Digital IPOs Hit New Lows as BSE IPO Index Cracks 7%
Between 18-January 2022 and 24-January 2022, the Sensex fell by nearly 4,000 points. However, this 6.7% fall in the Sensex was dwarfed by the 12.3% fall in the BSE IPO index during these 5 trading sessions. In fact, on Monday alone, the BSE IPO index crashed by a huge 7.3%. While the fall was seen across IPOs, the biggest impact was on digital IPOs.
Digital IPOs have been a mixed bag. IPOs like CarTrade and Paytm never managed to recoup their IPO prices and continue to trade at huge discounts. Then there were IPOs like Policybazaar which opened at a premium but now trades at a deep discount to the issue price. Finally, there are the likes of Zomato and Nykaa which are still above the issue price but have lost 30-40% from their recent highs. In short, the crack was severe.
In the last few days, it looked like most of the investors were finally giving up on the digital IPOs. At least, the retail investors who had flocked to these IPOs, appeared to be disillusioned. You just needed to look at some of the specific movements of the IPO stocks on 24-January to understand the extent of the fall. In most cases, there was a mix of panic selling and also margin calls that forced offloading of these positions. It just added up.
On Monday 24-Jan, IPOs like Zomato, MapmyIndia and PB Fintech were down about 20%. Even Nykaa lost close to 15% in a single day. Paytm may have been a little more subdued in its fall but that was only because the stock has already lost up to 55% from its IPO price. Most of the damage has already been done. That was perhaps the only redeeming feature that things could get worse from that point.
However, the sell-off was not just about the digital IPO. Even other IPO names also deep cuts on Monday. Stocks like Latent View Analytics, Go Fashion, Chemplast Sanmar, Macrotech, CMS Info Systems, Sona BLW and even Devyani International were all down between 8% and 10% in a single day. Among all the indices on the BSE, the IPO index was the top loser. What triggered this fall?
Some of the numbers and guidance show that Q3 has been quite tough for digital names. There has been widening of losses in most cases. Things got exacerbated after JP Morgan showed a clear preference for Swiggy over Zomato in the food delivery business. But essentially it was a broad sell-off.
If 2021 was the year of IPO optimism, then year 2022 has been a return to reality. The truth obviously lies between these 2 extremes. It is this middle path that will eventually drive the IPO demand in the current year.
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