Happiest Minds & Route Mobile: investors bet Rs 90,000 cr on two tiny IPOs

Hopes of bumper listing, success of last offering seen driving subscriptions of Happiest Minds & Route Mobile

Nearly Rs  90,000 crore is riding on the two tiny initial public offerings (IPOs) — that of Happiest Minds Technologies and Route Mobile — that concluded this week. The combined issue size for the offerings, excluding the anchor book, was just Rs  806 crore — translating into 111 times demand for the shares on offer.

Forecasts of bumper debut and success of previous listing spurred these bets, said experts. The previous IPO to hit the market, specialty chemicals firm Rossari Biotech, saw its stock nearly double on listing, which helped several high networth individuals (HNIs) pocket quick gains.

Both Happiest Minds and Route Mobile are expected to surge over 50 per cent during their debut, said market players. Route Mobile’s IPO, which closed on Friday, was subscribed 74 times, while that of Happiest Minds, which closed on Wednesday, garnered 151 times subscription.

Market players say the huge subscription figures are a sign that the exuberance seen in the secondary market could be spilling onto the primary markets.

“There were not too many IPOs in the past many months. And the market seems fairly buoyant at the moment. Whenever there is buoyancy, people tend to put more money,” said Jyotivardhan Jaipuria, chief executive officer, Valentis Advisors.

 

 

The maximum bids in both the IPOs have come from HNIs. These investors avail short-term loans from non-banking finance companies (NBFCs) to apply in the IPO. This pushes up their break-even costs. However, they still stand to gain if the stock lists at a huge premium as with Rossari.

“HNIs subscribe if funding is available and there is a grey market premium. Whether the issue is good or bad is not their concern. The funds should be available at reasonable interest, and they should get a nominal margin,” said Arun Kejriwal, a market analyst.

Most HNIs are seasoned investors. Usually, they get their calculations right unless there is a game-changing event between an IPO closing and listing, which is usually six to eight days.

Happiest Minds’ IPO saw nearly 2 million retail applications, while Route Mobile saw another 1.5 million. Experts said the high number of applications was the result of the boom in new account openings at brokerages. About 4 million new demat accounts have been opened since April, spurred by the ease of online account opening and people working from home during and after the lockdown.

However, experts advise caution and say one should keep an eye on the primary markets to identify a bubble.

“History tells us that the final leg of a bull market comes with the boom in the primary market. First, the bull run comes in mid and small-cap, and it spreads to the primary market and then the slide starts. And this has been the pattern for the last 30 years. Investors should tread very cautiously. They should take money off the table once they see some returns,” said G Chokkalingam, founder of Equinomics.