Mid-, Small-Cap Selloff Drives Half Of 2024 IPO Stocks Below Issue Price

The bloodbath triggered by concerns of froth in the small- and mid-cap stocks has left investors in the initial-public-offering space scrabbling for profits.

Ten of the 21 companies that went for the public offer this year have seen their market prices trade below their IPO price, even as the equity markets scaled new highs.

This comes after a panic selling of investors after the market regulator warned of "froth" in the system. This was later followed by a stress test for all asset management companies dealing with small- and mid-cap funds.

Capital Small Finance Bank Ltd., Entero Healthcare Solutions Ltd., JG Chemicals Ltd. and Gopal Snacks Ltd. are among the companies that saw their price fall below their IPO price after their issue.

Krystal Integrated Services Ltd., Platinum Industries Ltd. and Rashi Peripherals Ltd. did not see a major change and were trading around their issue price. However, BLS E-Services Ltd. and Jyoti CNC Automation Ltd. saw their prices double since their listing.

The BSE IPO, a gauge that tracks the performance of companies for two years after their offering, saw a deep dip in March after SEBI's warnings about the valuations in the SMIDs.

The index, which was at a peak of 14,181 on Feb. 6, saw a 12% decline during mid-March. On a year-to-date basis, the index advanced 2.83%.

So far in 2024, companies that raised smaller capital witnessed a huge subscription, while the companies that raised huge sums saw a muted subscription.

While the markets hit new highs in 2023, India recorded the fourth-highest number of initial public offerings in the year. By value, however, the mop-up fell over 2022.

While the valuations were the bigger concern for the selloff in March, the trigger for the broader markets comes from the regulatory comments regarding froth in the mid-and small-cap space.

The Securities and Exchange Board of India asked mutual funds to proactively protect investor interest amid "froth" building up in the broader end of the Indian equity market. The market regulator has asked AMCs to be cautious and consider moderating flows and rebalancing portfolios.