Vivek Kumar M
As many as 66 companies will see the end of the lock-in period of their shares worth Rs 1.48 trillion in the next four months. Market experts said this could lead to some selling pressure on these stocks.
Among the big names whose anchor and other investors will get an opportunity to exit include Tata Technologies, Mamaearth-promoter Honasa Consumer, Cello World, and Jana Small Finance Bank, according to a report by Nuvama Wealth Management.
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On April 1, the lock-in period of some shares of Global Surfaces, Sai Silks, JSW Infrastructure, Platinum Industries, and Exicom Technologies, will expire.
Deepak Jasani, head of retail research at HDFC Securities said that while there could be some selling across the counters where lock-in periods will expire, it may not impact the share price so much if the stock has performed well since its initial public offering (IPO).
As per the Securities and Exchange Board of India (Sebi) regulations, anchor investors have to hold at least 50% of the shares allotted to them in IPOs for at least 90 days. Similar restrictions are also placed on promoter shares in the IPO companies.
The market regulator had introduced lock-in periods to safeguard the interest of small investors by ensuring stability in the share prices of the newly-listed companies, at least for some time. The regulations also help restrict promoters and institutional investors from early exit if the stock gets listed at lofty valuations.
Added Jasani, “If some stock has not performed since listing and is below listing or issue price, the selling pressure might be higher as the pre-IPO investors may not be willing to wait out more.”
On several occasions earlier, shares of companies with lock-in period expiry have come under intense selling pressure. Most notable among these are Zomato, FSN E-Commerce, PB Fintech, and Delhivery. Most notably, shares of Zomato saw significant selling with major investors like Alibaba, Moore Strategic Ventures and Uber selling their stake in the company after the expiry of lock-in period.
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However, things seem to have stablised significantly now as the fear of sky high valuations seem to be receded amid market players. The lock-in period of Zomato and other new age companies coincided with the period when start-ups were undergoing a massive valuation correction. Shares of many of these companies, which were yet to turn profitable during their listing, were also listed at lofty valuations, exacerbating the selling pressure.
The last few years has seen a slew of companies flocking to the stock market. Of the 75 stocks that got listed in FY24, as many as 14 are trading at a price 10% lower than the issue price, data from Prime Database showed. These include Gopal Snacks, Flair Writing Industries, Fedbank Financial Services, and Credo Brands Marketing.
Among the biggest IPO gainers were Indian Renewable Energy Development Agency, Tata Technologies, Netweb Technologies, Cyient DLM, BLS E-Services, and Tata Technologies.
