45% mutual fund schemes didn't keep IPO buys for a year

Of the total IPOs issued in the last one year, 72 per cent were listed at a premium while 28 per cent opened at a discount

A sizeable number of mutual fund schemes that invested in initial public offerings over the past year have not stayed put for the long haul. 

Of the 1,051 mutual fund schemes that applied for IPOs over the past year ended June 30, only 582 schemes are holding on to the shares post listing. That means 469, or 45 per cent, of the schemes have exited within a year of listing. 

Nippon MF had applied for 23 of the 36 IPOs during the period under review, the most among fund houses, the data from domestic brokerage Ventura Securities shows.

Of the total IPOs issued over one year, 72 per cent were listed at a premium, while 28 per cent opened at a discount.

The top five IPOs that MFs applied for in the past year in terms of the number of schemes include Gland Pharma (113 schemes), CAMS (84), Sona BLW Precision Forgings (80), Rossari Biotech (72), and Indigo Paints (65). 

Nine IPOs have not seen an exit by MF schemes, of which five were released in June. Since anchor investors cannot sell their IPO investments within a month, the IPOs which were released in June can only be sold off the next month or later.

A few of the recent IPOs that saw robust MF participation include Zomato, which saw an investment of Rs4,450 crore, GR Infra (Rs 1,080 crore), Tatva Chintan Pharma (Rs 210 crore) and Rolex Rings (Rs 1,420 billion), showed the data from Edelweiss Alternative Research.

The trend of higher mutual fund participation has picked up, thanks to robust monthly inflows into equity schemes. Over the past five months, equity funds have continued to witness net inflows amounting to Rs 51,207 crore, more than reversing the outflows seen over the previous seven months. Equity-oriented schemes saw net inflows of Rs 22,583 crore in July, the most since at least August 2017.  

According to experts, IPOs provide an opportunity to be part of companies that are not represented in the market. Anchor investment allows the buyer to get a fixed allotment at a fixed price without an impact cost. This is not so in the open market and the allotment can reduce to the extent the issue is oversubscribed.

After two months of robust activity, marked by heavy subscriptions and listing gains, the enthusiasm in the IPO market seems to be on the wane. Five out of the eight companies that made their debut at the bourses in August were listed at a discount. In fact, KFC and Pizza hut franchisee Devyani International, which rose 56 per cent on its debut, was the only stock to list with good listing gains in the month. 

At least five companies looking to raise a cumulative Rs 6,595 crore could launch their IPOs this month after a busy August that saw eight IPOs.