Stocks

Will anchor investors trigger sell-off in recently-listed IPOs as lock-in term ends?

Suresh P. Iyengar | | | Updated on: Dec 07, 2021
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Offloading by anchor investors may lead to spurt in floating stock and may depress prices

 

The capital market will put to test investors frenzy for initial public offering witnessed last month as the mandatory one-month lock-in of anchor investors expires progressively from Wednesday. Traditionally, the highly sophisticated anchor investors, who invest substantially in IPOs before they open for retail investors, rush to book profit partially after the lock-in period.

Last month, about 10 firms had raised ₹36,100 crore through IPO, buoyed by a sharp rally in the secondary market. In most of the issues, the anchor investor portion was oversubscribed multiple times.

Five companies – Fino Payment Bank, SJS Enterprises, One97 Communications, Sapphire Foods and Tarson Products – which were listed last month, are trading below the issue price and may face further heat if the anchor investors prefer to press the sell button.

Signal to retail investors

In fact, the anchor investment trend in a company’s public issue provides the much-needed signal and confidence for retail investors to put in their hard-earned money in a company’s business.

VK Vijayakumar, Chief investment Strategist, Geojit Financial Services, said stock behaviour post lifting of the lock-in depends on various factors such as valuation and market sentiments. Stocks will come under selling pressure and drift down if valuations are excessive, as they are in many cases now.

Low floating stock is an important reason for the irrational valuations of some stocks. With lock-in getting lifted, floating stock increases and this in turn may drag prices down, he added.

 

Only one-fourth of IPOs are up

Since January, only 10 of the 41 issues have managed to close in green on the day when anchor investors lock-in was lifted, according to a Edelweiss Alternative Investment Research study. Shares of FSN E-Commerce Ventures (Nykaa), which listed at 79 per cent premium at ₹2,001 a share over the issue price of ₹1,125, is already facing the heat with the anchor investors lock-in being lifted on Wednesday. Shares of Nykaa, the online beauty e-commerce platform, were down two per cent at ₹2,140 on Tuesday.

On Thursday, anchor investors of One97 Communications (Paytm) will be free to sell their shares in the open market. The anchor portion of Paytm was oversubscribed 10 times after attracting investment of ₹8,235 crore. Incidentally, Paytm, which already had a poor debut with the stock price crashing 27 per cent to ₹1,564 against the offer price of ₹2,150 on listing day, was down two per cent at ₹1,577 on Tuesday.

Similarly, SJS Enterprises and Tarsons Products dipped three per cent and two per cent to ₹429 and ₹612, respectively. Sapphire Foods was the only exception as it closed with a gain of seven per cent at ₹1,130.

Published on December 08, 2021

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