Investor Confidence Wanes in Unlisted Securities Market

Following HDB Financial Services' Initial Public Offering (IPO), priced significantly below grey market expectations, investor confidence in India’s unlisted securities market has taken a notable hit. High-profile pre-IPO stocks such as NSE, NSDL, and Tata Capital have seen their unlisted values drop between 5% and 18% in recent weeks.

The Ripple Effect of HDB's IPO Pricing

The Rs 12,500-crore HDB IPO was priced at Rs 740 per share, a sharp decline from the Rs 1,225 quoted in the unofficial market on June 18. This resulted in nearly 40% losses for investors who bought at peak levels. The stock debuted at Rs 835 and closed at Rs 838 on Wednesday.

Shift in Investor Sentiment

"Post the HDB IPO, we've observed a shift in investor sentiment, from being brand-conscious to becoming more valuation-sensitive," said Hitesh Dharawat of Dharawat Securities. This shift is particularly noticeable as HDB was priced significantly lower than its unlisted market value.

Retail Investors' FOMO Persists

Despite the downturn, retail investors continue to buy into these names, driven by Fear Of Missing Out (FOMO) and expectations of strong listings, even in the face of elevated valuations.

Valuation Awareness Increases

Investors are now more valuation-aware, comparing unlisted prices with listed peers. For instance, NSDL is currently valued at a P/E ratio of 59.8 times, compared with listed rival CDSL’s 70 times. Tata Capital trades at a P/B ratio of 10.5 times, significantly higher than Bajaj Finance's 7.4 times.

Caution Advised in Unlisted Market

Experts advise caution in the unlisted market, warning that inflated expectations could lead to sharp downturns if IPO pricing does not match market valuations.