Is IPO investing back? IPO have a dream run in 2019. Should you invest?

                                                                     image : dsji.in

So far in 2019, only 13 companies have gone public and raised around ₹10,709 crore as of 15 October 2019, compared with 24 IPOs in 2018 and 35 in 2017. But guess what 11 out of 13 IPO are trading above their issue price enriching investors.

This is a whopping 85% success rate. So should you invest in IPOs?

Fewer companies went public in 2019 due to volatility and uncertainty due to trade wars etc, but the ones that did performed better after listing than their peers in the last two years did so, as the stock issuers reduced their valuation expectations.

IRCTC Ltd leads the way and trades at about 119% premium, followed by Indiamart Intermesh Ltd which is up by 115%, Neogen Chemicals Ltd (78%) and Affle India Ltd (57%)

                                                            Data as on 15^th Oct 2019. Source BSE / NSE

                                                                    

The only companies which are trading below issue price is Sterling & Wilson Solar Ltd and MSTC Ltd

Investment bankers attributed the performance of these stocks, in a year when secondary markets have been volatile, to better pricing at the time of their public offerings.

The main factor behind this is the “pricing”. IPO launched in 2019 were fairly priced as compared to previous years during which greed of bankers and issuers had taken toll on price post listing.

So the question is should we again go for IPO investing or not?

To answer this we need to again look at IPO offered during 2019. Price was a BIG factor indeed. Issuers did left something for retain investors at time of IPO by not valuating IPO too aggressively. But there is another factor. And this is differentiated business models of companies.

Let’s take case of Indiamart, it is only company e-commerce B2B (business-to-business) marketplace platform to get listed. Another case of IRCTC, as it has a virtual monopoly on railway ticketing and catering.

“As a result of this, most of the IPOs are trading at a premium to their issue price giving good returns to investors; this has boosted investor confidence, especially retail and HNI (high-net-worth individual) investors.

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