Mumbai: Bids for stocks allocation in initial public offerings (IPO) by wealthy individuals have become rather conservative after the central bank capped the IPO Financing ceiling for non-bank lenders to ₹1 crore per application from April 1 this year.

Consequently, the average oversubscription multiple for the quantum of stocks reserved for high net worth individuals (HNIs) and non-institutional investors was 13 times this fiscal year, compared with a mean of 150 times last year.

Of the 23 issues launched in FY23, the HNI portion in five IPOs – Delhivery, Tracxn Technologies, Paradeep Phosphates, Five Star Business Finance, and Prudent Corporate Advisory Services – was undersubscribed. In another 10 IPOs, bids were between 1 and 8 times the number of shares on offer for the HNI category.

In recently-concluded IPOs, such as the ₹881-crore Bikaji Foods International and ₹2,206-crore Global Health share sales, the HNI portions were subscribed seven and four times, respectively.

The HNI portions in IPOs such as Aether Industries, Ethos, Fusion MicroFinance and eMudhra were subscribed between 1 and 2 times.

The central bank’s financing The cap has created a level playing field for bona fide investors, allowing a more efficient price discovery process, said bankers.

“With the funding restrictions, the price discovery in the recent IPOs has been much better compared with last year,” said Ravi Sardana, an investment banker. “IPO financing created artificial demand by increasing subscription levels, gray market premiums, and listing price expectations.”

On average, ₹25,000 crore had been funded to HNIs in last year’s IPOs that saw massive oversubscription. The HNI portion of the ₹171-crore IPO of

was subscribed 928 times, while the ₹1,083-crore Tatva Chintan IPO was subscribed 512 times. In , the HNI subscription was 651 times, while in Nazara Tech, Easy Trip, , and , the HNI portions were subscribed between 300 and 400 times. “As the shares were allocated proportionally in the non-institutional investors (NII) or HNI category, investors used to borrow massive funds and bid aggressively,” said Arun Kejriwal, founder of Kejriwal Research & Advisory. “Almost all NBFCs have stopped funding IPOs since April 1 after the RBI restrictions, while some brokers are giving small funding for retail investors.”


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By Dipak

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