- New-age tech companies like Nykaa, Policybazaar, Paytm and Fino Payments Bank may witness some pressure in their stock prices due to the end of lock-in period for pre-IPO investors.
- The IPO lock-in period is a time span post-listing during which pre-IPO investors are not eligible to sell their shares.
- The lock-in period is ending for nine companies in November, with five others following suit in December.
Newly-listed tech companies could be in for some more pain in the months to come as the lock-in period ends for investors who had invested in them prior to the public offer. While FSN E-Commerce (Nykaa) has announced a bonus issue of shares before this event, others like PB Fintech (Policybazaar), One97 Communications (Paytm), and Fino Payments Bank may witness pressure on their stock price this month due to the end of the lock-in period for pre-IPO investors from last November and December.
To recall, the lock-in period for Zomato’s pre-IPO investors ended on July 25 this year, tanking the stock by as much as 14.3% to an all-time low of ₹40.6 a share.
The IPO lock-in period is a time span post listing during which pre-IPO investors are not eligible to sell their shares. Now, since the lock-in period is ending this month for several companies, there are concerns that pre-IPO investors might sell their holdings.
Starting April this year, market regulator Securities and Exchange Board of India (SEBI) reduced the lock-in period to six months for investors who buy the shares of the company in a pre-IPO issue. Earlier, it was one year.
“Typically as expected there should be a correction as those who could not exit earlier because of lock-in would rush to exit. Shares of companies that have corrected sharply since listing could see more correction. And it is also an investor psychology wherein promoters would take home whatever is available after the sharp fall. On the other hand, stocks which have gone up, selling could be steady because comfort is still there,” said Ambareesh Baliga, an investment analyst.
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Nykaa is the first off the block as its lock-in period ended on November 10. The online beauty platform made its market debut on November 10, 2021, and closed 6% below its issue price.
Although Nykaa has delivered poor returns to investors, analysts believe the sell off may not be as severe as expected because of the issue of bonus shares. The company’s board announced a share bonus (5 shares for every 1 share held) .
“Concerns are high around lock-in expiry, but we think that 10-Nov may not be that important as existing shareholders will only have 17% (1/6th) of their holding – rest (83%) available only by November 15, in our understanding,” said a report by Jefferies.
Among the list, Paytm has tumbled the most as it lost 70% of its value from its issue price since listing. The new age tech company is backed by global investors like SoftBank Group Corp, Warren Buffett’s Berkshire Hathaway Inc. and Jack Ma’s Ant Group.
Companies whose investor lock-in period expires in November-December
| Company | Lock-in period ending | Issue price | CMP | Performance |
| FSN E-commerce | 09/10-11-2022 | ₹1,125 | ₹1,060 | -6% |
| FINO Payments Bank | 11-11-2022 | ₹577 | ₹198.4 | -66% |
| SJS Enterprises | 11-11-2022 | ₹542 | ₹470.5 | -13% |
| PB Fintech | 11-11-2022 | ₹980 | ₹390 | -60% |
| One97 Comm. | 15-11-2022 | ₹2,150 | ₹643.7 | -70% |
| Sigachi Industries | 16-11-2022 | ₹163 | ₹268.3 | 65% |
| Sapphire Foods | 16-11-2022 | ₹1,180 | ₹1,381 | 17% |
| Tarsons Products | 24-11-2022 | ₹662 | ₹708.5 | 7% |
| Go Fashion | 28-11-2022 | ₹690 | ₹1,301 | 89% |
| Star Health | 09-12-2022 | ₹900 | ₹699.5 | -22% |
| Anand Rathi | 10-12-2022 | ₹550 | ₹705 | 28% |
| Shriram Properties | 15-12-2022 | ₹118 | ₹74.75 | -37% |
| Supriya Lifescience | 24-12-2022 | ₹274 | ₹273 | 0% |
| HP Adhesives | 27-12-2022 | ₹274 | ₹402.7 | 47% |
Source: NSE, Nuvama Alternative & Quantitative Research | Current market price as on November 11, 2022
