PE-backed Aavas Financiers makes weak stock market debut

Home-loan provider Aavas Financiers Ltd made a weak debut on the stock exchanges on Monday, with shares listing at a steep discount from the initial public offering (IPO) price and falling thereafter.

Shares of Aavas Financiers, which is backed by homegrown private equity firm Kedaara Capital and Swiss investment firm Partners Group, began trading at Rs 758 apiece on the BSE compared to the issue price of Rs 821.

Aavas shares fell to a low of Rs 710 apiece in early trade before recovering to finish the session at Rs 773.15, nearly 6% lower than the issue price.

The benchmark Sensex opened lower but closed nearly 100 points higher after a volatile trading session.

Aavas Financiers is 21st company to list on the main board of the stock exchanges in 2018. Twelve of the previous 20 companies had gained on debut this year.

Aavas Financiers’s weak start follows an IPO that failed to garner full subscription as concerns related to non-banking financial companies (NBFCs) overall continued to hurt market sentiment.

Besides external factors such as the depreciation of the Indian rupee and rising crude oil prices, market sentiment has weakened in recent weeks amid fears that NBFCs and housing finance companies are facing a cash crunch.

These concerns were triggered after Infrastructure Leasing & Financial Services (IL&FS) defaulted on its debt payments, sparking a sell-off in shares of NBFCs and mortgage lenders.

The Sensex has fallen nearly 10% since the record highs on 29 August.

Aavas IPO is third PE-backed offering in the recent past to have received a tepid response from retail investors and wealthy investors against a backdrop of volatile market sentiment and frothy valuations.

TA Associates-backed TCNS Clothing Co. Ltd’s IPO had sailed through solely on the back of institutional investors’ support in July. The company made a weak debut on the stock market.

In August, the IPO of microlender CreditAccess Grameen Ltd had also sailed through with support from institutional investors, but retail investors and high net-worth individuals remained on the sidelines. Its shares fell on market debut late last month.

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