If August is a busy month for companies that come out with the initial public offering and register on the Stock Exchange, it is also a month of disappointment for investors. The reason? The shares of the company registered so far this month failed to produce sufficient returns for investors compared to solid profits made in IPO shares which debuted from January to July.

Experts say there are various factors for the performance of IPO shares that are relatively worse in August, including the “inconvenience of assessment” in the majority of stock sales, the portion of a large offer in the IPO, mood changes in the secondary market after sharp rallies, and weaknesses in more markets large.

List of performance

Ten companies have their shares registered as far as this month – Glenmark Life Sciences on August 6, Rolex Rings on August 9, Windlas Biotech, Tiles Exxaro, Diagnostic Devyani International and Krsnaa on August 16, Cartrade Tech on August 20, Nuvoco Vistas Corporation in August 23 , and Sanmar Chemprast and Aptus Value of Financial Housing on August 24.

All of these IPOs, except with Exxaro tiles and Biotech windlas, large size – starting from Rs 1,200 Crores to RS 5,000 Crore.

Five of the 10 IPO shares were registered with a discount for the price of their problems and even closed below that level on their debut.

On August 25 it was closed, seven of the 10 shares appeared to be in a bear trap. Only three have advanced above the price of their problems – Devyani International with a gain of 26 percent, Rolex Rings 21 percent and 2.3 percent Exxaro tiles.

Valuation

“Most IPOs in the first half of 2021 do it very well, where most of them are quality stocks and there are some comforts assessments too. But many IPOs recently have quality problems and discomfort assessments that disrupt sentiment in the primary market,” said Santosh Meena, a research head in Swastika Investmart. “The promoter wants to cash opportunities at this Bull Run, where the main part of the IPO has recently offered for sale, and that is another reason for fragile sentiments in the primary market.”

Although some IPOs subscribe to heavy, high net wealth individuals fail to restore their costs despite a good list, which also weakens the sentiment, added Meena.

The Cartrade Tech IPO attracts offers for more than 20 times the shares offered, the Biotech windlas subscribes to more than 22 times and the Aptus housing value of more than 17 times. However, relatively, investor response is weaker for Sanmar Chemprast, which subscribes 2.17 times and Nuvoco Vistas (1.71 times).

As seen in the table, the size of the offer – for sale in eight out of 10 IPOs – including the value of Aptus, Sanmar Chemprast, Nuvoco Vistas and Carrade – larger than new stock problems. Offers for sale are usually made by existing investors and promoters.

According to Ajit Mishra, VP – Research in Broking Religation, assessment where several companies offer shares appear stretched and therefore the list has been muted.

“Considering sharp run-up, the market atmosphere has shifted towards profit taking, which further has an impact on sentiment in the primary market. We believe the whole sentiment is still positive, but the company needs to give prices appropriately to get investor traction,” Mishra said.

Wider market weakness

After hitting the record high last week, the benchmark index was RangeBound, while relative, a wider market was weaker this month.

However, Gaurav Garg, head of research at Capitalvia Global Research, said the assessment was not a problem.

“Overall, IPO fever declined and along with it, the weakness of the wider market index was another setback that pampered the sense of IPO, especially in August. I did not see a higher assessment as a problem. The market traded on a higher assessment,” Garg said.

Shrikant Chouhan, Executive Vice President for Equity Technical Research in the Securities Box, said market sentiment has been hit by global factors such as tapered expectations in quantitative easing, increased geopolitical risks, a surge in Covid-19 cases in developing countries, new uncertainty of regulations at China, expensive assessment and liquidity tightening. As a result, some shares are registered with discounts for their IPO prices, he said.

Good listing advantages in several IPOs from the past have recently lifted the expectations of retail investors, who are looking for fast returns.

However, someone needs to be selective in the IPO, Chouhan said, advising investors to evaluate each company on the benefits and not be carried by the hype around the IPO.