From Hyundai to LIC to Paytm: All big IPOs failed on market debut; here’s why

Large initial public offerings (IPOs) have always grabbed a lot of attention from investors and created a lot of buzz on Dalal Street. However, most of them, barring a few exceptions like Coal India, Zomato, and DLF, have disappointed investors in terms of listing gains, causing significant losses. Historical data suggest that all big IPOs such as LIC, Paytm (One 97 Communications), GIC Re, SBI Cards, Reliance Power, and The New India Assurance registered losses on listing day. The ₹27,856-crore IPO of Hyundai Motor India Ltd (HMIL), the largest-ever public issue in India, also faced similar fate.

Shares of Hyundai Motor India listed at ₹1,934 apiece on the NSE, a discount of 1.3% over the issue price of ₹1,960. Post listing, the stock declined as much as 7.6% to hit a low of ₹1,811.05, before settling at ₹1,845 per share, down 5.8%. Meanwhile, the BSE benchmark Sensex and NSE Nifty ended with over more than 1% loss, while the BSE auto index dropped 2.3%, with all sectoral heavyweights closing in negative terrain.

The market capitalisation of HMIL dropped by ₹9,185 crore to ₹1.5 lakh crore from ₹1.59 lakh before the IPO. With this, the company became the fifth most valuable automaker in India, led by Maruti Suzuki India with a market cap of ₹3.83 lakh crore, followed by Mahindra & Mahindra (₹3.47 lakh crore), Tata Motors (₹3.22 lakh crore), and Bajaj Auto (₹2.89 lakh crore).

The listing of HMIL was below street expectations as the stock was commanding a grey market premium (GMP) of ₹45 in the unlisted market, estimating listing price to be around ₹2,008, a premium of 2.45% over the IPO price. The company has seen a sharp turnaround in its GMP price as it dropped into negative terrain to ₹32 last week after its issue closed with lukewarm demand from investors.

The IPO of HMIL, which was entirely an offer for sale of 14.22 crore shares by South Korean parent, Hyundai Motor Company, was subscribed 2.37 times amid muted response from retail as well as non-institutional investors (NII) amid valuation concerns. The issue, having a price band of ₹1,865-1,960 per share, received 0.50 times bids in the retail category and 0.60 times in the NII segment. The quota reserved for qualified institutions buyers (QIB) were booked 6.97 times, while the employee portion garnered 1.74 times subscription.

Let’s take a look at how big IPOs performed on listing day.

The bigger IPO size doesn’t guarantee better listing as indicated by the performance of LIC of India and Paytm parent One 97 Communications. The shares of state-owned insurer LIC fell 7.75% on its listing day, while Vijay Shekhar Sharma's Paytm ended with a loss of 27.25% on market debut.

In May 2022, the Life Insurance Corporation (LIC) of India raised ₹21,000 crore through IPO route, making it India's largest IPO ever. The IPO, which was entirely offer-for-sale of 3.5% shares by the government, was booked 2.95 times despite grabbing a lot of attention from investors.

In a similar trend, the ₹18,300-crore IPO of Paytm, which came in November 2021, also disappointed investors as the issue was subscribed merely by 1.89 times.

Among others, Reliance Power’s ₹11,700 crore IPO, and SBI Cards and Payment Services’ ₹10,355 crore issue also disappointed investors on listing day, with both stocks falling below their IPO price.

However, some IPOs such as Coal India, which raised ₹15,200 crore, delivered 40% return on its listing day. Footech unicorn Zomato, which garnered ₹9,375 crore, jumped 65% on its listing day.

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