The excitement around the initial public offerings (IPOs) continues to grow after Tata Technologies and IREDA listed over 100-160 per cent gains above the IPO price. Many more large IPOs are expected to hit the primary market in 2024.
In the first week of the December IPO market, the focus was primarily on Tata Technologies and IREDA, as their prices more than doubled after the IPO listing. Though IREDA shares maintained the same level throughout the week, Tata Technologies shares slumped by 9 per cent. The IPO frenzy extended beyond these shares though, with other issues like Gandhar Oil, and Flair Writing Industries experiencing robust demand from investors.
Says Mahavir Lunawat, managing director, Pantomath Capital Advisors: “The surge in IPO activity is attributed to the eagerness of companies to tap into capital markets before the Lok Sabha elections, coupled with robust economic activity and positive sentiments from both domestic and foreign investors towards India.”
Tata Technologies shares stabilised at Rs 1,187 from its high of Rs 1,400 after the IPO. The price declined by 9.6 per cent this week after having debuted at Rs 1,313, up 160 per cent from its IPO price of Rs 500. IREDA soared at 100 per cent above IPO price when listed, and is maintaining at the same level, while another IPO, Fedbank Financial Services fell short at listing. Fedbank debuted at the National Stock Exchange (NSE) at Rs 138 against the issue price of Rs 140 on the NSE.
Investors who have been allotted Tata IPOs made huge gains when it debuted. The gains increased on the second day, but the share price slumped later. So, new investors are left wondering when to sell their IPOs and if they should sell immediately after booking the gains (after listing, but before the price drops).
Determining the right time to sell a listed stock depends on its expected growth trajectory and valuation. Stocks that may have a promising future, such as Tata Technologies, which has strong potential within the tech sector, and is likely to have a sustained growth, can be considered for the long term, but it is impossible to the predict price movement in the short term.
Says Basavaraj Tonagatti, a certified financial planner: “It is crucial to have a well-defined purpose for choosing a stock. If your goal is a quick profit, then consider your success and avoid excessive greed by selling it promptly. Conversely, if your intention is long-term investment grounded in the company’s fundamentals and values, I strongly recommend staying committed to that approach.”
“In my opinion, given the Tata Technologies’ unique business model, robust fundamentals, and significant growth prospects, holding onto the stock is a wiser choice than selling merely to capitalise on short-term gains,” he says.
Sriram Jayaram, a Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA), however, has a different view on the matter.
“Applying for IPO is a waste of time, because if it is a successful IPO, you will get a small fraction of shares, provided you are lucky. Many may not get any shares at all. If it is a failed IPO, like the previously listed LIC or Paytm, you will get all the shares you applied for, and when they hit the market you will be at a loss,” says Jayaram.
“Simply put, retail investors can stay away from all IPOs. For people who have already got Tata shares, it is difficult to predict the price movement in the short term. If they have made a good profit, consider selling the shares,” he adds.
Some investors are doubting whether buying IPO stock is a good idea because FedFinancial IPO got listed at a discount.
So, when considering buying an IPO share, the decision boils down to value over price. IPOs like Tata Technologies and IREDA, which were conservatively priced upon debut, held appeal due to their promising growth potential. Fedfina failed to deliver listing benefits due to its limited growth expectation and high valuation, which failed to attract investors.