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The meltdown seen in stocks of some of the biggest initial public offerings of last year seems to be driving investors away from the unlisted space as well. Dealers pointed to a sharp decline in trade volumes and investor interest in companies close to going public.
“As the broader market is giving up the gains before the Union Budget, the unlisted markets too have failed to recover from the recent lows. One rarely sees a rapid fall in unlisted markets as most participants are long-term investors. Hence, if the broader market extends the losses, we may see a rub-off effect in unlisted space but at a slower pace,” said Manan Doshi, Co-Founder of unlistedarena.com.
The sentiment in the unlisted space turned after the disastrous debut of One97 Communications, parent of Paytm, on the bourses in November that saw the stock plunge 27 percent from the issue price. Paytm has lost nearly 51 percent since listing, eroding over Rs 70,000 crore of its market value.
In recent sessions, dealers warned of volumes drying up scorched by a simmering sell-off in both global and domestic markets amid fears of interest rate hike in the US and geopolitical tensions in Eastern Europe.
The fears around higher interest rates have hit the shares of new-age technology stocks like Paytm, Zomato, PB Fintech, Nykaa and CarTrade Tech hardest as the net present value of their future earnings sees a sharp downgrade when interest rates rise.
“It was a known fact that there was a good amount of froth in the unlisted markets and as the NASDAQ and the Indian new listings (especially new-age ones) corrected heavily, the unlisted markets also got spooked,” said Aditya Kondawar, COO of JST Investments.
In addition to the broader market sell-off, the disappointment around issue price of recent public offerings like PB Fintech and AGS Transact Tech has also mellowed risk appetite of investors in the unlisted space.
Both PB Fintech and AGS Transact were traded at Rs 1200 and Rs 220 a share in the unlisted market before their IPO. Their IPO price band came in much lower at Rs 980 and Rs 175 a share, respectively.
The pressure on unlisted stocks has not been as much as that in the officially listed space. Shares of API Holdings traded at Rs 107 in unlisted market at the end of December and quoted Rs 98 apiece on January 27. Ixigo-owner Le Travenues Technologies also traded unchanged at Rs 104 during this period.
Shares of Sterlite Power Transmission are down to Rs 1,260 from Rs 1,390 apiece, while those of Mobikwik Systems fell to Rs 860 from Rs 900. HDB Financial, an HDFC Bank arm, has risen to Rs 900 from Rs 895 but Tamilnad Mercantile bank declined to Rs 625 from Rs 640.Kondawar expects the unlisted market to find its mojo back once the listed space reflects some signs of risk appetite among investors. “They will return to vibrancy once the listed markets return to euphoria because while unlisted markets see a lot of interest from long-term investors, in the past few years, investors have been also getting to unlisted markets to make a quick buck,” he said.