The Street will closely watch whether the pre-IPO investors offload their positions or continue to hold them.
Pre-IPO investors need to compulsory hold the shares for six months from the IPO, while promoters must hold a minimum of 20% for a year.
shares plunged 22% in July, immediately after the one-year lock-in period ended, as some of the pre-IPO investors including Uber and Tiger Global offloaded stakes.
The Securities and Exchange Board of India cut the lock-in period for investors who purchase shares in a pre-IPO issue, or promoters’ shareholding in excess of 20%, to six months from one year effective from April this year.
Eight companies including Delhivery, Rainbow Children’s Medicare, Paradeep Phosphates and Campus Activewear went public after April this year, and the locked-in period for them will end next month. Paytm owner , PB Fintech, Nykaa parent FSN E-Commerce, and were among eleven that will complete one year as publicly listed companies in November. These companies come under the one-year locked-in period rule.
“These stocks may see some profit-booking if the pre-IPO shareholders decide to offload part of their holdings,” said Dharmesh Mehta, managing director of DAM Capital. “However, the pre-IPO investor will have their rationale for holding on or offloading the stake depending on the market conditions or company prospects.”
Anchor investors’ lock-in period in Nykaa will expire on November 10. Analysts believe that 67% of the share capital, or around 319 million shares, will open for trade on the lock-in expiry day. Nykaa shares have declined 13% in the last one month and are currently trading near the IPO price of ₹1,125.
Shares of PB Fintech, the parent company of Policybazaar, declined nearly 61% from its offer price. Its pre-IPO shareholders’ lock-in period will expire on November 15 and analysts expect about 28 million shares to open up.
“As new-age companies such as Nykaa, PB Fintech, Delhivery, and Paytm are expected to see their lock-in expire in November, potential buyers might be spoilt for choice,” said
analyst Sachin Dixit. “Hence, there could be a sharp dip in share prices if even a small set of investors decide to liquidate their position,” the brokerage firm said in a report.
The stock price of fintech firm Paytm, which raised ₹18,300 crore last year, has plunged 70% from the IPO price of ₹2,150. Shares of Delhivery have crashed to a record low as the company’s stock has tumbled over 30% in two days on a muted growth outlook. The lock-in period will end on November 18 for Paytm and November 24 for Delhivery.
In their regulatory disclosures in IPO prospectus, companies mention the possibility of pre-offer shareholders selling their shares after the lock-in period.