Worst IPOs In India: Behind the limelight of success stories and rag-to-riches, billionaires exists a darker, grim version of the stock market.
People lose money in the market every day and this is a well-known fact to those who are experienced in the market. To new investors who enter the market, it can be quite confusing and difficult to digest.
Quite a lot of companies have gone public since the 2020 pandemic swept India, and we’ve compiled a list of the worst-performing IPOs in India that have wiped out lakhs of crores of investor wealth.
In this blog, we’re going to cover some of the worst IPOs in India in terms of how much wealth has been lost since their recent listing.
List Of Worst IPOs In India
IPO Size (Issue Size)
Market Price (As On 04-11-2022)
% Loss since listing
Life Insurance Corporation Of India
₹902 to ₹949 per share
One97 Communications (Paytm)
₹2080 to ₹2150 per share
₹72 to ₹76 per share
Fsn E-Commerce Ventures (Nykaa)
₹1085 to ₹1125 per share
₹462 to ₹487 per share
1. LIC (India)
Coming up on #1 on this list is India’s biggest historical IPO – Life Insurance Corporation Of India. Among all the companies we’ve mentioned here, it has the longest time gap between its founding and its public offering – almost 66 years!
Finance Minister Nirmala Sitharaman announced the proposal to take LIC public in the 2021 Union Budget and it came to fruition in May 2022, when LIC finally went public. The issue size of the IPO was the highest of its time at almost ₹21,008 crores.
The company is listed at a discount as compared to their offer price of ₹901 to ₹949 per share. LIC of India has already lost over 28% of its value from listing to November 2022.
While a 28% loss itself is a sizable number, given the market cap and sheer size of the IPO, it represents a loss of almost $18 billion dollars in investor wealth. It makes LIC one of the largest IPO flops in India as well as Asia.
2. Paytm (One97 Communications)
UPI is one of the most successful payment technologies in the world and its convenience has changed the way we conduct day-to-day transactions. One company that has contributed to this growth is Pay Through Mobile or Paytm.
The company was started by Vijay Shekhar Sharma back in 2010 in New Delhi. They provide a wide range of services including booking online flights, train and bus tickets, DTH and mobile recharge, credit card payments, online shopping, bill payments, and much more.
Paytm’s parent company, One97 Communications got listed in November 2021, barely a year ago. The size of the issue was a mind-boggling ₹18,300 crores, making it one of the biggest IPOs of 2021.
The issue price of the share was between the range of ₹2080 to ₹2150 but it was listed on the markets at a deep discount of ₹1,560 per share, almost a 20% decline from its asking price.
At a 58% loss, this IPO has fallen the sharpest in our list of Worst IPO in India. The company’s losses have consistently widened year on year and will continue to reflect in the company’s share price. In fact, they haven’t booked a profit in well over 5 years.
Zomato – One of India’s largest delivery and online restaurant service companies. The company started as f back in 2010 and connects customers, restaurants, and delivery partners through its website and mobile applications.
Besides food delivery, the company has also transitioned to groceries and high-end ingredients through its subsidiaries BlinkIt and Hyperpure respectively.
Zomato went public almost 11 years after being founded – In July 2021. The company was issuing its shares between the price range of ₹72-₹76 per share. Their total issue size was worth almost ₹9,400 crores.
The stock even listed at a premium when it went public – ₹126 per share! Well close to double what the company was asking before listing.
For a short duration, it climbed and reached an all-time high of ₹169 per share. The stock hasn’t recovered since then and it is trading below the issue price at the moment.
4. Nykaa (Fsn E-Commerce Ventures)
Officially known as FSN E-Commerce Ventures, Nykaa is an e-commerce platform that sells lifestyle, beauty, and self-care products through its online website and applications.
The company was founded by Falguni Nayar, a veteran director with experience at renowned companies such as Kotak Mahindra Capital, Dabur, and Tata Motors.
Coming to the IPO, Nykaa went public a year ago in November of 2021. The total issue size was slightly over ₹5,300 crores at a price range of ₹1085 to ₹1125 per share.
To investors’ delight, it opened at a premium of double its asking price – around ₹2,300 per share! The trend was short-lived and currently, its stock price is almost on par with the issue price.
Since listing, Nykaa’s shares have given a return of -52%, translating to losing over half its value.
Delhivery is a logistics company that was founded in Delhi over 11 years ago. The company began operations through offline delivery from stores and local restaurants to customers’ homes.
After e-commerce took over, they shifted their services to online deliveries of products. The company went on to offer delivery services to large e-commerce giants.
Now coming to the IPO, the company went public recently in May 2022 with an issue size of over ₹5,235 crores.
Their issue price was in the range of ₹462 to ₹487 per share but the stock listed at a premium of ₹541 and within two months, reached an all-time high of ₹688 per share!
The stock only went downhill from there and since listing, it has fallen by over 28% in value, wiping out thousands of crores of investor wealth in the process.
The most basic expectation from an investment is that it should safeguard your principle and these IPOs have so far failed to do that.
With almost 6 weeks to go for 2023, do you think there will be more IPOs that’ll surprise investors and make it to the list of Worst IPOs in India? Let us know below!
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Understanding What Is The Cut Off Price In IPO: An initial public offering is a process that helps an organization make a public offer to investors for the first time to attract investment. In this case, trade is between investors and the original issuer.
Investors are required to get familiar with the terminologies used during the IPO. For example, price band, floor price, issue price, cut-off price, etc. are some of the basic terms which are used when the companies are out with their IPOs.
The price band is the range within which investors are allowed to bid for IPO shares. This range is jointly set by the company and underwriter. In this article, we will understand what is the cut off price in IPO and what is its importance.
What Is The Cut Off Price In IPO?
You might have heard “cut-off price” when companies are out with their IPOs. This is an essential aspect of IPO. The cut-off price is the price at which investors can get shares.
The company finalizes the price once consultations are done with book-running lead managers (BRLMs). The cut-off price in an IPO can be any price within the price band. Investors are required to be aware that this price is different from the floor price.
A floor price is a price at which minimum bids can be made. According to SEBI’s guidelines, retail individual investors are eligible to apply at the cut-off price. Simply put, the cut-off price means the offer price at which shares can be issued to the investors.
IPO book building issue starts with a price range. Every investor is allowed to place bids for desired quantity and in multiples of the lot size. Choosing a cut-off option at the time of applying for the issue exhibits an investor’s willingness to subscribe at any price which can be discovered within the price band through the book-building process.
This eventually increases the chances of getting the IPO allotment. Basically, if an investor selects a cut-off, that investor becomes eligible for allotment at any issued price which can be discovered.
Types Of IPO Pricing In India
To understand what is the cut-off price in an IPO, it is important to understand 2 types of pricing mechanisms that are adopted in India. We have broken it down so that types can be understood in a better way.
1. Mechanism with Fixed Price
In a fixed-price mechanism, the price of the IPO is decided in advance by an organization. It makes an IPO available to the general public. At the time of issuance, this sort of mechanism declares the entire details of investors and the categories they belong to.
In a fixed-price mechanism, there is no requirement of determining a demand for the shares before the issuance date. If the firm decided to go ahead with a Fixed-Price Mechanism, SEBI has mandated that it should set aside 50% of total shares only for retail investors.
2. Book Building Method
In the book-building method, IPO pricing is not determined at the start. In this method, the company announces price ranges at the time of launching an IPO. Later on, investors tend to bid with the help of a price range that falls between pricing bands.
In a book-building method, the issuer needs to identify the price band or a floor price in its red herring prospectus. “Cut-off price” is referred to the actual identified issue price. This can be any price within the announced price range or any price which is higher than the floor price.
After monitoring the book and the desire of investors for the shares, the issuer reaches a decision. However, only the retail category of individual investors can apply at the cut-off price, as per the SEBI rules. Let us understand this method with the help of an example.
If the price range of an IPO has been set at INR300-INR310, an investor can apply for 10 shares (and in multiples) at any price between this range. Let us consider that he chooses INR305. This means that the investor is willing to pay a maximum of INR305 per share.
Therefore, if the decided issue price is less than INR305, he will be allotted the shares. However, if the decided price is higher than INR305, he will not be eligible for an allotment. Therefore, it is advised to choose a cut-off price as this makes an investor eligible for allotment at any issued price.
Role Of Cut-Off Price In IPO
Now that we know what is the cut off price in IPO, it is now time to understand the role of the cut-off price. When an IPO nears its closure, investment bankers tend to start the process of price discovery. However, since a set price has not been established, there are several bids that occur at different values.
How is cut off price calculated?
Investment bankers decide the final price by considering a weighted average of all the offers received. The cut-off price is usually called the ceiling price when the IPOs are quite popular. These IPOs generate bids higher than the number of shares on offer.
Should we bid IPO at cut off price
After the cut-off price has been set, investors who decide to place their bids below the cut-off price will get their money back. This is because the IPO will not be allotted to them. Investors who have placed their bids higher than the cut-off price and got the allocation will be reimbursed for the excess difference.
If an investor believes in the financial position of the company and he/she intends to acquire an IPO at any cost, they are required to choose the option to buy at the cut-off when they fill out an application form. This helps in ensuring that a person is eligible regardless of the cut-off price.
We hope the most common question, “what is the cut-off price in an IPO,” has been answered. Nowadays, most companies decide to go for a book-building method to set the cut-off price of their shares. Book-building method has exhibited adaptability, efficiency, and effectiveness in several circumstances.
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Understand what is new issue market: You already might have heard of the Primary market and Secondary market. The primary market is often called a new issue market. But what exactly is the new issue market?
This article will delve deep into understanding what is the new issue market. Read on to find out more about this market.
Definition of New Issue Market
A new issue market is where a stock or bond is being sold to individuals for the first time. This new issue can either be an Initial Public Offering (IPO) or a new issue floated by an enterprise that has floated several issues in the past. A market that focuses on these new issues is called the new issue market.
On the other hand, the secondary market deals with existing shares and bonds. IPO is the process of offering shares of a private company to the public in a new stock issuance for the first time. Simply put, the primary market is known as the new issue market because securities are sold for the first time in this market.
Now that you have a fair understanding of what is new issue market, let us now look at 3 bodies directly involved in this transaction. The whole transaction in the new issue market is something like this- company raises funds through IPO by selling some of its shares to some of the interested investors.
The cost for the total securities involved in this selling is calculated by underwriters. Therefore, the company, investor, and underwriter are 3 parties involved in the new issue market.
If you want to understand what is new issue market, first it is important to have a glimpse of the functions they perform. The new issue market plays the role in providing both private and public issues.
The new issue market is the place where new and fresh stocks or bonds are offered to the general public for the first time. Apart from these asset classes, the companies can also issue bills, notes, etc.
The underwriters start their work by issuing shares of the company that doesn’t trade on any exchanges. More often than not, these underwriters are investment banks or merchant bankers.
They have a significant role to play in the new issue market. These underwriters take the responsibility of guaranteeing a certain portion of fundraising for the proposed issue. For these services, they earn commissions. Later, these underwriters sell the securities to investors applying for an IPO in the primary market.
The distribution function of new issues can take place in the primary market. Distributions are made by merchant bankers using the Draft Red Herring Prospectus (DHRP). The proposed issue is heavily advertised by conducting investor roadshows.
What Are The Advantages Of New Issue Market?
New issue markets give investors the advantage of investing in a company before it gets listed, among other things. It also allows the company to raise capital with high liquidity.
Some of the advantages of the new issue market are –
Raises Fresh Capital For the Company
Provides new investment opportunities to the public
Lowers cost of capital for companies
By now, you must have had a fair idea of what is new issue market, is and what functions are performed by it. In short, any company can sell securities to raise funds.
This can be done for several reasons such as business expansion or infrastructure development. A new issue market is a place where investors are allowed to purchase securities directly from the issuer.
By choosing to raise funds from the new issue market, the companies can save their interest expenses. The primary market offers the liquidity of securities by IPO.
Apart from these advantages, the securities which have been bought on fresh issues can be sold easily in the secondary market. Therefore, the risk of investment is quite low.
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Understanding the Difference Between IPO and OFS: When a company goes public or decides to go public, we see dollar signs in the air ( or ₹ signs). Whether the IPO performs well or not, investors take the risk and invest in it, hoping that they’re the first ones to hold it and earn returns within a year or two.
A general understanding of IPOs is the generation of capital through public funding. This public funding is done through issuing shares through registered exchanges. Besides IPOs, there are other ways through which a company can raise funds from the stock market.
Specifically, we’re talking about Offer For Sale. But What Is The Difference Between IPO and OFS? Before we jump into the differences let us understand what the primary and secondary markets are.
What Is The Primary Market?
The primary market is where securities are listed for the first time ever i.e., they are going to be traded and bought publicly for the first time. The company which was previously private turned into a publicly listed company. Here, investors can buy directly from the issuing company.
What Is The Secondary Market?
The secondary market is the broad public perception of what we know as the stock market. Here, securities that are already listed are traded from Monday to Friday. (Excluding public holidays and weekends)
The two national exchanges, BSE and NSE are secondary markets. Read More About IPOs here.
What Is An IPO?
A basic understanding of an IPO is this –
A company wishes to raise additional funds from the share market by putting its shares for sale in the primary market for the first time. An IPO is basically the issuance of shares by a private company for the first time in order to list itself on an exchange. Here retail investors like you and I can invest in these companies through the stock market.
What Is OFS?
Now an Offer For Sale is different from an IPO although they both serve the same purpose – Raising Capital. Here a company which is already listed goes for a public offering once again.
But, an IPO raises fresh capital by issuing securities that were not there in the market before. An OFS on the other hand does not issue new securities into the market. Instead, an existing shareholder dilutes their stake in the company through the primary market.
Difference Between IPO and OFS
Let’s try to understand the Difference Between IPO and OFS below. Keep reading!
1. Cost (Expenditure to Company)
An IPO is very cash intensive, with multiple parties involved. This is apart from the company itself. Underwriters, Investment banks, regulatory bodies, legal teams, and marketing teams all involve themselves in taking the company public as well as finding buyers for the issue. The more unaware investors are about the company, the more it has to be marketed for people to be made aware of the IPO as well as its existence.
An OFS, which is usually an internal dealing, incurs the basic dealing charges that occur when securities change hands, especially since the percentage stake in the company is in question. The main concern is that the company must have the securities ready at least two days before the exchange takes place.
2. Rules and Regulations
Here are some of the top requirements to be followed in the case of an IPO:
OFS is valid for only the top 200 companies by market capitalization. Shareholders who hold more than a 10% stake in the company are eligible for an Offer For Sale.
SEBI guidelines state that 25% of shares of the OFS must be kept aside for Insurance and Mutual fund companies and 10% must be reserved for retail investors.
Also, the exchange platforms need to be informed two days before the company officially announces the OFS.
An IPO works quite differently in this regard as well.
It is usually open anywhere from 3-10 days, which varies from company to company. Of the total shares issued, 35% is reserved for retail investors and each retail investor can spend a maximum of ₹2,00,000 rupees on the IPO.
3. Share Allotment
Similar to how businesses have an agreement to sell and buy each other’s services and products at a discounted price than the actual market price, in an OFS, the fair price is below the market price of the securities.
This price is discussed beforehand among the promoters of the company. This fair price is set as the threshold mark below which the shares will not be sold.
Upon deciding the base price of the security, the buyers/investors bid for the stake or give out an offer for sale, which is above the fair price set by the promoters. The winning bidder gets to buy as many shares as they want as there is no limit under OFS.
Now all investors might receive the shares at the same price or it could all be at different prices depending on the clearing costs.
4. Difference In Procedure
An IPO requires the company to use the full scale of its potential in the open market, as it’s a new source of funding. It also poses an exciting opportunity for investors to buy into the company, especially today when you can buy into an IPO online through your broker.
OFS on the other hand is used by companies that are already listed on the stock exchanges. They are not made available to the public and are usually decided by key members of the company i.e., the promoters.
That’s it for this blog on “Difference Between IPO and OFS”. To Read more about IPOs, check out the blog section to go into detail. Happy Investing!
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Ola is the go-to ride-hailing company in India. But can you put your money into Ola besides cabs and scooters?
Ride-hailing services have become a duopoly in India, with two major companies battling for market share in the sector. India is already one of the largest producers and consumers of automobiles, which has only amplified the traffic congestion situation in Tier-1 cities.
This, combined with the cost of fuel and maintenance, makes owning vehicles comparatively expensive to ride-sharing. According to a study by Frost and Sullivan, this industry is expected to be worth $90 billion dollars by 2030. Continue reading to get the answer to the question Is Ola Listed In Stock Market?
About The Company
Ola started off as a ride aggregator, offering discount ride-sharing options across its different taxis, which range from autos/rickshaws to SUVs. To gain a better market share among people, it offered heavy incentives to its drivers and discounted rides to its customers to attract traffic over its competitors.
Previously, the ride-sharing industry was largely unorganized and dominated by small players such as Rickshaw drivers and travel agencies. Ola was founded on December 3rd, 2010 by Ankit Bhati and Bhavish Aggarwal under the name ANI Technologies Ltd.
The unicorn has raised billions of dollars of funding through investment firms like Segantii Capital Management, Arrow Capital Partners, Softbank, and Edelweiss Financial Services.
They started off as a ride-sharing business and recently entered into the EV segment as well. In 2021, Ola launched its line of EV scooters, after the emergence of EVs in India.
Companies Acquired By Ola
In the past 7 years, from 2015 to 2022, Ola has acquired eight companies including Foodpanda, Ridlr, Geotagg, TaxiForSure, and Avail Finance.
How much has Ola raised?
Ola is one of the elite startup companies that has achieved unicorn status. A unicorn is a startup that is valued at + $1 billion dollars and above. So far, according to Crunchbase, Ola has received $5 billion dollars in funding. This is through 29 rounds of funding from over 60 investors.
Is Ola Listed In Stock Market?
Coming to the point in hand, Is Ola Listed In Stock Market?
While Ola’s main competitor Uber is listed on The New York Stock Exchange in America, Ola is still a privately held startup and is not yet listed in the stock market. The company does plan on going public in the near future and is even venturing into the manufacture of EV cars, hinting at a launch on August 15, 2022.
When will Ola Go Public?
Ola planned on going public in the first half of 2022, according to the company CEO Bhavish Aggarwal. But that has been delayed after controversies surrounding the startup’s EV scooters malfunctioning, according to multiple customers online. OLA Cabs IPO is one of the most awaited IPOs in Indian stock market.
What Is Ola Share Price?
Ola is currently not a listed company so the current Ola share price is unavailable. The cab aggregator’s plans to go public have been delayed as of now so the estimated issue price is uncertain as well.
In India, Uber is Ola’s largest competitor, and the two companies combined to hold a strong presence as ride-aggregators.
Other smaller competitors are Meru Cabs, Savaari Cab Rentals, Mega Cabs, Tab Cab, NTL Taxi, etc.
Now that’s not Ola’s only business. They have also recently ventured into the EV segment, with their own line of electric scooters. They’re directly in competition with companies like Ather, TVS, Okinawa, and Revolt Motors. They have even announced the launch of their own electric car which will be launched in the near future.
Startups tend to wait for years together before having a steady business model that works for them. Upon that, going public is taking the company to the next level, literally. With the saturation of the ride-sharing market, Ola decided to divest into other sectors, particularly Electric Vehicles.
We hope that answers your question “Is ola listed in stock market?”. Happy Investing!
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How Have IPOs performed in 2022: Fluctuating market circumstances have caused a major decrease in IPO activity in the first trimester of 2022 after record-high activity levels in 2021. Statistics show that in 2021, 63 Indian companies made an initial public offering (IPO) and raised a total of 1.19 lakh from investors. So far, just 12 IPOs in 2022 have been issued in the Indian market.
Life Insurance Corp. is looking at a mid-May schedule for an offering expected to collect as much as 654 billion rupees ($8.5 billion) for the Indian government by March’s close. According to statistics published by Bloomberg, initial public offerings (IPOs) have resulted in the raising of around $65 billion throughout the globe so far in 2022.
This is a 70% decrease from the $219 billion raised in the first three months of the previous year. During the first quarter of 2022, the global initial public offering (IPO) market saw 321 transactions that raised US $54.4 billion in proceeds, representing a drop of 37% and 51%, respectively, year on year (YOY).
The abrupt turnaround may have been caused by several factors, some of which are new while others are more ingrained. This article tries to give an overview on How Have IPOs performed in 2022 so far.
EY, a global consulting firm, says that the rise in geopolitical tensions, the volatility of the stock market, price corrections in overvalued equities from recent IPOs, raising concerns about an increase in commodity and energy prices, the effect of inflation, and likely interest rate hikes, and the COVID-19 pandemic risk are all holding back a full economic recovery around the world.
In the first quarter of 2022, 37 agreements were completed, generating the US $2.4 billion, a 72 percent decrease in the number of deals, and an 89 percent decrease in the amount of money raised compared to the same period the previous year.
Area totaled 188, a reduction of 16% in volume but an 18% gain in total proceeds YOY. According to statistics gathered by EY, IPO activity in the EMEIA market in Q1 2022 registered 96 transactions and generated US $9.3 billion in proceeds, a decrease YOY of 38% and 68%, respectively.
So, let us dive into this article to learn more about How Have IPOs Performed in 2022. Continue reading for more information.
Forces that may Affect IPOs’ Performance in the Coming Months
Considering how bad IPOs have performed so far in 2022, one would expect that a recovery will happen. However, some forces may affect how IPOs perform in the coming months, and some of those forces are already at play.
The current volatility in the stock market is unwelcome news for IPO hopefuls. Since coming public, numerous IPOs have dropped significantly below their initial offer price. “The public markets are turbulent. “That correlates with fearing,” said Wharton’s David Hsu. In other words, “companies do not want to bet on the outcome of their float.”
Another concern, as cited by Wharton’s David Hsu, is the possibility of additional COVID variations and the prospect of increased interest and inflation rates. As a result of the conflict in Ukraine, some firms have already postponed or canceled their initial public offerings (IPOs).
Investors’ confidence in the IPO market has been rattled by recent SEC steps to restrict SPACs and the potential for future capital market restrictions. The SEC has suggested a series of measures to “level the playing field” between SPACs and regular IPOs, which have less stringent compliance needs. A 60-day consultation process has begun on the idea.
Shock Losses that May Await IPO Investors from New Listings
According to experts, the freshly listed companies are expected to suffer further losses in the months ahead. As a result of the fact that some of the firms that went public have not yet made a profit, the markets and investors may be even more dissatisfied with the profits those companies report over the next several months.
As a result of the interaction of a variety of macro variables, FIIs and DIIs do not know how much money IPO-bound firms or other businesses that are not yet publicly traded will make. This is according to Manoj Dalmia, the founder, and director of Proficient Equities Private. Noting that the earnings for the following quarters will be the turning point for market conditions for initial public offerings (IPO) and markets in general.
As companies like LIC, Delhivery, and Veranda Learning Solutions that had just gone public announced their profits for the March quarter, investors became even less optimistic.
During the March quarter, LIC’s net profit was Rs 2,409 crore, a decrease of 17 percent from the previous quarter. Both Delhivery and Veranda Learning Solutions said they had lost 119 crores and 20 crores, respectively.
Adani Wilmar was an exception in this regard. As a consequence of the conflict between Russia and Ukraine, the price of edible oil increased during the March quarter, which led to an increase in the company’s profit of forty percent. But this particular piece of news could hurt most other businesses in the same industry, which could mean less money, higher prices for raw materials, and other problems.
More than just the conflict in Ukraine, the lack of available funds is also affecting the values of firms with solid fundamentals; nevertheless, initial public offerings (IPOs) that were priced too high will continue to suffer even more once results are reported.
From this article, it is a no-brainer to see how poorly IPOs performed in 2022. Many investors will be hopeful, but it is a thin line between what to expect and if there will be any turns of events.
Global markets are all at the mercy of growing inflation, which brings about a decreased level of purchasing power. Many companies, including even startups, have started to lay off workers because of the current volatility in the market.
So, that’s all for today. We hope you liked our article on How Have IPOs performed in 2022, do let us know your views in the comment section below.
As to how IPOs will perform in the coming months, we think you already know the answer. Get more updates and keep yourself updated with the Fingrad blogs section.
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