SMALL INVESTORS FLOCK TO PUBLIC OFFERINGS
Small investors are chasing initial public offerings (IPOs) like never before. Of the past 10 IPOs which have hit the market, five have seen more than a million applications from them.
State-owned Cochin Shipyard’s IPO saw nearly two million applications, while the recently concluded one of Godrej Agrovet saw 1.5 million applications in the retail category, meant for investors applying for shares worth up to ~2 lakh.
Investment bankers say a million applications used to be rare a few years ago, but has become a norm these days.
Stellar listing day gains for most, coupled with changes in the allotment process, have led to an increase in retail participation, say players. Of the 24 companies which have listed during 2017, as many as 17 have given positive returns on the listing day. Almost a dozen companies have seen their shares rally by more than 25 per cent on listing day itself.
More importantly, most IPOs have been able to sustain their gains, thanks to buoyancy in the secondary market.
The Indian markets, up 22 per cent on a year-to-date basis, are trading close to their lifetime highs. Strong liquidity is supporting high valuations. Market players say IPOs in new sectors such as insurance, stock market intermediaries, etc, are keeping the investors excited. Also, thanks to development in technology and use of smartphones, applying for an IPO is now possible in a few minutes. Change in allotment norms, to provide allotment to most applications, has seen most applicants apply for minimum number of shares in every IPO. Also, savvy investors are opening accounts for all their family members to participate in the IPO boom, say brokers.
Retail participation has also seen substantial increase in mutual funds (MFs), especially through systematic investment plans , which involves investing a fixed sum every month. So far this year, equity MFs have seen net inflows of ~1.03 lakh crore. MFs have also become big participants in the IPOs thanks to the huge investor flows, providing retail investors an alternate way to gain from IPOs.