Ever since we’re born, we’re made to consider that ‘Greater is Higher’.
And we stock this previous saying with us into a number of aspects of life together with the world of investing. We appear to instinctively consider {that a} larger firm or an even bigger fund will present higher returns.
As an investor, it’s simple to get confused at first, particularly with the continuing flurry of IPOs. And, once you’re raised to suppose massive, you’ll instantly consider making use of for the most important preliminary public choices.It most likely comes from the concept larger appears to be safer.
The Life Insurance coverage Company of India (LIC) simply concluded its IPO on Monday. It created a report for the best variety of purposes crossing over 6 million. Retail buyers flocked to the providing like by no means earlier than. Apparently, the report for highest variety of purposes was held by the IPO of Reliance Energy (the most important IPO on the time). It had acquired 4.8 million purposes virtually fourteen years in the past.
However is greater truly higher? To reply that, we determined to look again on the ten largest IPOs of all time and got here away shocked. Learn on…
#1. Cairn India Ltd
The ₹8,616 crore IPO ran between 11 December and 15 December, 2006. It acquired a muted response from buyers.
The IPO had failed to draw sufficient non-institutional and retail particular person buyers. The difficulty obtained subscribed 1.14 occasions, thanks primarily to purchasing by institutional buyers. The Indian arm of British oil and gasoline companyCairn Energymade an unassuming debut. The inventory listed at a 12% low cost to the difficulty worth of ₹160 and finally closed down 14% at ₹137.50.
The corporate was finally merged with its debt-ridden mum or dad Vedanta in 2017 and the inventory was delisted. The closing worth on the final day of buying and selling was recorded at ₹285.40 on BSE.
#2. HDFC Life Insurance coverage Co Ltd
The ₹8,695-crore preliminary public providing (IPO) of HDFC Life Insurance coverage was bought within the worth band of ₹275-290 in November 2017. It was subscribed 4.8 occasions.
It listed on the trade at a premium of seven% at ₹311.
At present, the inventory is buying and selling at ₹564 i.e., a CAGR of 13% over the past 5 years.
#3. DLF Ltd
Though the DLF IPO was subscribed 3.47 occasions, subscription within the retail buyers class was at solely 0.98 occasions.
The inventory listed at a premium of over 8% on itemizing and over the following few months zoomed to as excessive as ₹1,205.
Nonetheless, since then the inventory noticed an erosion of over 90% of its market worth crashing to as little as ₹80 in 2016. On the present worth of ₹318, it’s nonetheless buying and selling at a reduction of 39.43% to its problem worth over 15 years in the past. This makes it one of many greatest wealth destroyers for buyers.
#4. Zomato Ltd
India’s main meals supply companyZomatomade a stellar debut on Dalal Avenue in July 2021. The inventory opened at Rs116, a52.63% premium to its supply worth of ₹76.
Nonetheless, Zomato has not solely been burning money for its development however has truly burnt buyers’ cash because the starting of the 12 months. Shareholders of the corporate have turned poorer by ₹90,449 crore following a 68% crash within the inventory from the all-time peak.
#5. The New India Assurance Co Ltd
The ₹9,600-crore IPO of New India Assurance had obtained a lukewarm response from buyers on the time of its providing in 2017.
Shares meant for retail and excessive internet value people (HNIs) within the IPO had been undersubscribed.
The IPO scraped by means of with institutional help and was subscribed 1.19 occasions on the final day of the difficulty. LIC bid for ₹6,500 crore value of shares within the IPO.
The inventory listed at a reduction of ₹50 or 6.25% on the exchanges and inside a 12 months was down over 50%.
At present the inventory is buying and selling at ₹104, having eroded over 71% of buyers capital had one invested within the public problem.
#6. SBI Playing cards & Fee Companies Ltd
The inventory of SBI Playing cards & Fee Companies noticed a weak debut itemizing at ₹658, 12.85% under its problem worth of ₹755. It will definitely closed at ₹683 on the BSE.
The IPO had managed to draw bids value ₹2 trillion producing near 2.7 billion bids (26 occasions).
The market had anticipated a 35% premium on itemizing for the mega problem as a result of scrip’s excessive demand within the unlisted market.
The gray market premium for the inventory stood at ₹350. The itemizing was an enormous blow for HNI buyers, who had borrowed cash to guess on the difficulty.
The inventory had made good points final 12 months peaking at ₹1,141 per share however has since fallen over 37% to settle again at under its problem worth of March 2020, leading to no good points for buyers over the past two years.
#7. Normal Insurance coverage Company of India Ltd
Persevering with the development of weak post-listing efficiency amongst insurance coverage corporations, shares of Normal Insurance coverage Company of India dropped 6% over its problem worth on its buying and selling debut in October 2017.
The tepid begin got here after the reinsurer’sIPO was subscribed 1.37 timeson the ultimate day of the difficulty due to help as soon as once more from state-run Life Insurance coverage Company. HNIs and retail buyers largely stayed away from the IPO.
As seen with different PSU IPOs lately, sadly GIC has disillusioned buyers with the present worth over 73% under its problem worth.
#8. Reliance Energy Ltd
Reliance Energy Ltd listed on 11 February, 2008 after the corporate had mopped up a report ₹11,563 crore in its preliminary public providing (IPO). The excitement surrounding the difficulty amongst buyers had been rising with gray market premiums for the shares as excessive as 80% over problem worth setting the stage for an outstanding opening.
The IPO was oversubscribed roughly 70 occasions attracting over 5 million bids from all classes of home and worldwide buyers.
The inventory debuted at a premium of 21% over its problem worth, however inside minutes after that, the inventory crashed and finally settled the day down by 17% from the difficulty worth.
The corporate filed a grievance with market regulator SEBI for investigating a marketing campaign towards it. It even introduced free bonus shares to all classes of shareholders, besides the promoter group.
Sadly, not one of the firm’s actions would assist buyers recuperate their cash because the inventory by no means once more touched its itemizing worth.
The inventory holds the unenvied title of the worst performing IPO on our checklist having misplaced over 95% of its worth over its problem worth.
#9. Coal India Ltd
In 2010, Coal India raised ₹15,475 crore in what was India’s greatest preliminary public providing of shares on the time.
And for buyers, it was a welcome Diwali present. The inventory debuted at 17% over its problem worth of ₹245 and zoomed to shut at ₹342.35, 28.44% increased than the supply worth.
Though the inventory was a star performer for brief time period buyers, it did not ship returns for long run buyers who’ve held on since.
In current occasions the corporate has underperformed the broader markets and the inventory is presently buying and selling at ₹170.
#10. One 97 Communications Ltd (Paytm)
Paytm’s ₹18,300 crore IPO was the most important ever problem on Dalal Avenue earlier than the just lately concluded LIC problem.
It eroded buyers wealth by over ₹35,000 crore within the first few hours of its market debut on 18 November 2021. The inventory opened for buying and selling atRs1,950 on the NSE, marking a decline of 9.3% from its problem worth ofRs2,150. On the shut of buying and selling, the inventory ended 27% decrease at ₹1,560.
And it’s obtained a lot worse since then.
Paytm’s market worth which was over ₹1.39 lakh cr on the problem worth has declined by 75.30%. It’s presently at ₹33,566 cr.
Does it Make Sense to Spend money on Massive Sized IPOs?
Trying again on the monitor report of the ten largest IPOs earlier than LIC, we see that eight of the ten have eroded wealth for its shareholders.
An IPO generally is a complicated matter for a lot of buyers. As a potential shareholder, subscribing to a difficulty when an organization goes public would possibly appear to be a straightforward approach to get in early.
When well-known and fashionable manufacturers resolve to go public, the media hype across the IPO can usually intrigue particular person buyers.
Buyers should remember the fact that newly public corporations lack a confirmed report of working within the public area. The secondary market is at all times the very best place to resolve what the worth needs to be. The first market is skewed. It’s a place the place there are just one or two sellers and too many patrons. This will likely lead to illogical worth discovery.
In 2021, 63 corporations listed on the exchanges together with many big-ticket IPOs like Paytm, Nykaa, and Zomato.
Amongst these 63 corporations, solely 15 supplied multibagger returns of as much as 300% to buyers.
Apparently, 11 of those had been small-sized IPOs of ₹100-600 crore.
Clearly, massive IPOs have did not ship through the years.
India’s greatest ever IPO, LIC is about to open for buying and selling tomorrow, on 17 Might.
As buyers wait with bated breath and fingers crossed, the query on everybody’s thoughts is, Will LIC be an exception?
Disclaimer:This text is for data functions solely. It’s not a inventory advice and shouldn’t be handled as such.
(This text is syndicated from Equitymaster.com)
Supply: Live Mint