November was a bumper month for initial public offers which saw 10 companies mop up over Rs 36,000 crore from the primary market. However, December would test investor appetite for these stocks as the one-month mandatory lock-in period for anchor investors ends this month.
According to the rules laid down by market regulator Securities and Exchange Board of India (Sebi), shares allotted to anchor investors are locked in for 30 days from the date of allotment. Anchor investors are large institutions roped in to generate demand ahead of an IPO. When the lock-in ends, the stock usually faces volatility as several anchor investors start selling the stock.
Hence, newly listed companies like Nykaa, Paytm, PolicyBazaar, Sigachi Industries, Sapphire Foods, Latent View, Tarsons Products, Go Fashion, SJS Enterprises and Fino Payments Bank may face heightened volatility starting today as the 30-day lock-in for their anchor investors expires, allowing them to sell their holdings.
The one-month lock-in period for the anchor investors of FSN Commerce Ventures, the parent company of Nykaa, expired today. Anchor shares make up for about 4.5 percent of total outstanding shares in Nykaa. The stock listed at 79 per cent premium at Rs 2,001 a share over the issue price of Rs 1,125, and is already facing the heat. Shares were down 1% and were trading at Rs 2,130.70 at the time of writing. The stock is up 95% from its issue price.
Anchor lock-in period for One97 Communication (Paytm) and PB Fintech (Policybazaar) will expire on 15 and 13 December, respectively. While Paytm is down 25% from its issue price of Rs 2150, Policybazaar is up 17 per cent.
Point to note: Of the ten firms that were listed last month, five -Fino Payment Bank, SJS Enterprises, One97 Communications, Sapphire Foods and Tarson Products – are trading below the issue price and may face further heat if the anchor investors press the sell button.
According to a note by Edelweiss Securities, calendar year 2021 saw 51 stock (listed ones) go public with 41 issuances. As many as 76% of those issuances have experienced selling pressure on the anchor lock-in opening dates, and the average decline has been 2.6%.
"In most cases, selling pressure persists over the day after anchor lock-in opening date: as many as 61% (25 out of 41) of the issues declined by 2.2% on the day after the anchor opening date. And after five days of the anchor opening date, 61% of issues traded 3.9% down," said the note.
For example, Easy Trip Planners and Zomato saw a sharp fall on the day of the lock-in opening of 9.7 percent and 8.7 percent, respectively. While Clean Science and Tech, Devyani International, Ami Organics and others saw a 4-5 percent fall.
For most stocks wherein anchor allocation made up a larger mix of outstanding shares, selling pressure has been higher near the anchor lockin opening date. Ten out of 13 such newly listed stocks closed in red with an average decline of 3% (on anchor opening date) wherein anchor allocations were above 10% of outstanding shares.
Of the ten companies, four companies have anchor allocation that is 10% over outstanding shares. These include Fino Payments (11.2%), SJS Enterprises (14.5%) , Sapphire Foods (12.4%|) and Go Fashion (12.2%|). Hence, there is strong possibility that the anchor investors will sell and not hold onto these stocks.
Since January, only 10 of the 41 issues have managed to close in green on the day when anchor investors lock-in was lifted, according to a Edelweiss Alternative Investment Research study.
