the stock has appreciated 152 per cent; it is currently trading at Rs 314 a share. It had hit a record high of Rs 355 last month.

Wonderla Holidays, Just Dial, Repco Home Finance and V-Mart Retail have seen their market value more than double, while Bharti Infratel, P C Jeweller and Credit Analysis & Research gained between 27 per cent and 75 per cent from their issue price, according to Capitaline Plus data.

Tara Jewels, the sole IPO listed since December 2012, is currently trading at Rs 93.40 - a 59 per cent discount against its issue price of Rs 230.

“Snowman has a good promoter backing and operates in a niche segment of logistics. There is a lot of potential and I expect a lot of follow-up buying to happen in this counter. The listing price may be a little euphoric but the stock will see ample buying around Rs 60 levels,” says Subramanyam of Asit C Mehta Securities.