Investors make a beeline as five IPOs hit market; most oversubscribed

Most listings see oversubscription on Day One

Investors are flocking to the five initial public offerings (IPOs) that have hit the market. Most share sales have already experienced more demand than shares on offer, with cumulative bids totalling almost Rs 25,000 crore. The five maiden share sales together aim to mobilise Rs 7,377 crore in what will be the busiest week for IPOs in calendar year 2023.

The strongest demand is observed for Tata Technologies’ (Tata Tech’s) Rs 3,042 crore offering. The IPO, the first by a Tata Group firm in nearly two decades, was subscribed 6.55 times on Wednesday, the first day of the issue.

Gandhar Oil Refinery (India) and Flair Writing Industries, which also opened on Wednesday, were subscribed 5.5 times and 2.3 times, respectively.

Fedbank Financial Services (Fedfina) had a relatively slow start, garnering 40 per cent subscription. The IPO of state-owned Indian Renewable Energy Development Agency (IREDA), which opened a day earlier, was subscribed close to 5 times.

Usually, subscriptions take a hit when IPOs are bunched together. However, this week could be an exception, with industry players hoping that total bids for the five IPOs will exceed Rs 2 trillion.

A combination of strong grey market premiums (GMP) and retail investor appetite is attributed to the reasons for this robust demand.

Some believe the secondary market performance could be subdued in the immediate term as the five IPOs are expected to block liquidity until mid-next week.

The GMP of Tata Tech is 75 per cent, of Gandhar Oil is about 43 per cent, IREDA is 28 per cent, and Flair Writing is 23 per cent above their issue price. Fedfina’s GMP is about 5 per cent.

“This is a sign of an active market, and there is powerful momentum there. We were expecting a bit of a slowdown, which does not seem to be happening. The quality of the companies is good. That is the driving factor, and the word in the market is that they are attractively priced. That would have given the confidence to the bankers to launch it at the same time,” said Pranjal Srivastava, partner (investment banking), Centrum Capital.

Arun Kejriwal, founder of Kejriwal Research & Investment Services, said the issue sizes are not big when you look at the pent-up retail demand.

“Investors have made money in small and midcaps. We are seeing strong demand for small and medium-sized enterprise IPOs as well. There is money on the table,” Kejriwal said.

Industry players said high net worth individuals are looking to place leveraged bets on issues such as Tata Tech and Gandhar Oil. Last year, the Reserve Bank of India imposed a Rs 1 crore cap on IPO financing by non-banking financial companies. Industry players said investors are eyeing workarounds, such as investing through multiple dematerialised accounts using family members and borrowing from brokers by pledging shares.

On a year-to-date basis, the National Stock Exchange Nifty Midcap gained 33.4 per cent, and the Nifty Smallcap gained 40.7 per cent.

“As long as issuers are reasonable in terms of pricing, the IPO momentum will continue. Most newly listed companies have also given decent returns,” said Srivastava.

The S&P BSE IPO Index, a gauge that tracks newly listed companies, has gained 35.1 per cent.