UPI IPO mandate creation dips in August despite best mop-up in 4 years

5.9 mn mandates were created compared to 7.7 mn in July

The mandate creation through Unified Payments Interface (UPI) for initial public offerings (IPO) dipped in August although it was the best-ever month in terms of mobilisation in nearly four years. Last month, saw eight IPOs cumulatively raise Rs 17,841 crore, the most since November 2017.

In August, 5.86 million IPO mandates got created through UPI, according to data released by the National Payments Corporation of India (NPCI), the umbrella entity for retail payments in India.

The preceding month saw a record 7.66 million mandate creation requests on the back of blockbuster IPO of food delivery firm Zomato. The IPOs of GR Infraprojects, Clean Science and Tatva Chintan also saw huge success. In comparison, the response for IPOs in August was lukewarm resulting in a 24 per cent month-on-month (MoM) drop in mandate creation through UPI.

Mandate creation is when a customer blocks an amount in the bank account for an IPO application.

Although the mandate creation request showed a dip, mandates executed—transactions where an investor get allotment of shares— saw a sharp rise. In August, more than 1.32 million mandates, or over 22 per cent of the mandates created got executed. In July, only 532,943 mandates, less than 7 per cent of the 7.66 million mandates created, had got executed.

Country’s largest lender State Bank of India (SBI) received the maximum mandate creation requests of 1.46 million in August, followed by HDFC Bank with 1 million, ICICI Bank with 711,593 requests, and Bank of Baroda with 484,685 requests.

The top four banks -- SBI, HDFC Bank, ICICI Bank, and Bank of Baroda -- in terms of volume of mandate creation requests saw 841,739 mandates executed, which constituted 63.37 per cent of the total mandates executed in August.

Also, there has been a substantial improvement in the rate of decline of UPI IPO mandates at banks. SBI saw an approval rate of 88.32 per cent. Other PSBs like Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank, and Central Bank reported approval rates of 93.99 per cent, 90.71 per cent, 93.51 per cent, 86.60 per cent, 93.83 per cent, respectively. This is almost at par, if not better when compared to the private sector banks.

In terms of amount mobilised, August was a good month for the primary markets but the investor frenzy seen in July was missing.

Online platform for buying and selling vehicles Car Trade and cement manufacturer Nuvoco Vista launched IPOs of Rs 5,000 crore each. In the preceding month, six companies had mopped up Rs 14,629 crore, with online food-delivery unicorn Zomato raising Rs 9,375 crore.

According to investment bankers, the pipeline for the rest of the year also looks strong. Aditya Birla MF, Go Airlines, and Vijaya Diagnostic are expected to launch their offerings in the near term, while Paytm, Policy Bazaar, and Nykaa could tap the market during the latter part of the year.