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Strong listing gains driving retail investors by hordes to IPOs

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Mumbai: Retail investor participation in initial public offerings (IPOs) has hit a record high in recent issues fuelled by strong listing returns, improved trading infrastructure and faster online payment systems. With investors able to punt on IPOs with a click on the mobile trading application, the retail category of issues has been flooded with bids that are many times the shares set aside for them. This augurs well for the pipeline of upcoming mega issuances including LIC.

In FY22 so far,15.68 lakh retail investors have participated on an average in each IPO. This is 25% more than the average 12.73 lakh retail applications in FY21 and 6.88 lakh in FY20.

In 2007-08, when the IPO market witnessed frenzy, the average applications from the retail investors were 3-5 lakh, except in the case of

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and Coal India.

Retail subscription in the latest two IPOs – Zomato and Tatva Chintan Pharma – is an evidence of their voracious appetite. Both the issues saw more than 32 lakh applications each, almost 5% of the total demat accounts in India. In the case of much-awaited Zomato, the retail category was lapped up within a couple of hours of the issue last week despite mixed commentary about its prospects.

The earlier two IPOs – Clean Science and GR Infraprojects – saw 23.5 lakh and 20 lakh applications, respectively, from retail investors. IPOs of 2021 such as Indigo Paints, RailTel Corporation, MTAR Technologies, Laxmi Organic and Nazara Technologies saw more than 20 lakh applications each from retail investors, a consistent trend that was never seen before.

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“The stellar performance of the recent IPOs – both in terms of listing gains and returns post-listing – will keep investor interest elevated in new offerings,” said Atul Mehra, managing director, investment banking, JM Financial.

Out of the 38 companies that have listed on the main exchanges in the past one year, 34 are trading above their IPO prices, showed data compiled by ETIG Database.10 companies have gained over 100% from their IPO prices. Around half of these 38 companies have gained at least 50%.

Investment bankers said mobile trading applications, which are easy to use, have eased the process of applying for IPOs.

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“Technology has dramatically reduced the barrier of entry for individual investors from participating in the primary market as now it takes just a minute to apply for an IPO,” said V Jayasankar, head of equity capital markets, Kotak Investment Banking.

Earlier, investors had to fill up IPO applications for each issue and the period between the time of issue and the listing was as long as a fortnight, resulting in application money getting stuck. All that has changed now.

“Technology plays a key role in increasing participation in new offerings beyond top-10 cities and penetrating tier 2 and 3 towns,” said Mehra.

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Retail investors are pumping money into equities like never before. More than two crore demat accounts were added since April 2020.

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