Best IPOs Performance since 2019
IPOs that more than doubled the wealth of Investors since 2019 are listed below
Primary Market
Performance of stocks listed in last three years
Primary Market participants take utmost benefits of price discovery mechanism of IPO listings. Most of the times they earn good listing gains. But sometimes things don’t work in their favor. Either Market conditions don’t support or valuations seems too high. IPOs listed in discount, keep breaking down further. Hence Investors take losses and exit rather than holding those stocks and facing big losses further. There were also IPO Opportunities in which Primary Market investors have made 50-80% listing gains. Exiting the Stocks listed on Discount during IPO listing is easier decision than to decide EXIT strategy of Stocks which list at high premium and still see further buying interest. Booking partial profits and holding rest of the stocks with Stop loss is common practice to deal such situation. If your pocket permits you can hold those stocks for long term. Very few people manage to do it. As per human psychology Riding Profits is more difficult decision that sitting on losses for long times. This is due to fear of losing Listing Gains which are visible in front of you. Only deep pockets allow some investors to overcome this fear. When we see Technical Analysis Expert Prakash Gaba Sir holding HDFC bank stocks from IPO times, we feel, “Oh ! I wish I could do that too”. It is easy to say but hard to do. Can we hold stocks listed in IPO for atleast 3 years? OK, Let’s check out how IPOs in the last three years performed to understand this. I have uploaded IPOs which are listed in Calendar years 2019,2020, 2021 and recent listings upto 25th Sept 2022. Total 118 stocks listed in the above mentioned period and their absolute returns is shown in the tables. Please note, I am discussing only those IPOs in details which have doubled the wealth of Investors. First let us see how IPOs listed from 2019 performed. You can see 85 stocks are still trading in profits since their listing prices; 32 Stocks out of these 118 stocks have doubled the wealth of Investors. 33 stocks out of 118 are trading in Negative which amounts to 27% of the total IPOs listed. But Prices of 8 out of them have more than halved which can be termed as very heavy losses. PayTm (-68%), Survoday Small Finance Bank (-67%), Cartrade Tech (-60%), Fino Payments Bank (-58%), Sterling and Wilson Solar (-57%), AGS Transacts technologies (-52%), Windlas Biotech Ltd (-50%) and PB Fintech Ltd (-50%) are the stocks which are down by more than 50% since their listings. As I mentioned in the start of this paragraph, we will discuss stocks that gave more than 100% returns in details now. For easier analysis, I have shared more details about them in the separate post here. Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered Research Analyst. He is NSE’s Certified Investment Analysis Professional, NSE’s Certified Marketing Professional Level-4, AMFI registered Mutual Funds Distributor, Authorized Person at IIFL securities ltd, MBA and B.Tech. This post is for educational purpose. Please consult your financial advisor before taking any investment or trading decision. Thank you.
Why to invest in Bonds?
Salaried people who are afraid to take risk in direct equity investments prefer investing through Mutual Funds. But, as you are aware Mutual Funds are subject to Market risks. Therefore for highly conservative investors Bond Market is really important avenue of Investment. Most of the big Politicians and Bollywood celebrities in India prefer to invest in Bonds. Unfortunately, retail investors have very minimum understanding of bonds and secondly they prefer SIP route of Investment in Mutual Funds over Lumpsum investment in Bonds irrespective of Low risk and fixed returns. Today in this post we will discuss some basics of Bonds. What are Bonds? Bonds are investment securities where an Investor lends money to a company or a Government for a set period of time, in exchange for regular interest payments. On the Maturity of period, issuer returns investor’s money. Bonds represent a loan from the buyer to the issuer of Bond. It does not give ownership rights like stocks. Why Bonds? Bonds provide higher returns than Fixed and Recurring deposits. They beat inflation rate. Bonds provide a steady and regular source of income to conservative investors. Bonds give assured returns as they aren’t linked to Market fluctuations. They are less-risky asset. Bonds help in diversify the Investment Portfolio. Bond are often liquid source of investment. There are variety of bonds available in the bond Market for different needs of Investors. Some bonds can be used to save taxes. Bondholders enjoy legal protection in case of default. What are Bond Markets Bond Market is a Market where debt securities like Government bonds and Corporate bonds are traded. Governments and Corporates raise long-term capital from issuing bonds in Bond Markets. In Primary bond market original bond issuer sells bonds directly to the buyer while in Secondary market bonds issued in primary market are traded further. Bond Market is less risky and less volatile compared to Share Market. It provides good opportunity to conservative investors to diversify their portfolio. Points to remember before investing in bonds Investors should first do their risk-profiling to understand how much percentage of their investment needs to be allocated to debt instruments. They should check whether their investment philosophy allows them to be tolerant towards bonds investment which demands long term commitments. What are the important points of the bonds you are opting? Investment horizon, minimum amount, coupon rate, frequency of interest payment, maturity clauses, any taxes, mode of payments, tradability, credit rating etc. Whether coupon is floating or fixed type of interest? Whether the Bond falls under secured category or unsecured category? What will happen in case of Default? Any legal protection available in such case? and so on. We will see more details about Bond Market in India in future posts on this blog. This was just a basic introduction. If you liked the post, feel free to subscribe to this blog and YouTube channel of Stocksbaazigar. Standard Disclaimer: This blog is for educational purpose. Investors should consult their financial advisors before taking any investment decisions. This is not recommendation post and Stocksbaazigar is not responsible for any profit/loss of the reader. Thank you.
How to open an account with Depository Participants?
Any investor who wishes to avail depository services must first open an account with depository participants of NSDL and CDSL The investor can open an account with any depository participant of NSDL and CDSL. An Investor may open an account with several DPs or he may open several accounts with a single DP. The investor has the freedom to choose a DP based on criteria like convenience, comfort, service level, safety, reputation, and charges. After exercising the choice, the investor has to enter into an agreement with the DP. Types of accounts with DP Types of depository account depend on the operations to be performed. There are three types of demat accounts which can be opened with a depository participants wiz. 1. Beneficiary Account 2.Clearing Member Account 3.Intermediary Account A DP may be required to open three categories of accounts for clients – Beneficiary account, clearing member account and intermediary account. A beneficiary account is an ownership account. The holder/s of securities in this type of account own those securities. A Clearing Member Account and Intermediary Accounts are transitory accounts. The securities in these accounts are held for a commercial purpose only. A Clearing Member Account is opened by a Broker or a Clearing Member for the purpose of settlement of trades. An Intermediary account can be opened by a SEBI registered intermediary for the purpose of stock lending and borrowing. Documents for Verification For the purpose of verification, all investors have to submit the following documents along with the prescribed account opening form. Proof of Identity – A beneficiary account must be opened only after obtaining proof of identity of the applicant. The applicant’s signature and photograph must be authenticated by an existing account holder by the applicant’s bank or after due verification made with the original of the applicant’s valid passport, voter ID, driving license or PAN Card with a photograph Proof of Address – The account opening form should be supported with proof of address such as verified copies of ration card/ passport/ voter ID/ PAN card/driving license/ bank passbook. An authorized official of Participants, under his signature, shall verify the original documents. In case any account holder fails to produce the original documents for verification within the aforesaid period 0f 30 days, it must be immediately brought to the notice of NSDL. Failure to produce the original documents within the prescribed time would invite appropriate action against such account holder, which would even include the freezing of their accounts Client Types in Depository System There are several client types in the depository system and different codes are allotted to them. These are listed below. 1)Resident – Ordinary and HUF 2)Financial Institutions – Govt sponsored FI, State FCs, other 3)FIIs – Mauritius-based, Others 4)NRI –Repatriable, Non-Repatriable, Depository Receipts 5) Body Corporate – Domestic Company, Overseas Corporate Body, Repatriable, Govt company, Central Govt, State Govt, Co-operative body, NBFC, Non- NBFC, Broker, Foreign Bodies, Group companies, others, OCB – Non-repatriable, Depository Receipt 6) CM (Clearing Member) 7) Foreign National – Foreign National/Depository Receipt 8) Mutual Fund – Foreign National/ Depository Receipt 9) Trust 10) Bank – Foreign Bank, Co-operative bank, Nationalized bank, Other 11) Intermediary These are several client types in the depository system and different codes are allotted to them as above. No minimum balance is required for opening a depository account. After verifying the form and the documents DP opens the account of their clients.
Allotment Procedure in IPO
There are different segments of Investors who invest in IPOs. The three important segments are Retail Investors, Qualified Institutional Buyers, and Non Institutional buyers. As per SEBI guidelines, there are a different set of allocation rules for different types of Book Building Issues. An issuer can issue securities to Investors in two ways: 100% book building and 75% book building (of the net offer to the public). We will see, these 3 important cases of allotment procedures below. Case 1: Issuer company makes an issue of 100% of the net offer to the public through 100% book building process. Allocation: Not less than 35% of the net offer to the public to Retail individual investor. Not less than 15% of the net offer to the public to NonInstitutional Investors i.e. investors other than retail individual investors and qualified institutional buyers. Not more than 50% of the net offer to the public to Qualified Institutional Buyer (out of which 5% to be specifically allocated to mutual funds) However 50% of net offer to the public shall be mandatory allotted to the qualified institutional buyers. Case 2: Issues made under Rule 19(2)(b) of Securities Contract Regulation, Rules 1957, with 60% mandatory allocation to Qualified Institutional Buyers (out of which 5% to be specifically allocated to mutual funds) Allocation: The percentage allocation to retail individual investors and non-institutional investors shall be 30% and 10% respectively. Case 3: CAn issuer company makes an issue of 75% of the net offer to public through book building process and 25% at the price determined through book building. Allocation: In the book built portion, not less than 25% the net offer to the public to non qualified institutional buyers. Not more than 50% of the net offer to the public to Qualified Institutional Buyer (out of which 5% to be specifically allocated to mutual funds) The balance 25% of the net offer to the public offered at a price determined through building to retail individual investors who either not participated or have not received allocation, in the book built portion.
Primary Market Prospectus
A large number of new companies float public issue. Most of these companies are genuine, but quite a few may want to exploit the investors. Therefore it is important for Investors to obtain detailed information about a Company before investing i it. What is Prospectus? As per the guidelines issued by SEBI (Securities and Exchange Board of India), it is mandatory for disclosure to the public. This disclosure includes detailed information like the reason for raising the money, the way money is proposed to be spent, the return expected on the money etc. This information is in the form of ‘Prospectus’. It acts as both, a disclosure document and a marketing document. It required to contain a detailed description of the business, its current and past performance, the projects, cost of the projects, means of financing, product and capacity etc. It must also give a description of management structure, management salaries, operations, and financial conditions, dividend policy and Market capital of the company etc. It should also include information regarding the size of the issue, the current status of the company, its equity capital, details of promoters, underwriting, statutory compliances etc. It normally starts with a table of contents, definitions, risk factors, the summary of an issuer and financial data. This is followed by a detailed disclosure under three sections.: a)Issue Structure b) Issuer Information c) General and Statutory Information This way the Offer document covers all the relevant information to help an investor to make his/her investment decision. ‘Draft Offer document‘ Draft offer document means the offer document in draft stage. The draft offer documents are filed with SEBI, atleast 21 days prior to the filing of the Offer Document with Registrar of Companies (ROC)/ Stock Exchanges (SEs). The Draft Offer document will be available on the SEBI website for public comments for a period of 21 days from the filing with the Draft Offer document with SEBI. SEBI may specify changes if any which Company with the help of Merchant Banker shall carry out before submitting offer document to the ROC/SEs Abridged Abridged Prospectus is shorter version of Prospectus. It contains all the salient features of a Prospectus. It accompanies the application form of public issue. Red-Herring Red Herring Prospectus is a prospectus which does not have details of either price or number of shares being offered or the amount of issue. Shelf A Prospectus in respect of which the securities or the class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus is called as Shelf Prospectus.
Primary market Intermediaries
Capital Market intermediaries are the important link between the regulators, issuer, and investor. SEBI has issued regulations in respect of each intermediary to ensure proper services to be rendered by them to the investors and the capital market. In this post, we will learn about some primary market intermediaries. The following market intermediaries are involved in the primary market: Merchant Bankers/Lead Managers Registrars and Share Transfer Agents Underwriters Bankers to the Issue Debenture Trustees etc. Merchant Bankers Merchant Bankers play an important role in the issue management process. Merchant Bankers are mandated by SEBI to manage public issues (as lead managers) and open offers in take-overs. Apart from these, they have other diverse services and functions. These include organizing and extending finance for investment in projects, assistance in financial management, acceptance house business, raising Euro-dollar loans and issue of foreign currency bonds. Lead Managers (Category 1 merchant bankers) has to ensure correctness of the information furnished in the offer document. They have to ensure compliance with the SEBI Rules and regulations and also guidelines for Disclosure and Investor Protection. To this effect, they have are to submit to SEBI a Due Diligence Certificate confirming that disclosures made in the draft prospectus or letter of offer are true, fair and adequate to enable the prospective investors to make a well-informed investment decision. Regulation: Merchant Bankers are one of the major intermediaries between the issuer and the investors, hence their activities are regulated by SEBI (Merchant Bankers) Regulations, 1992 Guidelines of SEBI and Ministry of Finance Companies Act 1956. Securities Contracts (Regulation) Act, 1956. and so on. Criteria for Merchant Banker: Regulation 3 of SEBI (Merchant Bankers) Regulations, 1992 lays down that the application by a person desiring to become merchant banker shall be made to SEBI in the prescribed form seeking a grant of a certificate of registration along with a non-refundable application fee as specified. The applicant shall be a body corporate other than NBFC The applicant has the necessary infrastructure like adequate office space, equipment’s and manpower to effectively discharge his activities. the applicant has in his employment a minimum of two persons who have the experience to conduct the business of the merchant banker. The applicant shall be a net worth of not less than 5 Crore rupees. The applicant, his director, partners, or principal officer is not involved in any litigation connected to securities market the applicant, his director, partner, or principal officer has not any time been convicted for any offence involving moral turpitude or has been found guilty of any offence. the applicant has the professional qualification from an institution recognized by the Government of Finance, Law or Business Management. the applicant is fit and proper person grant of certificate to the applicant is in the interest of investors Registrars and transfer agents R & T agents form an important link between the investor and issuer in the Securities Market. R & T agent is appointed by the issuer to act on its behalf to service the investors in respect of all corporate actions like sending out notices and other communications to the investors as well as dispatch of dividends and other non-cash benefits. R & T agents perform an equally important role in the depository system as well. R & T agents are registered with SEBI in the terms of SEBI (Registrars to the Issue and Share Transfer Agents) Rules and Regulations, 1993. Underwriters Underwriting services are provided by some large specialists financial institutions such as banks, insurance or investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability arising from such guarantee. Securities underwriting is the process by which investment banks raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equities and debt capital). The services are typically used during a public offering in the primary market. Underwriters are required to register with SEBI in terms of SEBI (Underwriters) Rules and Regulations, 1993. Bankers to the Issue Bankers to an Issue means a scheduled bank carrying on all of the following activities: acceptance of application and application money acceptance of allotment of call money refund of application money Payment of dividends or interest warrants etc. The activities of the Banker to an issue in the Indian Capital Market are regulated by SEBI (Bankers to an issue) Regulations, 1994 Debenture Trustees Debenture Trustee means a Trustee of a Trust deed for securing any issue of debentures. Debenture trustees call for periodical reports from the body corporate takes possession of trust property in accordance with the provisions of the trust deed enforce security in the interest of debenture holders do such acts as necessary in the event the security becomes enforceable carry out such acts as are necessary for the protection of debenture holders and to do all things necessary in order to resolve the grievances of the debenture holders. ascertain and specify that debenture certificates have been discharged within 30 days of registration of the charge with ROC ascertain and specify that debenture certificates have been discharged in accordance with the provisions of the Company Act ascertain and specify that interest warrants for interest due on the debentures have been dispatched to the debenture holders on or before the due date and so on. To inform SEBI in case of breach of Trust Deed and take measures accordingly. The activities of Debenture Trustee in the Indian Capital Market are regulated by SEBI (Debenture Trustees) Regulations, 1993.
Flow chart of IPO Process
The process of offering shares in a private corporation to the public for the first time is called Initial Public Offering (IPO). Flow Chart of IPO Process Approval of Board: An approval of the Board of Directors of the company is required fo raising capital from the public. Appointment of Lead Managers: The Lead Manager is a Merchant banker who orchestrates the issue in consultation with the company. Appointment of other Intermediaries: Several intermediaries facilitate the IPO process. A company secretary, an underwriter, bankers, brokers, registrars etc. are selected. Filing of the Prospectus with SEBI: All the companies seeking to make a public issue have to file their offer document with SEBI. The Offer document or Prospectus communicates the information about the company and the proposed security issue to the investing public. Filing of the Prospectus with Registrar of Companies: Once the SEBI and Stock Exchanges gives approval to the prospectus, offer document, must be filed with the Registrar of Companies, along with required documents by the Companies Act, 1956 Filing of Initial Listing Application: Within 10 days of filing the prospectus, the initial listing application must be made to the concerned stock exchanges, along with the initial listing fees. Promotion of the Issue: To promote the issue the company holds conferences for brokers, press, and investors. Advertisements are also released in newspapers and periodicals to generate interest among potential investors. Statutory Announcement: The Statutory announcement of the issue must be made after seeking the approval of the lead stock exchanges. This must be published at least 10 days before the opening of the subscription list. Collection of Applications: During the period of subscription, the bankers to the issue collect application money on behalf of the company. While the managers of the issue, with the help of registrar, monitor the situation. Information is gathered about the number of application received in various categories, the number of shares applied for, and the amount received. Processing of Applications: The applications forms received by the bankers are transmitted to the registrars of the issue for processing. This mainly involves scrutinizing the applications, coding the applications, preparing a list of applications with all the relevant details. etc. Establishing the Liability of Underwriters: If the issue is undersubscribed, the liability of the underwriter has to be established. Allotment of Shares: According to SEBI guidelines, one-half of the net public offers have to be reserved for applications up to 1000 shares and the balance one-half for larger applications. For each of these segments, the proportionate system of allotment is followed. Listing of the issue: The detailed listing application should be submitted to the concerned stock exchanges along with the listing agreement and the listing fee. The allotment formalities should be completed within 30 days after the subscription list is closed or such extended period as permitted by the lead stock exchanges. STAGES OF THE IPO 1) Pre-issue Due Diligence Draft Offer document to be filed with SEBI Final Offer document to be filed with SEBI Application for listing with Stock Exchange Promoter’s Contribution to be brought in prior to the issue Appointment of Compliance Officer In-Principal approval from Stock Exchange to be obtained and filed with SEBI Issue Advertisement Book-building and Bidding processes to be followed 2) Issue Subscription list to be kept open for at least 3 days Issue open with in the time prescribed 3) Post-Issue Monitoring reports to be submitted to SEBI Final Post issue monitoring reports Post Issue Advertisements Dispatch of shares certificates etc. and allotment of the documents.
Advantages and disadvantages of going public
The first public offering of equity shares of a company, which is followed by a listing of its shares on the stock market, is called the Initial Public Offering (IPO). Often going public is the best choice of growing business. The decision to go public is a very important business financing strategy of a company. Therefore we must discuss the Advantages and Disadvantages of going public. Advantages of going public Lets first discuss some advantages of going public: 1) Access to Capital: The principal motivation for going public is to have access to larger capital. A company that does not tap the public financial market may find it difficult to grow beyond a certain point for want of capital. The biggest advantage of going public is the capital raised. 2) Respectability A company which goes public commands respectability. Pubic companies offer more growth potential compared to non-public companies. Hence they can attract superior talent. 3) Exploit the opportunity Many companies are usually started privately by their promoter(s). When a non-public company recognizes that other companies in the industry are overpriced. It has an incentive to go public and exploit that opportunity 4) Scope for diversification When a company goes public, original owners, investors, managers etc. can cash out of the firm and build a diversified portfolio. 5) Reality Check from Market Market forces decides stocks prices of the companies which are publicly listed. Managers can use this information as a feedback for the improvement of the company. 6) Reduces the Marketing cost Going public attracts media attention. Business Newspapers, TV Channels, Websites, Magazines etc. focus on public companies for providing information to the Investors. This increases the exposure of the public listed companies and their products. 7) Helps Business growth Going public gives companies an increased availability of capital which can be used for building a competitive edge and increasing the market share by increasing the market penetration. 8) Increases Network Public companies can build a great network of suppliers, distributors, and partners due to their reputation as a Publicly listed company. 9) Ability to take advantage of market price fluctuations: Once public, a company can take advantage of market price fluctuations to sell stock when the markets are hot, buy back the stock when the market is cold. This can often be an effective and low cost way to raise significant capital. Disadvantages of going public A public company (or, more precisely, a listed company) is not an unmixed blessing. There are several disadvantages to going public 1) Adverse Selection Investors, in general, know less than the issuers about the value of companies that go public. Hence to stimulate interest and participation of Investors, companies has to under price its securities. 2) Loss of Flexibility The affairs of a public company are subject to fairly comprehensive regulations. Hence when a non-public company is transformed into a public company there is some loss of flexibility 3) Disclosures Public companies must make extensive disclosures and submit to stringent regulations. They are required to disclose a lot of information to investors and regulator. They can not keep secrecy of their expansion plans and product marketing strategies. 4) Accountability Understandably, the degree of accountability of a public company is higher. It has to explain a lot to its investors. Investors who want to see the rise in their share prices often scrutinize every action of management 5) Public Pressure Because of its greater visibility a public company may be pressurized to do things that it may not otherwise do. It really upsets the Entrepreneurs who started those businesses. Market pressure can compel Management to focus on short-term results instead of long term growth. 6) Expenses The cost of complying with SEBI rules and regulations is high and it is getting higher. The cost of going public is substantial both initially and on an ongoing basis. Fees of financial reporting documents and investors relations, stock holding meetings, and other expenses are significant. These are some of the disadvantages of going public.
Primary Market
Capital Market can be broadly divided in Primary Market and Secondary Market. What is a Primary Market? The Primary Market is the part of Capital Market that deals with the issuance of new securities and then sold to investor directly by the issuer. It is also known as a New Issue Market. In this Market, Investors buy securities that were never traded before. New Issue Markets are facilitated by underwriting groups, consisting of investment banks that set a beginning price range for a given security and oversee its sale to investors. Once the initial sale is complete, further trading is conducted on the secondary market. Investors typically pay less for securities on the primary market than secondary market. What is the role of the ‘Primary Market’? It issues new securities on an exchange for companies, Government and other groups to obtain financing through debt-based or equity-based securities. It provides the channel for sale of new securities. It create long term instruments through which corporate entities raise funds from the capital market. It provides the issuers the opportunity to raise resources to meet their requirements of investment and/or discharge of some obligation. They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt etc. They may issue the securities in domestic market and/or international market. Ways of raising funds through Primary markets Corporate entities raise funds from New Issue Market in three ways. Public Issue: A stock exchange lists the securities and corporate raises funds through Initial Public Offering (IPO). Rights Issue: Existing shareholders are offered more shares at a discounted price and or a pro-rata basis. Private Allotment: A corporate issues shares at a price which may or may not be related to the current market price of the same security. Major Players of Primary Market There are several major players in the New Issue market. These include the merchant bankers, mutual funds, financial institutions, foreign institutional investors (FIIs) and individual investors.