InvestorQ : What has driven the interest in IPOs in the current year 2020?
Niti Shenoi made post

What has driven the interest in IPOs in the current year 2020?

ishika Banerjee answered.
5 months ago

Firstly, you must remember that solid returns attract solid interest. There have been a number of star performers. For example, Burger King IPO that gave above 200% returns over issue price in less than a week of listing. Then there were the IPOs like Rossari Biotech, Happiest Minds and Bectors Foods have given around 100% returns on issue price.

Even stocks that saw less flattering subscriptions like Gland Pharma, Likhitha Infrastructure, Mazagon Docks and Yes Bank gave returns of over 40% post-listing. Only two stocks i.e. UTI AMC and SBI Cards gave single-digit returns. If you look at the IPOs overall as a portfolio for an investor, the returns are around 50% on an average in the last one year.

Why did we see solid returns in 2020? It is tough to pinpoint a single reason but there were multiple factors at play. The year saw quality IPOs with good cash flows and sound balance sheets. Most of them were profit making companies with established track records. Then, due to the COVID crisis, companies did not price IPOs too aggressively. That created profits.

Also, it must be noted that IPOs came from preferred sectors like pharma, QSR, specialty chemicals etc. This gave more confidence to retail and institutional investors. Even HNI investments were taken in by the premiums. Finally, there has been boredom with the rising valuations in secondary markets. That allowed IPOs to enter and fill the gap.