From IdeaForge To Latent View, Here Are Top Underperforming IPOs In Last 5 Years With 100x Subscription; Check

The capital market witnessed an extraordinary boom during the pandemic as numerous companies seized favourable conditions to launch their initial public offerings (IPOs). Investors showed immense enthusiasm, with some IPOs oversubscribed by over 300 times, resulting in substantial listing gains. However, as market dynamics shifted, some of these stocks faced significant declines. This article explores some notable oversubscribed IPOs that have since delivered negative returns.

The Rise and Fall of Oversubscribed IPOs

The initial surge in IPO activity was a direct response to the pandemic, where investors, buoyed by low interest rates and increased retail participation, rushed to invest. However, this enthusiasm has not been consistently matched by sustained performance.

Tatva Chintan Pharma Chem Ltd

Founded in 1996, Tatva Chintan specializes in manufacturing a diverse range of chemicals, including structure-directing agents and electrolyte salts for batteries. Its IPO, launched in July 2021, was wildly successful, with a staggering subscription rate of 180.36 times. The retail segment alone was oversubscribed by 35.35 times, while Qualified Institutional Buyers (QIBs) showed overwhelming interest at 185.23 times. The issue was priced at Rs 1,083 per share and debuted at Rs 2,111.85.

However, the euphoria was short-lived. The stock has since plummeted over 54%, trading at Rs 968 as of now. The company's operating margins have declined from 22% in FY21 to just 15% in FY24, leading to a negative compounded profit growth of 17% annually over the past three years. This financial downturn has heavily impacted investor sentiment.

Chemcon Speciality Chemicals Ltd

Incorporated in 1988, Chemcon manufactures pharmaceutical intermediates and oilfield chemicals. Its IPO, which opened in September 2020, was subscribed 149.30 times, with retail subscriptions at 41.15 times. The issue was priced at Rs 340 and listed at Rs 730.95. However, the stock has since seen a staggering decline of 63%, currently trading at Rs 265.45. Rising raw material costs and shrinking profit margins have adversely affected the company's financial performance, contributing to this drop.

IdeaForge Technology Ltd

Founded in 2007, IdeaForge Technology is known for its Unmanned Aircraft Systems (UAS). Its IPO was oversubscribed 106.06 times, with a listing price of Rs 1,305.10 on July 7, 2023, following an issue price of Rs 699. Unfortunately, the stock has since yielded a negative return of 46.44%, now trading at Rs 699. Irregular order flows have led to inconsistent quarterly earnings, creating uncertainty for investors.

Vibhor Steel Tubes Ltd

Established in 2003, Vibhor Steel Tubes specializes in manufacturing steel pipes and tubes for heavy engineering industries. Its IPO was heavily oversubscribed at 320.05 times, with the stock initially listed at Rs 421 after an issue price of Rs 151. Despite a strong debut, the stock has declined over 38.23%, currently trading at Rs 260.05. The company's recent quarterly results showed a 10.22% year-on-year revenue drop.

Latent View Analytics Ltd

Latent View Analytics provides a wide range of analytics services, making it a key player in data consulting and predictive analytics. The IPO was a success, being oversubscribed 326.49 times. Priced at Rs 197, it debuted at Rs 530 on November 23, 2021. However, the stock has since delivered a negative return of 8.02%, currently trading at Rs 487.5. Concerns regarding overvaluation in a highly competitive market have pressured the stock price.

Factors Behind the Decline

While the pandemic-induced IPO boom generated initial excitement, many of these oversubscribed stocks have faced sharp corrections post-listing. Several common factors contributed to this trend:

Declining Margins: Many companies experienced a decline in operating margins, which in turn impacted profit growth and investor confidence.
Rising Input Costs: Increased costs of raw materials have squeezed profitability, particularly in sectors heavily reliant on commodities.
Irregular Earnings: Companies with fluctuating order flows and inconsistent revenue streams have struggled to maintain investor trust, leading to sharp sell-offs.
Market Overvaluation: As some companies rushed to capitalize on the boom, valuations became inflated, setting the stage for corrections as reality set in.