5 days Ago
IIFL Securities in a strategy note said a total of 263 companies that went public in the past five years have an aggregate maket capitalisation (m-cap) of $575 billion, which is over 10 per cent of India's total market value. The brokerage noted that the stock debutants have been generally good performers with average listing gains of 20.1 per cent and average outperformance of 11 per cent over sectoral indices since IPO listings.
"Most of the gains come on listing day itself, and outperformance from listing day closing is nil. PE backed companies IPO at a premium to sector index PE whereas non-PE backed companies come at a discount, but this gap is surprisingly short-lived. The quality of companies has been good with historical 3-year PAT CAGR at 46 per cent, and EPS downgrade in last 3 months is at 4.
8 per cent, which is in line with the broader average," IIFL said. IIFL said the average outperformance over respective sector indices on average for PE- backed companies from the issue price stood at 23 per cent after one-year of listing. The non-PE backed company saw its shares outperforming sectoral index by 30 per cent after 1 year.
If taken from issue date to now, the gap widens corresponding annualised numbers for PE/non-PE backed companies at 1.4 per cent and 17.5 per cent, it said.
IIFL noted that the PE-backed IPOs came at a 30 per cent premium to index PE. On the other hand, non-PE backed companies come at a 13 per cent discount. This explains part of the outperformance of non-PE backed companies after listing, IIFL said.
IIFL said the outperformance from shares of non-PE companies is upfronted -- 25 per cent in 1 month compared with 30 per cent in 1 year. In fact, the listing gain is 23 per cent in non-PE against 16 per cent in PE-backed, suggesting that a good bit of the convergence happening immediately, the domestic broking firm said. "But even after listing, the outperformance of non-PE is notable compared to PE.
If taken from the listing date closing to now, the corresponding annualised outperformance numbers over respective sector indices for PE/non-PE backed companies -4.7 per cent/3.5 per cent," IIFL said.
The biggest new mcap addition from IPOs has come from fintechs and financial services, with 30 companies with $140 billion mcap – notable ones being LIC, SBI Card, IREDA and PB Fintech. Besides, industrials companies commanded $75 billion m-cap, consumer discretionary and IT ($67 billion each) and pharma ($46 billion). The worst performing sectors have been banks, utilities.
Best performing sectors have been real estate, financial services, capital goods and IT, IIFL said..
