Five recent IPOs have delivered more than 100% returns from their issue prices, with ESDS Software Solution emerging as the biggest gainer. The stock, which was issued at ₹429, is currently trading at around ₹1,586.35, translating into a 270% return.
IndoMIM has also generated strong gains, rising from its IPO price of ₹485 to ₹1,288.40, a 166% return. Technocraft Ventures has climbed from ₹212 to ₹492.35, delivering a 132% return.
Meanwhile, Milky Mist Dairy Food, which was issued at ₹140, is trading at around ₹318, translating into a 127% gain. Xtranet Technologies has risen from its IPO price of ₹127 to ₹285, generating a 124% return.
Talking about the listings, ESDS Software Solutions shares made a strong debut on 4 September, listing at a premium of more than 76% over the IPO price of ₹429 before extending gains and hitting the upper circuit. IndoMIM shares listed on 30 July at a premium of nearly 45% over the issue price of ₹485.
Technocraft Ventures made its market debut on 14 August, listing at a premium of more than 34% against its IPO price of ₹212. Milky Mist Dairy Food shares, which listed on 18 August, opened nearly 18% above their issue price of ₹140. Meanwhile, Xtranet Technologies debuted on 30 July, listing at around 7% above its IPO price of ₹127.
However, the recent performance of these IPO multibaggers has been mixed. ESDS Software Solution has been locked in a 5% lower circuit over the past few sessions, while Xtranet Technologies and Milky Mist Dairy Food have also been trading in the red today. In contrast, Technocraft Ventures was up more than 2%, while IndoMIM traded in the green.
Fundamentals vs valuations: What’s driving the IPO multibaggers?
Arun Kejriwal, founder of Kejriwal Research and Investment Services, said the sharp gains seen in some of the recent IPO stocks appear to be driven by factors beyond their underlying fundamentals, and investors need to be cautious where valuations have moved significantly ahead of business performance.
Kejriwal said IndoMIM stands out on account of its unique business model. The company operates in metal extrusion and serves both the domestic and export markets, particularly the US and Europe, while also having manufacturing facilities in the US. He noted that its differentiated business profile sets it apart from some of the other stocks in the list.
On Milky Mist Dairy Food, Kejriwal said the company has benefited from strong marketing around its paneer and food-products positioning. However, he pointed out that around 97.5% of its revenue comes from milk products, while only about 2.5% comes from foods, and said the latter has received greater attention in the market. He also referred to the secondary sale transaction during the IPO as a factor that may have contributed to investor interest.
On ESDS Software Solution, Kejriwal said the stock’s story is linked to the data-centre opportunity. He highlighted the company’s deal with an Australian company involving data-centre capacity and GPU infrastructure, under which the capacity is expected to be used for a five- to seven-year period and resold to customers. He also pointed to ESDS’s investments in its own data centres as a potential source of future revenue.
However, Kejriwal cautioned that ESDS’s price movement has been “explosive”, and said even a relatively small decline in quarterly profit has triggered a correction in the stock.
On Technocraft Ventures, Kejriwal was more cautious, describing it as a stock from the infrastructure space with a small market capitalisation and relatively small turnover. He said the stock appears to have characteristics of what he described as “operator-driven activity” and that he would refrain from such a stock.
Regarding Xtranet Technologies, Kejriwal said he was not sufficiently familiar with the company’s business to comment on its fundamentals, but noted that its valuation appears to have run significantly ahead of its performance.
Overall, Kejriwal said investors should be wary of stocks where market prices and valuations appear to defy underlying fundamentals, particularly when the businesses do not appear to justify the multiples at which they are trading.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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