As we know the IPO runup was hot in 2021, and the same was expected in 2022. However, there has been a slowdown, and most people know the reason but do they really know?
What’s Happening?
Over 60 IPOs came out in 2021. We are already moving towards February-end, and we have seen only three listings till now. There are two theories in the market doing rounds. First, everybody’s waiting for the LIC IPO to go through because it’s the biggest one in our country. Second, ever since the slide of Paytm, Zomato and Nykaa, investors have been worried about investing in IPOs. This has also been affecting other companies who want to get publicly listed.
For instance, after several high-profile startups tanked, Oyo Hotels and Delhivery have pushed their IPOs and are reworking on their target valuations. Both these companies are backed by SoftBank Group Corp. Investors are infuriated with their losses in the recent listings. After what happened, all companies have put their IPO on hold.
Some believe LIC IPO is everything that the market is concerned about, and that’s why others are backing out. Once LIC is listed, the IPO ecosystem will speed up as expected. Media sources believe that the LIC listing will dictate the course for other IPOs. The result of this theory can only be tested once LIC is listed.
Should This Concern You?
The street makes a lot of noise about IPOs, but not all of them are profitable. Hence, it’s always important to read the IPO’s DRHP and research it in detail. There’s no shortcut to making money in the stock market. Only fundamentally strong companies will continue to do well, and we will have to scout them.
For instance, Macquarie had warned about Paytm earlier and slashed its target price to Rs 700 v/s issue price of Rs 2,150. The brokerage firm that’s almost always correct about companies had said that the path to profitability is a concern for Paytm. Since then, Paytm hasn’t been able to stand back up.
What Lies Ahead?
The IPO pipeline will continue to run because the COVID-19 wave has neared its end, and economic activity has been picking up. As soon as liquidity flows in the system, companies that were planning to launch their IPOs will do it eventually. And when they do it, make sure to only invest your time, energy and money in those who are profitable.
