The most sought-after initial public offerings (IPOs) of 2017-18 have reaped handsome gains for investors. The top 10 offerings in terms of oversubscription gained an average 66 per cent on listing day. Shares of these 10 companies are currently trading an average 60 per cent higher over their issue price even as the benchmark indices have come off nearly 10 per cent from the record highs in end-January.
According to Prime Database, Salasar Techno Engineering and Astron Paper & Board were the most-subscribed IPOs of FY18 with their offering witnessing over 200 times demand the shares on offer. The strong demand spilled over to the secondary market as shares of Salasar and Astron gained more than doubled on listing and have managed to sustain gains. To be sure, part of the reason for high oversubscription was the small quantity of shares on offer in the IPO. The issue size of both Salasar and Astron was less than Rs 1 billion.
The minimum listing day gains for the top eight subscribed IPOs was 37 per cent. However, getting hands on the shares most-subscribed IPOs is as difficult as winning a lottery. Only an average one out of 30 investors applying in these IPOs got allotment. As per the process laid down by market regulator Securities and Exchange Board of India (Sebi), shares are allotment to IPO investors on a proportionate basis. However, if there are number investors than shares available, shares are allotted randomly in a lottery-like system.
In terms of number of investor applications, state-owned Cochin Shipyard and Hudco top the chart, as per Prime Database. Both these issues saw nearly two million applications each from retail investors. The listing gains for Cochin and Hudco were relatively moderate, with their shares gaining around 20 per cent each on listing. Among the private sector IPOs, depository firm CDSL, asset manager Reliance MF and poultry firm Godrej Agrovet saw the most number of applications at over 1.5 million each.
Market players say investors take cues from the grey market while applying in the IPO.
“Typically, investors look at the premium shares of new companies are quoting in the unofficial grey market and then decide whether to apply in an IPO. Most of the frenzy is to pocket listing day gains,” said an investment banker.
Notably, demand for some of the recent IPOs amid a downturn in the market. Of the dozen IPOs that hit the market in March, only two issues saw more than 10 times subscription. Most issues remained undersubscribed by retail investors and got only a few thousand applications.
Experts say investors could be shunning primary market offerings due to the market volatility. If the current volatility persists it could impact future issuances.
“Going ahead, we are likely to see more volatility which could affect fundraising plans of companies. There are 12 companies having Sebi approval looking to raise Rs 104 billion and another 18 companies wanting to raise Rs 293 billion awaiting Sebi approval. As seen in the past, the pipeline may quickly vanish if the volatility and negative sentiment continues,” said Pranav Haldea, managing director, Prime Database.
According to Prime Database, Salasar Techno Engineering and Astron Paper & Board were the most-subscribed IPOs of FY18 with their offering witnessing over 200 times demand the shares on offer. The strong demand spilled over to the secondary market as shares of Salasar and Astron gained more than doubled on listing and have managed to sustain gains. To be sure, part of the reason for high oversubscription was the small quantity of shares on offer in the IPO. The issue size of both Salasar and Astron was less than Rs 1 billion.
The minimum listing day gains for the top eight subscribed IPOs was 37 per cent. However, getting hands on the shares most-subscribed IPOs is as difficult as winning a lottery. Only an average one out of 30 investors applying in these IPOs got allotment. As per the process laid down by market regulator Securities and Exchange Board of India (Sebi), shares are allotment to IPO investors on a proportionate basis. However, if there are number investors than shares available, shares are allotted randomly in a lottery-like system.
In terms of number of investor applications, state-owned Cochin Shipyard and Hudco top the chart, as per Prime Database. Both these issues saw nearly two million applications each from retail investors. The listing gains for Cochin and Hudco were relatively moderate, with their shares gaining around 20 per cent each on listing. Among the private sector IPOs, depository firm CDSL, asset manager Reliance MF and poultry firm Godrej Agrovet saw the most number of applications at over 1.5 million each.
Market players say investors take cues from the grey market while applying in the IPO.
“Typically, investors look at the premium shares of new companies are quoting in the unofficial grey market and then decide whether to apply in an IPO. Most of the frenzy is to pocket listing day gains,” said an investment banker.
Notably, demand for some of the recent IPOs amid a downturn in the market. Of the dozen IPOs that hit the market in March, only two issues saw more than 10 times subscription. Most issues remained undersubscribed by retail investors and got only a few thousand applications.
Experts say investors could be shunning primary market offerings due to the market volatility. If the current volatility persists it could impact future issuances.
“Going ahead, we are likely to see more volatility which could affect fundraising plans of companies. There are 12 companies having Sebi approval looking to raise Rs 104 billion and another 18 companies wanting to raise Rs 293 billion awaiting Sebi approval. As seen in the past, the pipeline may quickly vanish if the volatility and negative sentiment continues,” said Pranav Haldea, managing director, Prime Database.
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