Retail investors turn selective in IPOs

The primary market seems to have got its mojo back, geared up by the sudden rush by companies to list their shares on the domestic bourses and improving investors’ appetite for new stocks, thanks to a strong rally in the secondary market.

Last week, five IPOs, including Belrise Industries, Leela Palaces Hotels & Resorts, Schloss Bangalore, and Aegis Vopak Terminals, unveiled their listing plans.

The ₹2,150-crore IPO of Belrise Industries, which opened for subscription between May 21-23, saw the issue being subscribed 41.3 times. Today, the stock made its debut on the BSE and NSE, listing at a premium of 11% over the issue price.

Big-ticket IPOs of Schloss Bangalore (₹3,500 crore) and Aegis Vopak Terminals (₹2,800 crore), which hit Dalal Street this week, are set to debut on the domestic bourses next week. Both the public issues closed today, sailing through on the final day of bidding with qualified institutional buyers (QIBs) chipping in.

Notably, it has been observed that retail investors are becoming increasingly selective in picking IPOs, and the contrasting subscription figures for recent issues clearly reflect this emerging trend.

Auto component manufacturer, Belrise Industries, which had earmarked 35% of the issue for retail participants, garnered healthy response from individual investors. In contrast, two other IPOs — Schloss Bangalore and Aegis Vopak — saw muted retail participation. Both had just 10% of their issue size reserved for retail investors.

As per exchange data, Belrise’s public issue received 4.27 times bidding from retail investors. On the other hand, the retail portion of Hotel Leela and Aegis Vopak failed to be fully subscribed. At the end of Day 3 subscription, the retail quota of the Leela IPO was booked 0.83 times, while that of Aegis Vopak by 0.77 times.

Overall, the IPOs of Schloss Bangalore and Aegis Vopak got fully subscribed on the final day.

The ₹3,500 crore IPO of Schloss Bangalore was booked 4.5 times on the final day, after being subscribing by 0.07 times on Day 1, followed by 0.17 times on Day 2. The quota for QIBs was subscribed 7.46 times, while non institutional investors (NIIs) and retail quotas received 1.02 times and 0.83 times bidding, respectively.  

On the other hand, the ₹2,800-crore IPO of Aegis Vopak Terminals, a joint venture between Aegis Logistics of India and Royal Vopak of the Netherlands, was subscribed 2.09 times on Day 3. The latest data available on the BSE showed that the QIB quota was booked 3.3 times, while that of NIIs and retailers were subscribed 0.56 times and 0.77 times, respectively.

Retail investors may be turning more selective. However, market players also point out that in the case of some of these recent IPOs, the difference in pricing of the issuances could also have been a reason for the divergence in retail participation. The price band for Belrise Industries IPO was much lower at ₹85-90 per share compared to ₹413-435 and ₹223-235 for Schloss Bangalore and Aegis Vopak Terminals, respectively.

In the grey market as well, Belrise commanded a grey market premium or GMP in the range of 15%–30% of the issue price, while Leela Hotel and Aegis Vopak saw marginal GMPs.

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