Shares in India's largest state-run defence firm Hindustan Aeronautics Ltd (HAL) fell as much as 7.7 percent on their market debut on Wednesday, following a tepid response to the company's 41 billion rupee ($633 million) initial public offering.
The military aircraft maker's offering last week was subscribed at just 99 percent, a rare occurrence for an Indian IPO in recent years with most oversubscribed.
Analysts said the offering has been hurt by competition from a number of IPOs due to hit the market this month and a fall in Indian stock markets from record highs reached in January.
State-run life insurer, Life Insurance Corporation of India was allotted 70 percent of the shares on offer, or about a 7 percent stake in the company, which helped the offer sail through, a stock exchange filing showed.
The market's weak response could prove to be another setback to a booming Indian IPO market, which saw a record $11 billion of fund-raising last year.
Brokerage ICICI Securities, an arm of India's third-biggest lender ICICI Bank, scaled back the size of its IPO on Monday and raised a lower-than-targeted $540 million.
On Tuesday, however, shares of Bandhan Bank rose as much as a third on their market debut despite a weak broader market, suggesting investors are looking to buy into companies with strong fundamentals and attractive valuations.
Firms are in the process of raising more than $2 billion combined in IPOs in India in March.
"Due to the weak market conditions and the line-up of defence IPOs, this offering has not done so well," Tarang Bhanushali, assistant vice president, research at IIFL, said of HAL. "But we were bullish on the stock and even at current prices would recommend a buy from a long-term perspective."
Other analysts have said that HAL's excessive dependence on government orders and a bumpy execution cycle were viewed as negatives despite India's push to increase self-reliance in defence production.
The government is also considering whether to float stakes in helicopter service operator Pawan Hans and Airport Authority of India (AAI), which have long been in the pipeline.
Shares in HAL closed down 6.76 percent at 1,132.85 rupees after dropping to a low of 1,121 rupees earlier in the day.
The NSE share index ended down 0.69 percent and has lost around 9.5 percent from record highs touched in late January.