Top Performing IPOs of 2021. What's Special About these Companies?

Initial public offers (IPOs) had a great outing in 2021. There were a lot of offers by traditional companies. But the notable features during the year were the startup IPOs.

From online food aggregators to online insurance brokers, to online pharmacies, 2021 will be remembered in history as the year of tech startup IPOs.

India's startup sector has seen a flurry of IPOs in 2021, which includes the likes of One 97 Communications (Paytm), the largest ever IPO in India.

There were other major companies too which successfully raised funds via the IPO route. There was Zomato, Policy Bazaar, Nykaa, and the most recent Star Health and Insurance.

Even though they were loss making companies, a few tech startups were attractive to retail investors, fetching good returns.

The reason behind this? Most companies came out with their IPOs during a bull market. The sentiment was good and the liquidity was ample. Indian stock market was one of the best performers in 2021. Many companies were emboldened to come out with their issues.

However, none of the high profile companies made it to the list of top performing IPOs of 2021. Instead, the list saw companies from the defence, chemical, and pharma sector topping the charts.

In this article, we take a look at the five best performing Indian companies that went public in 2021.

All data is as of 21 December and the performance is based on the issue price of the company.

#1 Paras Defence & Space Tech

The company which tops the list of top performing IPOs of 2021 is none other than Paras Defence & Space Tech.

The IPO of Paras Defence & Space Tech saw a massive response from investors and was fully subscribed within the initial hour of sale.

During the three-day bidding process, Paras Defence IPO was subscribed 304 times!

In October this year, shares of Paras Defence & Space Tech made a blockbuster debut, listing at a hefty premium of over 171% above its issue price of Rs 175.

On the listing day, shares of the company closed at Rs 498.75. That's a gain of 185%. And just when we thought this was huge, more gains kept rolling in.

Shares of the company currently trade at Rs 683, a 291% gain from the issue price!

If you were allotted even one lot of the shares at an investment amount of Rs 15,000, your initial investment would now be worth more than Rs 57,000. Those who got shares in the IPO nearly tripled their money within a few minutes of the listing.

Even if you had invested Rs 1 lakh in the company after its listing at Rs 498, your investment amount would have appreciated by 37% in just two months.

So what's so special about this defence company which got investors excited?

Well, the company is a critical player in India's defence and space research segment. It's the only Indian provider of essential imaging components for space applications, such as large scale lenses and diffractive gratings.

While there are other Indian companies which make defence equipment, none of them have the product portfolio of Paras Defence. It makes products for defence and space optics, defence electronics, electro-magnetic pulse (EMP) protection solution, and heavy engineering.

It has the capacity to offer a diverse variety of goods and solutions, bolstered by high-quality products and operational performance. Paras Defence is also increasing its reach in international markets.

Paras Defence also has a checkmark against its management quality box. The company's management has three decades of experience in designing, developing, and manufacturing of a wide range of engineering products and solutions for defence and space sector. The team includes several ex-employees of Bharat Electronics and Defence Research and Development Organisation (DRDO).

Its clients include big names like ISRO, DRDO, Bharat Electronics, Cochin Shipyard, Hindustan Aeronautics, Bharat Dynamics, Tata Power, Tata Consultancy Services (TCS), and Alpha Design Technologies.

While it derives most of the revenues from the top 5 clients, many are government organisations. This reduces the counter party credit risk. The company has been able to generate fresh order inflows over the past four financial years.

Finally, the company has the advantage to benefit from the drone revolution. As investors are falling head over heels with companies associated with 'drones', Paras Defence, via its subsidiary Paras Aerospace, has tied up with a few drone manufacturers in Israel, Latvia, & Italy.

All this just goes on to show that Paras Defence holds immense promise in lots of areas.

#2 MTAR Technologies

No surprises here as another company with a background in defence technology, forms this list.

Defence is considered to be a new field for conventional businesses. A few years back, there was nothing significant happening on the defence front. There was little for the financial press to write on the defence sector. But now, the government has pushed for strengthening India's armed forces.

The 'Make in India' and 'Atmanirbhar Bharat' initiatives combined with an import ban on certain defence items have paved the way for the development of the domestic defence industry.

MTAR Technologies caters to manufacturing various machine equipment, assemblies, sub-assemblies, and spare parts for energy, nuclear, space, aerospace, defence, and other engineering industries.

In March this year, shares of MTAR Technologies made a stellar debut, listing at Rs 1,082.3 on BSE, a rise of 88% from the issue price of Rs 575.

Its Rs 6 bn IPO was met with robust demand. The issue was oversubscribed within a few hours of the first day and was eventually subscribed a whopping 200 times on the final day.

From its issue price, it is up around 280%.

What's so special about this company?

MTAR Technologies' promoters and management team have a diverse industry experience of more than 20 years. So, as far as management is concerned, there's nothing to worry about here.

The products manufactured by MTAR Technologies have a tolerance of about 5-10 microns. These products require critical tolerances as they go into nuclear reactors and space launch vehicles. Till date, the company hasn't faced a single blemish.

Due to the fact that MTAR caters to highly technical and complex work, its customers have stayed intact over the decades.

The company has a long and established relationship with most of its customers - DRDO, Nuclear Power Corporation (NPCIL), LPSC, and ISRO, which spans more than 35-40 years with repeat orders.

The company has much to show on the financials front. Its revenues have grown at a CAGR of 25% over the last five fiscals through 2021. Revenue is expected to grow at the same pace given the healthy offtake from its key customer Bloom Energy Corporation, NPCIL, and ISRO.

With little or no debt, cash surplus in its books, investors' enthusiasm for this company is justified.

#3 Nureca

Third on the list, we have Nureca, a company engaged in the business of home healthcare and wellness products under the brand "Dr. Trust".

Nureca is a digital-first company, which sells products through online channel partners such as e-commerce players, distributors, and retailers. It also sells products through its own website - drtrust.in.

In February this year, Nureca made a strong debut and listed at Rs 634.95, a premium of 59% over its issue price of Rs 400. It closed the day at 667 with 67% gains overall.

This was a short IPO worth Rs 1 bn which was subscribed 39.93 times in total.

The gains kept on rolling even after Nureca's solid debut. Shares of the company traded in a range for the initial two months. Then in mid-April, shares started to gain traction and rallied some more.

From its issue price of Rs 400, Nureca currently trades at Rs 1,437 which implies a gain of 259%. Rs 1 lakh invested would have turned Rs 3.5 lakhs in just a matter of 10 months.

What makes Nureca's business exciting is its asset-light business model. The company enters into agreements with vendors who manufacture the products as per the specifications. This allows Nureca to quickly scale its operations at a predetermined cost without incurring any capital expenditure on manufacturing facilities.

Nureca does not invest heavily in physical assets such as plant and machinery, land, and property. This allows the company to be capital efficient.

Since the pandemic, Nureca has seen acceleration in consumers demand shifting from offline channels to online channel. This is very positive for Nureca which is solely focused on digital sales channel.

Capitalising on this trend, Nureca saw a very strong growth in its results due to robust demand for quality preventive healthcare products. This was supported by shifting consumer demand and restricted movements due to the lockdown.

The company's financials are also what makes it an investment candidate. Nureca has recorded 122% CAGR growth in revenues over the past three fiscals. Its net profit has also grown at a 44% CAGR during the same period.

Nureca Financials

(Rs m)	FY18	FY19	FY20	FY21
Net Sales	201	620	995	2,163
Net Profit	31	62	64	464
Total Debt	-	4	98	39
Cash & Bank Balance	1	1	1	1,267

Data Source: Ace Equity

The company is continuously penetrating into new geographies and launching new products. Its diversified portfolio, growth in the home healthcare segment, and higher online channel mix will drive profitability in the years to come.

#4 Laxmi Organic Industries

Next on the list we have a specialty chemical company - Laxmi Organic Industries.

Laxmi Organic Industries made a decent stock market debut in March 2021, listing at a 20% premium over its issue price of Rs 130. On the listing day, the stock closed higher by 27% at Rs 164.6.

Currently, the stock trades at Rs 396. That's a 205% gain from the issue price.

As the specialty chemical market was booming at that time, the Rs 6 bn IPO was a big hit. It received 106.81 times subscription.

India is considered the fastest-growing market for specialty chemicals in the world. For instance, the agrochemical, pharma, and textile industries depend heavily on a steady supply of specialty chemicals for their day to day activities.

What makes the company special is that it is the largest manufacturer of ethyl acetate with over 30% market share in the Indian ethyl acetate market.

Laxmi Organic is the only manufacturer of diketene derivatives in India and has one of the largest portfolios, with about 34 diketene products. It meets close to 55% of the domestic demand for diketene derivatives while the balance is imported, mainly from Europe and China.

Diketene derivative products entail technologically-intensive processes and are highly hazardous in nature (leading to restricted transport). That is why local supplies of the same are preferred by Indian customers, leading to higher penetration and higher market share.

This year, the company also entered into the fluorochemicals segment, which experts believe, may open up new growth avenues for Laxmi Organic and help expand margins.

Over the years, Laxmi Organic has allocated a good sum to its Research & Development (R&D) segment which has helped it expand in terms of production volume and product portfolio.

#5 Easy Trip Planners

Last on our list we have Easy Trip Planners, the parent company of online travel aggregator platform EaseMyTrip.

The company, which made its stock market debut in March this year, got listed at 10% premium to the IPO price of Rs 206 per share. But since listing, the stock has soared over 150%.

Even though the company received over 150 times subscription, we saw a muted listing.

Since its issue price of Rs 187, the stock is up around 192% and currently trades at Rs 546.

The sharp rally in its stock can be attributed to the optimism among investors for the travel and tourism sector because of the revenge travel and re-opening trade.

The dividends announced by the company are also enticing investors. The company first announced its first dividend in April 2021, a month after its listing on the stock exchanges. Later, the company declared an interim dividend of Rs 1 per equity share for fiscal 2022 that ends in March next year.

Adding to positives is the company's profitability. Easy Trip Planners reported an over 330% growth in its net profit and 164% in revenue in the most recent September 2021 quarter.

The company has been profitable since its inception. It's the only profitable player among key online travel agencies (OTAs) in India.

Easy Trip Planners is a dominant player in domestic air ticketing. While the company has the largest agent network in the Indian OTA industry, it also ranks second in terms of air ticket volume and third in terms of gross booking revenue (GBR) and number of registered customers.

The company has a wide distribution network, the largest network of 59,274 registered travel agents to be precise!

The profitable business model wherein it does not charge convenience fees to the customers is what separates Easy Trip Planners from competitors and helps build a loyal customer base. Generally, other OTAs and airline websites charge a convenience fee of Rs 300 per person. EaseMyTrip waives this fee.

All these points certainly make Easy Trip Planners special from competitors.

Which other companies performed better in 2021?

Apart from the above five, here are other companies which are trading significantly higher than their issue price.

Top Performing IPOs of 2021

Company	Issue Price	Listing Day Price	Listing Day Gains (%)	Current Price	Gains from issue price (%)
Barbeque Nation Hospitality	500	590	18%	1,305	161%
Clean Science and Technology	900	1,585	76%	2,268	152%
Latent View Analytics	197	489	148%	490	149%
Stove Kraft	385	446	16%	951	147%
Sigachi Industries	163	604	270%	398	144%
Sona BLW Precision Forgings	291	363	25%	709	144%
Macrotech Developers	486	463	-5%	1,150	137%
Tatva Chintan Pharma	1,083	2,310	113%	2,507	132%

Source: Equitymaster

Amid the ongoing IPO mania, investors are increasingly looking to make quick and appealing returns by putting their money in the shares of a company going public.

The idea here is to make listing gains through the purchase and sale of shares in a public issue.

However, there is no guarantee that a stock will always open at a gain. For instance, the IPO of Easy Trip Planners received whopping response and was subscribed more than 150 times. But on the listing day, it made a tepid debut.

This just shows that even if IPOs get massive subscription, it doesn't automatically mean that it's a great company or a great investment.

If you had stayed put till now, you would be sitting on 3x gains as Easy Trip Planners went on to gain over 180% post listing.

Hence, it is wise to invest in companies with longer horizons. Invest in an IPO as a long-term option than a profitable proposition at current juncture.

This goes without saying that the companies should have solid fundamentals and good long-term growth prospects.

One must also understand the business of the company along with the risks involved in investing.

Most of the recent IPOs have untested business models and have been priced at exorbitant valuations.

So, if you're not comfortable investing in these new businesses, don't compromise on the margin of safety. Wait to see how they execute after listing and only then take the plunge.

Buying stocks at steep valuations during IPOs could just as well mean a compulsion to hold on to them for many years without meaningful returns.

Happy Investing!