LIC, Paytm, Coal India correct 20-73% on issue prices; which one is better bet at current levels and why? Explained

India's three largest initial public offering (IPO)—Life Insurance Corporation (LIC), One 97 Communications (Paytm) and Coal India— seem to have disappointed investors as all of these IPOs continue to trad below their issue prices.

LIC, India's biggest IPO, came with a humungous issue size of Rs 21,000 crore, followed Paytm which has kept the IPO issue size at Rs 18,300 crore. India’s largest coal producing company, Coal India, raised Rs 15,200 crore through its IPO at the issue price of Rs 245 a share. The issue prices of LIC and Paytm shares were 949 and 2150 respectively.   

These shares have corrected significantly against their Issue prices and are available at a massive discount. Shares of LIC, Paytm and Coal India ended at Rs 668.20 per share, Rs 583.10 apiece and Rs 191 a share on Monday. 

LIC Vs Paytm Vs Coal India 

Against the issue price of Rs 949, LIC shares are available at a discount of Rs 29.5%. Similarly, Paytm, which had fixed the issue price at Rs 2150, was trading at nearly 73% discount and the stock of India's largest coal producing company, which floated its IPO almost a decade ago with an issue price Rs 245 per share, was trading with over 20% discount against its issue price as on June 13.       

Speaking of the listing, while share of LIC and Paytm, top two biggest initial public offering, made a tepid debut on the exchanges, Coal India rather made a spectacular listing on the bourses. Shares of Coal India were listed at Rs 287.75 per share, a gain of Rs 42 apiece or around 17% on issue price of Rs 245.   

As the Coal India has made a strong debut against weak listing of LIC and Paytm, market expert is of the view that it would not be fair to compare the three IPOs on same line. 

Coal India launched their IPO almost a decade ago. Hence, comparing Coal India with current IPO prices may not be appropriate, said Sunil Damania, Chief Investment officer, MarketsMojo. 

"The reason why Coal India has underperformed is purely because of multiple environmental-related issues. Several ESG funds were uncomfortable investing in Coal India, which is one of the reasons the company has underperformed," underlined the expert   

Off late, Coal India has begun to perform well because of rising coal prices all over the world and the rise of another alternative source of energy, Damania said.   

"And that makes Coal India and coal a commodity back in demand. These are the main reasons Coal India has done reasonably well in the recent past," said MarketsMojo CIO.   

With regards to LIC and Paytm, there are two chief reasons for their prices trading below the issue price, he said   

1.The merchant bankers have not left enough on the table for the investors by pricing the IPOs very aggressively. Due to that, both LIC and Paytm have been commanding below the issue price.   

2.Post Paytm and LIC IPO, market sentiments have deteriorated, adding further pressure on LIC and Paytm IPOs.   

LIC, Paytm or Coal India—which one should do well from here? 

Given the power shortages worldwide and other energy source prices rising, Coal India seems to be a better bet among all 3. "So, if I have to pick one company between Coal India, LIC and Paytm, it would be Coal India," the expert concluded.   

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)