IPO stocks tank after bumper listing; Should you now buy Happiest Minds, Chemcon, other such shares?

Stock markets have so far seen 5 new debutants enter the primary market since the beginning of September and are eagerly waiting for three fresh listings in the coming week. However, of these five, only one stock is currently trading at premium to its listing price. This is despite four of these five stocks witnessing a bumper listing. Rossari Biotech, the stock that was the first stock market debutant this fiscal and is still at a premium to its listing price. On the other hand, Happiest Minds is at a discount to its listing price, so is Chemcon Speciality Chemicals, CAMS, and Angel Broking.

Stocks that tumbled

Since August last year 14 stocks have made their share market debut and of these 9 were listed on a premium to the issue price. Currently, only 8 of the 14 are trading higher than their listing price. Spandana Sphoorty Financial shares were listed at Rs 824 per share, and are now trading at Rs 614 apiece. Sterling Wilson shares have slipped Rs 700 to Rs 219 per share. CSB Bank shares debuted in November last year and after listing at a premium are now down over 16%. Ujjivan Small Finance Bank is down 44%. Stocks that entered equity markets this fiscal and are down from their listing price are, Happiest Minds, Chemcon Speciality Chemicals, CAMS, and Angel Broking. 

Adding to listing gains

On the other hand, some stocks have added to their listing gains as well. Vishwaraj Sugar Industries shares made their stock market debut at a premium of just Re 1, however, Now the stock is up 72% from listing. Another gem of a stock that entered primary markets in September last year was IRCTC. Shares were listed at a 101% premium and now the stock trades at a 110% premium to the listing price. Shares of Principal Pipes are also up from listing price, which was marginally down from the issue price. The last IPO of the previous fiscal year was SBI Cards and Payment Services. After making a weak debut during the March sell-off, SBI Cards shares are now at a 25% premium to the listing price. From the IPOs that came in this fiscal year, only Rossari Biotech and Route Mobile are trading at a premium to their listing price. 

How to trade

Some analysts believe that in a volatile market situation with uncertainties ahead, investors should sell half of their lot to take advantage of listing day gains as stocks usually list at a premium value. Vinod Nair, Head of Research, Geojit Financial Services suggests a stock specific approach and advises investors to draw conclusions from IPO subscriptions rates. “If there is demand for the stock with subscription levels being at 60-70 times and then shares drop from their listing gains it opens an opportunity for those who missed on allotment to come and buy the stock which will improve the price,” he said. Vinod Nair adds that businesses that are in line with the new norms such as digital players are performing well.

Investors are also advised to rather look at valuations and future prospects of businesses before rushing to apply for the IPO’s. “The investors in IPO’s where they have received allotment and have made listing gains, should re-look at the valuations and future prospects of the companies to decide whether to continue holding those investments for long term wealth generation or book listing gains,” said Divam Sharma, Co-founder of Green Portfolio.

Listings ahead

Next week, stock markets are waiting for the listing of UTI Asset Management Company and Mazagon Dock. “The Mazagon Dock Shipbuilders Limited is India’s leading defense PSU primarily engaged in constructing and repairing warships and submarines. The company has a order book of 11 times FY 20 revenues and the IPO can list at a premium of Rs. 90-100 however the UTI AMC IPO might fail to generate listing gains for the investors due to concerns including fair valuation of the IPO,” Divam Sharma added. In the grey market, ahead of their listing, Mazagon Docks is trading at a premium of Rs 106 per share but UTI AMC was down Rs 23 apiece, Dinesh Gupta, Partner, UnlistedZone told Financial Express Online.