A significant amount of pre-IPO shares, valued at $69 billion, will become available for trading soon. Lock-in periods for shares in 87 companies are expiring over the next three months. This could lead to increased supply in the market. Some companies have already seen their shares unlocked.

Lock-ins on $69 billion worth of pre-IPO shares to end soon

Synopsis

A significant amount of pre-IPO shares, valued at $69 billion, will become available for trading soon. Lock-in periods for shares in 87 companies are expiring over the next three months. This could lead to increased supply in the market. Some companies have already seen their shares unlocked.

Mumbai: Mandatory lock-ins on $69-billion worth of pre-IPO shares across 87 companies are set to end over the next three months, according to Nuvama Alternative & Quantitative Research. The end of these lock-ins makes these shares eligible for trading, potentially increasing supply in the market.

The first set of expiries began this week. While ICICI Prudential AMC's 70 lakh shares, amounting to 1% of the company's total equity, were unlocked on March 17, KSH International and Gujarat Kidney & Super Speciality will also see 4-6% of their equity freed up later in March. Gaudium IVF and Women Health will see about 30 lakh shares, or 4% of its equity, becoming eligible for sale on March 27.

These pre-IPO shares have had a lock-in of one and three months.

The bulk of the upcoming unlocks will come from shares with six-month and longer lock-ins. Urban Company alone accounts for 94.1 crore shares, or 66% of its outstanding equity. These shares were eligible for trading from March 17. Similarly, companies like GK Energy (13.1 crore shares, 65%) and Euro Pratik Sales (6.3 crore shares, 62%) have a sizable proportion of shares coming out of lock-in.

The lifting of the lock-in does not mean all these promoters and investors will rush to offload their holdings.

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"The actual supply may be lower as a large part is promoter-held," said Nuvama's Abhilash Pagaria.

The supply overhang could, however, put a lid on their gains in the near-term.

"In the current market environment, we do not expect a one-way rush by anchor investors to exit immediately upon lock-in expiry," Kamraj Singh Negi, MD & CEO - Investment Banking, Pantomath Capital Advisors.

Several stocks approaching lock-in expiry are currently trading below their issue price, which could reduce the incentive for early investors to sell aggressively. For instance, names like Dev Accelerator, GK Energy and Ivalue Infosolutions have seen declines both from issue price and listing levels.

On the other hand, a few stocks, such as ICICI Prudential AMC and Bharat Coking Coal, continue to trade at a premium to their issue price.

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