Comparing the CNX 500 index to the 30 IPOs, just twelve of them, in terms of issue size, were able to provide investors with returns. From a different perspective, 60% of IPOs have not been able to outperform the CNX500 since their introduction. Thirty-one IPOs have had eight negative returns.
Reliance Power destroyed the most wealth held by investors. Its price has dropped by 84%, although the CNX500 returned 961% during that same time frame. On February 11, 2008, the company’s shares became public on the exchanges.
One97 Communications, led by Vijay Shekhar Sharma, trailed Reliance Power. Paytm’s stock has dropped 66% from its debut date, whereas the CNX500 has returned 54% over that same time. In late November 2021, One97 Communications’ equities debuted on the NSE and BSE. Paytm ended the first day of trading at a 27.2% discount to its issue price of Rs 2,150 on the BSE.
Only one of the top ten IPOs that produced appreciable excess returns was Zomato. ICICI Lombard, Sona BLW Precision Forgings, Indian Railway Finance Corp, and Hindustan Aeronautics were the other notable winners in the top 30.
Owing to favorable market circumstances, the previous two years accounted for five of the top ten IPOs. The majority of them, like Brainbees (First Cry), Bharti Hexacom, and Bajaj Housing Finance, have performed effectively.
Bull markets are full of IPOs because they are valued optimistically, and most late-stage bull markets are defined by a small number of sizable IPOs that are typically valued optimistically. IPOs with high profiles end up with lower-than-expected returns when the earnings growth that should have justified such valuations does not materialize and is accompanied by a mean reversion in broader markets.
