The past decade saw a major rush of companies launching initial public offerings (IPOs) on the stock exchanges. However, an analysis of the performance of the top 30 IPOs based on issue size shows that the majority have failed to generate positive returns for investors.
According to a study conducted by Capitalmind Financial Services, only 12 out of the 30 largest IPOs by issue collection were able to provide returns outperforming the CNX 500 index. This means that over half or 18 of these prominent IPOs underperformed the broader market benchmark. Even more concerning is that 8 of these big-ticket IPOs have actually delivered negative returns since their listing.
Two companies among the top performers have been Bajaj Housing Finance and Bharti Hexacomm, with their shares providing strong gains. However, Reliance Power was one of the biggest disappointments for investors, with its stock price plunging 84% since listing. Another major laggard was One97 Communications, which runs the Paytm platform, with its shares plunging 66% from the issue price.
While a few IPOs from the past 2 years like Brainbees (First Cry) have rewarded investors in a bullish market, most large offerings tend to be overvalued during euphoric periods. Consequently, when post-listing business growth fails to validate lofty expectations, these stocks often correct sharply and underperform the overall market in the long run.
Only a small fraction of the top IPOs like Zomato and Hindustan Aeronautics have been able to meaningfully beat the market index. This highlights the risks for investors of chasing headline-grabbing mega IPOs due to popularity rather than evaluating long-term business fundamentals and valuation rationale. Successful stock picking requires diligent research beyond the hype of new listings.
