Many big companies in India have tried to make money by selling their shares to the public through IPOs. But some of these IPOs, like Hyundai and Paytm, were not successful. Investors who bought these shares didn’t earn much money and some money even lost. This shows that even big companies can be bad IPOs and investors need to be careful.
Let’s find out how!
Hyundai Motor India’s IPO is A Missed Opportunity
Hyundai Motor India plans to collect ₹27,870.16 crore through an initial public offering (IPO) on October 15, 2024. Given the company’s status as India’s foremost vehicle brand, expectations were high. On October 22, the stock started at ₹1,931 per share on the BSE, representing a 1.5% decrease from its issue price of ₹1,960.
Unfortunately, the stock did not acquire motivation. On November 4, the shares closed at ₹1,814.55, down 7.4% from the original IPO price. Many investors were unhappy with the stock’s poor performance. The market’s mood did not match what they had expected. Many people relate this to valuation issues and an adverse market environment at the time of listing.
Paytm IPO is a Great Hype but Poor Returns
Paytm, India’s popular digital payments business platform. and one of the most talked-about initial public offerings in recent years. The November 2021 IPO, valued at ₹18,300 crore, is one of the largest in the country’s history. Despite a bright start, Paytm’s stock launch was disappointing. It listed at a discount of more than 9% to its issue price, causing an instant setback for early investors.
Paytm’s dismal market debut mirrored concerns about its high value and profitability .The stock has struggled to reach its original IPO value. Many investors are now at a loss because the market mood was not as positive as expected. Still Paytm is an important player in the digital payments market. Its IPO story serves as a lesson for others.
LIC IPO: Valuation Woes
In May 2022, the Life Insurance Corporation of India (LIC) announced its much anticipated initial public offering (IPO). The ₹21,000 crore IPO was planned to harness LIC’s large customer base and market position. However, the company debuted at an 8% discount to its issue price of ₹949, shocking many investors.
Analysts believe that LIC’s performance has been influenced by high valuations and market volatility. LIC has a strong brand reputation. its IPO’s performance has been disappointing.
The LIC IPO demonstrates how even trusted companies can face difficulties when market conditions and valuations are not aligned.
What Causes Poor IPO Performance?
There are many reasons why an IPO can perform poorly, even for well-known companies. Here are some common reasons:
High Valuation: Companies frequently price their IPOs based on future growth projections, which can lead to overvaluation. If the market conditions are not good, the stock may not stay at a high price. It could start trading at a lower price instead.
Stock listings can be influenced by market conditions such as volatility or bearishness. Investors may not want to invest a lot of money because the IPO will perform poorly.
Profitability Concerns: The many technology or growing organisations have profitability may remain a long-term objective. If investors have doubts about a company’s potential to earn a profit, they may avoid the IPO, affecting its early performance.
Investor Sentiment: Public opinion and investor sentiment both play important roles. If there are concerns about the company’s business model or financial health, the IPO may not go as planned.
Learning from previous IPOs
Large IPOs are sometimes appealing because of their high profile, but they are not necessarily the best investment options. Smaller and mid-sized IPOs have given some of the best returns. They are usually priced lower and interest many different types of investors.
Investors should approach initial public offerings with prudence, concentrating on issues such as the company’s business plan, profitability, and market conditions. Not every high-profile IPO guarantees returns, and doing some research can help you make better investment decisions.
A Bright Side with Successful IPOs.
Not all major IPOs end in losses. A few companies, such as Coal India, Zomato, and HDFC Life Insurance, have performed well in the market, generating good returns over time. These examples demonstrate that with the correct pricing, market conditions, and investor confidence, IPOs may be successful.
Key Takeaways
The Indian IPO market is common with success and disappointment stories. The instances of Hyundai, Paytm, and LIC demonstrate that huge IPOs have their own set of dangers. Many companies are entering the market. Investors should carefully consider each IPO, instead of just investing in them because everyone is various. After all, informed judgments are critical to getting the most out of IPO investments in a volatile market.