Many investors feel that the shares of companies investing PE funds seem to have a good rise after listing. However, the results of Moneycontrol’s study suggest that the performance of shares of those companies has been better in the day of listing and the subsequent 12 months, which do not invest PE funds. For this, the 218 IPO was analyzed between FY 2020 from Finance 2020. The results of the analysis suggest that the shares of those companies gave an average of 32.86 per cent returns on the day of listing, which did not invest PE funds. In comparison, the shares of companies with PE funding gave the average of 21.48 per cent return on the day of listing.
Shares of companies with backward PE funding even in 12 months of returns
This difference increases further when looking at returns in 12 months. During this period, the average return of shares of companies with PE investment was 50.24 per cent, while the average return of shares of those companies was 75.32 per cent in which PE funds did not invest. Talking about Median Listing Day Returns, the return of non-PE funding shares was 20.03 per cent, while the return of PE fund shares was 11.44 per cent. In 12 months, the median returns of shares of non-PE funding companies were 47.49 per cent and PE funded shares were 31.78 per cent.
Weaken performance on both short term and long -term scale
71 percent of IPOs with PE funding were listed on investment. In comparison, investors were listed on investment in 76 percent non-PE funding IPOs. If seen in a 12-month period, 74 per cent of non-PE funding companies were shared in green mark, while 70 per cent of companies with PE funding were shares in green mark. This shows that shares of companies in short term and long term have performed better, which do not invest PE funds.
Experts gave several reasons for the difference in return
Market experts say that there may be many reasons for this difference in the return of shares of PE funding and non-PE funding companies. PE investors generally invest in companies long before the listing. They invest at a very low valuation. When the company comes to the market with an IPO, its value has increased considerably. This means that the first PE Investors have bet on his growth possibilities.
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Exit premium included in PE funding shares
The price of shares in IPOs of many companies with PE funding not only shows a glimpse of the company’s fundamentals but also includes exit premium for PE Investors. Due to this, there is no scope for much rise in the prices of shares on the day of listing. PE Investors typically use IPO opportunities to sell their stake in the company. This provides more shares in the market. Due to this, the sentiment in the secondary market does not remain very strong.
