There might be a huge sell-off in November on Dalal Street as a large supply of recently-listed companies will see their lock-in periods ending this month. The list has even high-profile names such as Paytm’s One 97 Communications, Nykaa’s FSN E-commerce, and PolicyBazaar’s parent PB Fintech.
The IPO lock-in period is the time span during which pre-IPO investors (incl. promoters) are not eligible to sell their shares. It is calculated from the allotment of the company. The end of the lock-in period is of significance because retail investors start selling the shares even before the lock-in end date.
Investors remain concerned that a huge supply from large investors may take the stock prices to new lows are they might be tempted to exit their holdings given hesitation to hold new-age technology stocks.
For instance, the stock of Zomato lost 39.93% in one month and 24.42% in 4 days when its lock-in period ended in July. Uber and Tiger Global were two of the other key investors which sold their stakes when the lock-in ended.
The Securities and Exchange Board of India (SEBI) made changes to the lock-in period duration for different types of pre-IPO investors with effect from April this year. The new rules shall not be applicable for Paytm and likes as they went public before April.
The five largest companies with respect to their IPO issue size which will see their lock-in expire in November are:
1. One 97 Communications, the parent company of Paytm on 18 November
2. PB Fintech, the holding company of PolicyBazaar on 15 November
3. FSN E-Commerce which owns the e-commerce portal Nykaa on 10 November
4. Logistics player Delhivery on 24 November
5. Sapphire Foods India, one of the largest franchisees of Yum! Brands in India on 18 November
On the development, Sachin Dixit, an analyst at JM Financial commented, “As new age companies such as Nykaa, PB Fintech, Delhivery, and Paytm are expected to see their lock-in expire in November 2022, potential buyers might be spoilt for choice.” He added, “There could be a sharp dip in share price if even a small set of investors decide to liquidate their position.”
Written by Vikalp Mishra
