MUMBAI : A clutch of companies that eroded billions in shareholder wealth since their public listing has seen an exodus of retail shareholders, a Mint analysis of exchange data showed.

At least 2.2 million retail shareholders, 73 large foreign institutional investors (FIIs), and 22 mutual funds sold shares of 12 large companies, including Nykaa (FSN E-Commerce Ventures Ltd), Life Insurance Corporation (LIC) of India and Paytm (One 97 Communications Ltd), since their initial public offerings. The companies have seen combined investor losses of $80 billion during the period.

“While the erosion in investor wealth somewhat indicates unfair IPO pricing, with their money stuck in such large listings, millions of public investors, especially retail, are now desperately waiting to exit and put in money in fresh IPOs as primary markets seem to be reviving," said the head of equity capital markets in India at a large US-based banking and financial services firm.

Investors in state-run LIC, Paytm and Nykaa have seen the worst losses, the Mint analysis showed. Nykaa and LIC alone saw investor wealth erosion of $8.3 billion and $23 billion, respectively, with their market values falling by 64.7% and 32% since their IPOs.

Other newly listed firms that saw wealth erosion include Paytm, EaseMyTrip (Easy Trip Planners Ltd), Star Health and Allied Insurance Company Ltd, PolicyBazaar (PB Fintech Ltd), Aditya Birla Sun Life AMC Ltd, Nuvoco Vistas Corp. Ltd and Sterling and Wilson Renewable Energy Ltd. These companies have seen the value of their shares falling in the range of 42% to 89%, eroding almost $20 billion in investor wealth since listing.

“Without clarity on improving profitability or business model, there is no visible chance of improvement in stock prices in sight for these firms. This is causing a desperate exodus of public investors," said the head of a boutique investment banking firm.

At least 441 companies got listed on stock exchanges in the past five years.

For instance, LIC, which sold shares in a ₹21,000 crore IPO in May 2022, and Paytm, which sold stock in a ₹18,500 crore IPO in November 2021, have caused losses of 32% and 60%, respectively, to their IPO investors.

On a net basis, investors in IPOs of these 441 companies are sitting on losses of ₹74,564 crore. Out of the 441 firms, 316 companies—mostly small and mid-cap—together have made gains worth ₹5.11 trillion in market value since their IPOs; however, at least 125 companies, mostly large-caps, caused a loss of ₹5.81 trillion for their IPO investors so far, forcing hundreds of thousands of disgruntled public investors to either exit at steep losses or await indefinitely for their IPO investments to turn a profit.

Companies that saw the largest erosion in investor wealth since IPO include Nykaa ( ₹57,779 crore), LIC ( ₹1.89 trillion), Paytm ( ₹81,837 crore), EaseMyTrip ( ₹26,014 crore), Star Health ( ₹16,229 crore) and PolicyBazaar ( ₹11,397 crore).

As public investors, at least 21 foreign investors (both portfolio and direct) and two mutual funds have dumped shares of Nykaa over the past year. In Paytm, at least 160,000 retail investors, four mutual funds, and two banks exited on a net basis.

Of all the firms listed in the past five years, LIC has witnessed the largest exodus since its mega-IPO. According to exchanges, at least 82 mutual funds (various schemes), four large FIIs, and 560,000 retail shareholders have exited LIC over the past year.

Meanwhile, rival HDFC Life Insurance Co. Ltd has more than doubled the wealth of its IPO investors, with its stock going up from the listing price of ₹311 to ₹625.50 now. ICICI Prudential Life Insurance Co. Ltd, too, has almost doubled the wealth of its IPO investors as the stock has risen from ₹329 on listing to ₹537.30 now. Shares of SBI Life Insurance Co. Ltd have risen from ₹733 at listing to ₹1,281.8 apiece now.

LIC has been losing market share in terms of first-year premium over the past two years since listing, which has added to its woes.

For multi-brand beauty retailer Nykaa, top management exits earlier this year, and the company’s struggle to enhance profitability have raised investor concerns and pushed the stock 88% below its listing price of ₹1,125.

For Vijay Shekhar Sharma’s One97 Communications (that runs fintech platform Paytm), legacy issues, questions over the business model and regulatory concerns have left the stock struggling to return to its listing valuation.

Recently, Sharma acquired a 10.3% stake in the company from China-based Ant Group to address concerns over Chinese connections in the firm. However, pending regulatory issues with the Reserve Bank of India remain to be resolved, and that may restrain the firm from diversifying its business model to create new revenue channels from a mere digital payment enabler.

This article has been updated after correcting the following error. Nykaa has witnessed an investor wealth erosion of $8.3 billion since listing, not $34 billion as mentioned in the original version of the story. The error in calculation was due to an inadvertent exclusion of a bonus issue of shares that was done by Nykaa on 10 November, 2022, which resulted in expansion of the company's equity base. On the day of listing, Nykaa's market value was $12.83 billion, which came down to $7.21 billion at the time of the bonus issue and has further slumped to $4.53 billion now.