Skip to main content

Market volatility seen affecting IPO plans of smaller companies

By
 Market volatility seen affecting IPO plans of smaller companies
With small-cap and mid-cap stocks declining in recent months, IPOs of small companies may attract lower valuations, say analysts
The volatility in Indian stocks in the past few weeks is expected to impact the valuations of small and medium-sized companies that are preparing to launch their initial public offerings (IPOs).
Since 2015, a majority of the 94 companies that have launched IPOs for listing of their stocks on the main boards of exchanges are small and medium-sized companies, data from stock exchanges shows.In the secondary markets, small-caps and mid-caps have been the biggest losers in the recent months, resulting in depressed sentiment for IPOs from these segments, industry experts said.
Year-to-date, the BSE Midcap index has lost 10.73% and the BSE Smallcap index 11.27%, underperforming the 3.08% loss in the benchmark Sensex.“The mood has been down in the last couple of weeks in the secondary markets and the political economy is also not looking very good. So sentiment is weak and that will definitely impact valuations,” said Prithvi Haldea, chairman of primary market tracker Prime Database.
Haldea added that people were willing to pay for stretched valuations when the Sensex was rising from 28,000 points to all the way up to 35,000-36,000 points.But now due to the fall in the stock prices of your peer group, your valuation will also take a hit,” he said.The post-listing performance of recent IPOs in this volatile market has also been a mixed one, adding to the softening of sentiment.
Of the six companies that were listed since January, three are trading below their issue price. These include Aster DM Healthcare Ltd, Newgen Software Technologies Ltd and Apollo Micro Systems Ltd.According to industry experts, given the prevalent market conditions some small- and mid-cap companies could even face difficulties in launching IPOs.
Banks tap vibrant IPO market to unlock value of subsidiaries
"People have disproportionately lost money in small and mid caps. People who started marketing their transactions two months back, the valuations then and the valuations in the secondary market today are starkly different. So a lot of small- and mid-cap deals will face pressure in launching given the gap between promoter’s valuation expectation and what investors are willing to pay,” said an investment banker working on several IPOs. He requested anonymity as he is not authorized to speak to reporters.
In these markets, investors would prefer investing in existing stocks in the listed universe rather than new ones coming in the IPO market, and thus small- and mid-cap companies going for IPOs will have to offer higher discount on valuations, he added.Companies and investors can expect volatility to continue given the several state elections that are slated to happen later this year and the Lok Sabha election due next year.
“This being an election year, government will go in election mode and governance will likely take some hit. We have three to four big state elections this year. So there is nervousness in the markets at this point of time,” said Haldea of Prime Database
The Mint, New Delhi, 23rd March 2018
 

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more