Bajaj Housing Lock-In: Why the Stock Dropped & What’s Next?

why bajaj housing finance share fell today? what's should investors do?

As the Bajaj Housing lock-in period ended, Bajaj Housing Finance saw a 6% drop in its stock price in one day which certainly gave rise to a lot of doubts in investors' minds with regard to the stock's not-so-sudden fall.

Here we will discuss the reasons for this fall and what current conditions look like for the company and the future. Other companies that can also be hit by this same impact will be highlighted towards the end. So stay tuned till the end for a complete analysis.

Detailed Video

Triggered Bajaj Housing Finance Share Price Fall 

When Bajaj Housing Finance IPO was available for the public, we discussed anchor investors and their lock-in period. Here is a quick overview for those who need it: 

An anchor investor is an institutional investor who undertakes to buy beforehand a specific percentage of the company's shares before the IPO. The chances of getting shares this way increase, but there may be one or two costs involved. 

As a result of SEBI regulations, anchor investors are supposed to have lock-in periods of 60 to 180 days during which they will not be able to sell from the holding in the company. 

Now here is what happened: 

End of the Lock-In Period: Bajaj Housing Finance's anchor investors had a 3 month (90-day) lock-in after the IPO. Today was that day.

Very Large Selling Pressure: On the expiry of that lock-in, anchor investors were free to liquidate their shares. The amount of shares thus locked was 12.6 Cr, or 2% of the total company. 

And so this massive volume of shares entering into the market triggered a selling pressure that sharply fell the share price.

Bajaj Housing was subjected to a short analysis. Such things are all temporary events. Think long-term in determining your course of action.

All shares are now lock-in indexed. Hence the question arises- what advice we can take before the lock-in date for self-precautions? Let us examine certain historical IPOs and assess their behavior on the lock-in date. Later we shall see the upcoming IPOs and check which ones will have the lock-in periods expiring soon.

 

 

What’s next for investors?

The good news is, that it generally happens for some time and passes by and does not necessarily correlate with a company's long-term problems.

The Positive Among the Negative

Apart from that fall, there is something good too, namely, the results of Bajaj Housing Finance in the September quarter.

It shows a good performance that clearly shows the ability of the company to be able to generate an income stream in the long term. And this is what investors should look at: the fundamentals rather than short-term price movements.

What About Other Companies?

Bajaj Housing Finance is sure not the only loser in such a scenario. Companies that also have anchor investors very near their lock-in end could expect similar selling pressures.

Like the Bajaj Housing Finance IPO or of less lock-in periods, others which launched very close to that date should be taking a closer look. Investors should keep an eye on these trends and brace themselves for temporary dips.

Conclusion

It was primarily caused by the impact of the end of the lock-in period for anchor investors, hence the selling pressure became too much in Bajaj Housing Finance shares. It is a temporary phenomenon that does not carry much of a future indication.

For long-term investors, such dips might even work as buying opportunities provided the strong fundamentals of the company remain intact. Keep an eye on the same events happening in other companies but always focus on long-term growth instead of short-term fluctuations.

DISCLAIMER: NOT a buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always discuss with an eligible financial advisor before investing