$20 BILLION LOCK-IN SHARES TO HIT MARKET BY MARCH '24: IS THERE APPETITE?

LOCK-IN EXPIRIES COULD TURN OUT TO BE THE LITMUS TEST FOR STOCKS' RESILIENCE.

- RAJIV RANJAN SINGH

THE 148 initial public offerings (IPOS) from 2021 till mid-November 2023 collectively raised about ₹2.32 lakh crore. Another slew of shares of these newly minted IPOs, worth about $20 billion (₹1.6 lakh crore) is likely to hit the market by March 2024.

A November report by brokerage Nuvama highlights an impending offloading of approximately $20 billion of shares held by anchor and preIPO investors, as the lock-in period for these shares concludes over the next three months.

It particularly applies to companies that went public in the last two years, where anchor and pre-IPO investors, including promoters, are facing lock-in expiries. Under listing norms, pre-IPO investors are subjected to a six-month lock-in period. Anchor investors can sell 50% of their shares a month post IPO, with the remaining 50% available for sale after three months.

While it is not mandatory for anchor and pre-IPO investors to sell their shares after lock-in expires, these shareholders may have to bear the cost of locked-in wealth if the market is not conducive to profitable sale of bulk shares held by them.

Pitfalls Around Lock-in Expiry

The IPOs of Nykaa and Zomato garnered substantial investor interest, leading to their listing at a significant premium over their issue prices. However, just before the expiry of the lock-in period for anchor and pre-IPO investors, these shares experienced a downward correction. Nykaa was listed at a premium of almost 80% over its issue price of ₹1,125. But just before the lock-in expiry of one year for pre-IPO investors, the share tumbled below its issue price and has not recovered since.

Others such as Cartrade, Paytm and LIC have not even been able to touch their issue price since launch.