Tezzbuzz Desk – Investors are eyeing two big IPOs in the Indian stock market. Market regulator SEBI has approved the IPO of Reliance Industries' tech unit Jio Platforms and the National Stock Exchange (NSE). The potential size of both the issues is large and hence the question is being raised among the investors whether investing money in these will be a profitable deal or the money may get stuck after listing.
According to estimates, NSE's IPO could be worth around Rs 30,000 crore. Whereas the issue of Jio Platforms is expected to be around $4 billion i.e. around Rs 37,800 crore. If Jio's IPO comes with this size, then it can become the largest IPO in the history of India. Jio's IPO is expected to come in late October or early November. However, a big IPO does not mean that investors will definitely get big profits on the day of listing. There have been many big IPOs in the Indian stock market before, whose listing day performance was not as expected.
If we look at the record of big IPOs of the country, Coal India had the best performance on the day of listing. The share was listed at Rs 291 against the issue price of Rs 245, which means investors got a profit of about 18.78 percent. In contrast, Hyundai Motor India's IPO was worth around Rs 27,859 crore, but the share was listed at Rs 1,934 against the issue price of Rs 1,960. That means there was a loss of about 1.33 percent on listing. LIC shares were also listed at Rs 867.20 against the issue price of Rs 949 and investors suffered a loss of about 8.62 percent. Whereas the shares of One97 Communications i.e. Paytm were listed at Rs 1,950 against the issue price of Rs 2,150, resulting in a loss of about 9.30 percent. Tata Capital's listing was with slight gains.
According to experts, the possibility of listing gain in IPO of Jio and NSE will mainly depend on their valuation and pricing. If the issue price is kept attractive for investors, then good upside may be seen during listing. At the same time, due to high valuation, there can be pressure on the shares. Another important aspect is the participation of institutional investors. In big IPOs, a large number of shares are allotted to institutional investors. In such a situation, their additional purchases from the market after listing may remain limited. Apart from this, after a big issue, there is more supply of shares in the market, which may limit the initial rise.
Experts are advising investors to avoid investing in big IPOs like Jio and NSE keeping only the listing day profits in mind. It is more important to understand the company's business model, earning potential, valuation and future growth. Jio Platforms is a big name in the digital and telecom sector, while NSE is among the leading institutions of the Indian capital market. In such a situation, long-term investors may remain interested in the IPO of both the companies. However, it would be better to take the final decision after looking at the price, valuation and market condition of the IPO. This is not investment advice and it is advisable to consult your financial advisor before investing.