IPO Investors Beware: Strong Listing Gains Aren’t Always Here to Stay – Insights from Aadhar Housing Finance to Ola Electric

Retail investors are increasingly drawn to IPOs because of the promise of strong gains when the stocks first list. However, during times of high market volatility, it’s important to be cautious.

The key question is how many companies can hold onto their listing gains and build on them over time. According to an analysis by ETIG of companies listed on the main board since the start of 2020, almost half of the companies that reported listing gains of 50% or more have struggled to maintain those gains.

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Drop in Returns After Initial Gains

Out of the 48 companies in the sample that posted listing gains of over 50%, 23 saw their returns drop below those gains by September 30, 2024. This shows that nearly half of these companies couldn’t keep up the momentum. The time period varies depending on when each company was listed, and September 30 was used as a cut-off date to avoid the impact of the market’s high volatility in early October. During the first four days of October, the benchmark indices dropped by over 3%.

Some Companies Still Deliver Positive Returns

However, not all companies that lost their listing gains are performing poorly. The analysis also found that 36 out of 53 companies, or about two-thirds, which failed to deliver listing gains have still managed to generate positive returns by September 30, 2024. For example, recent IPOs like Aadhar Housing Finance, EPACK Durable, Ola Electric Mobility, and Zaggle Prepaid Ocean Services saw gains in later trades, even though they were initially listed at or below their offer price.

Notable 2024 IPO Performances

In 2024 alone, several companies, such as Vibhor Steel Tubes, BLS E-Services, Premier Energies, Bajaj Housing Finance, and Unicommerce eSolutions, have reported triple-digit listing gains.

IPOs: A Gateway to Lesser-Known Businesses

IPOs offer investors a way to explore new or lesser-known businesses or companies that were previously privately held. Of the 250 companies listed since January 2020, 135 (or 54%) have provided returns of 50% or more, while 84 (or 33%) have delivered triple-digit returns.