Nineteen of the top 30 IPOs by size failed to generate excess returns when compared to the returns from the CNX500 index, according to a report. The largest and most high-profile of them was Reliance Power, which delivered a negative return, said Capitalmind Financial Services, a wealth management firm, in a report.
Only two of the top 10 have generated returns greater than the CNX500.
Coal India (NS:COAL) just about doubled in price over 14 years but does much better with its dividends. Even then, it just about matches the index.
"Zomato (NS:ZOMT) is the only top 10 IPO that has delivered meaningful excess returns. Other big winners out of the top 30 are Hindustan Aeronautics (NS:HIAE), Indian Railway Finance Corp, Sona BLW Precision Forgings (NS:SONB) and ICICI Lombard," says in a report.
Further, the report added that five of the top 10 IPOs come from the last two years. Most have done well, including Bajaj Housing Finance, Bharti Hexacom and Brainbees or First Cry, thanks in no small measure to a favourable market.
Investments & Head of Research of Capitalmind Financial Services Anoop Vijaykumar said: "Overall, big IPOs have failed to deliver excess returns for the investors. IPOs abound in bull markets since they get optimistic valuations and most late-stage bull markets are characterised by a few large IPOs which tend to be valued optimistically ".
"When those earnings rise to justify those valuations do not emerge, combined with a mean-reversion in broader markets, high-profile IPOs end up delivering lower than expected returns," he added.
On an industry basis, financials have been the largest sector of public market fund-raising for a long time. Even in 2024, this proportion remains at 27 per cent. Interestingly, consumer companies of both cyclical and noncyclical type have emerged as the biggest industry category in 2024 so far. Consumer companies have accounted for 34 per cent of funds raised in 2024. The next is financials at 27 per cent, while industrials stand at 14 per cent.
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