In 2023, the Indian primary market experienced a significant upswing, marked by the active participation of prominent entities. However, amidst the overall buoyancy, certain initial public offerings (IPOs) failed to resonate with the sentiments on D-street.
The initial half of the year saw the introduction of substantial IPOs, although their numerical representation appeared relatively modest when compared with the robust listing activities witnessed in the latter half of the year. Even in the concluding week of 2023, six IPOs, predominantly from the mainboard segment, are poised for debut.
Despite the overall enthusiasm prevailing in the primary market throughout the year, there were instances of suboptimal performance, as evidenced by some underperforming IPOs. This compilation focuses on 2023's top five IPOs (mainboard) that didn't quite live up to the expectations in listing gains.
1. Udayshivkumar Infra
Uday Shivakumar Infra Ltd. specializes in constructing roads, including state highways, district roads, and smart city projects under PM's Smart City Mission. The company's shares had an unimpressive debut on bourses, listed at a discount exceeding 10 per cent.
Analysts believe that the infra company's underperformance in the ongoing bull market can be attributed to its elevated reliance on the state of Karnataka. Transitions in state policies can have a significant impact on the overall working structure of the company.
Changes in government leadership can also influence the nature of contracts received by Udayshivkumar Infra.
"With its peers expanding their operations on a pan-India basis and the company restricting its operations in Karnataka with a limited set of clients, the growth outlook remains a question amongst investors," said Parth Shah, Research Analyst, StoxBox.
2. Avalon Technologies
On a year-to-date (YTD) basis, the company's shares have yielded robust double-digit returns. However, Avalon Technologies failed to make a noteworthy impression on Dalal Street during its subdued debut on NSE. The company experienced a 22 per cent decline in net profits, decreasing from Rs 67 crore in FY22 to Rs 52 crore in FY23.
Analysts attribute the company's tepid IPO performance to US macroeconomic challenges, including issues with US customer demand.
Avalon Technologies is a prominent Indian Electronic Manufacturing Services (EMS) company, specializing in high-value precision engineered products. Despite short-term macro headwinds, analysts foresee a positive outlook for Avalon's long-term growth, pushed by demand in clean energy and other industrial sectors.
3. IRM Energy
Cadila Pharmaceuticals-backed IRM Energy., raised Rs 545.40 crore through a fresh share sale, issuing 1.08 crore shares. The company, focused on developing Natural Gas distribution projects nationwide for industrial, commercial and domestic customers, made a subdued debut on the stock exchanges. The weak listing performance was attributed primarily to the prevailing negative sentiment in the market on its listing day. The company experienced a decline in annual net profits, decreasing from Rs 113 crore in FY22 to Rs 56 crore in FY23.
However, the firm's advantageous ownership by Cadila Pharmaceuticals Ltd. (holding a 49.5 per cent stake) has facilitated overcoming specific entry barriers, including the necessity for substantial investments in this industry.
4. Updater Services Ltd.
In a rather muted debut, the facility management and business support services provider was listed at a discounted rate of 5 per cent on the National Stock Exchange. The company experienced a significant decline in its annual net profit, falling by approximately 40 per cent from Rs 57 crore in FY22 to Rs 34 crore in FY23.
Analysts say that the company's aggressive pricing on the valuation front led to its underperformance.
"The management of the company seems to be indecisive as the net proceeds of the IPO for acquisitions have not been utilized nor they have identified the targeted companies," said Shah.
However, since its listing date, Updater Services Ltd. has witnessed a significant upswing, with its share price surging by almost 25 per cent, on NSE. A broader equity market euphoria might have helped the company's share price in gaining momentum.
5. Yatra Online
Among the select few new-age companies that went public in 2023, Yatra Online stood out as one of the top underperforming IPOs. Despite reducing losses and achieving a net profit, the figure remained in the single digits. The most recent quarterly report indicated a negative EBITDA.
Recognized as one of the popular travel booking destinations in the country, Yatra Online Ltd. witnessed a poor start to its IPO at a discount of 10 per cent. The shares of the company closed its listing day at a 4 per cent discount.
The company's overvaluation and weak quarterly performance may have also caused its shares to underperform post-listing, as per analysts.
While the number of IPOs increased this year, the cumulative amount raised by these IPOs remained lower than FY22. However, the Indian primary market remained resilient as compared to its global counterparts.