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Of the 144 IPOs that raised Rs 2.13 trillion, 75 per cent (108 IPOs) delivered positive returns, with as many as 26 IPOs delivering more than 50 per cent listing day returns.
A majority of investors who get an allotment for shares in an initial public offering (IPO) sell their shares within a week, while 70 per cent of shares are sold within a year. A study conducted by market regulator Securities and Exchange Board of India (Sebi) on 144 IPOs listed between April 2021 and December 2023 shows that most individuals applying for IPOs look to sell shares for quick gains.
“The study found a strong disposition effect, with investors showing a greater propensity to sell IPO shares that posted positive listing gains, compared to those that listed at a loss,” said Sebi in a press release, which stated that the greater the post-listing gains, the greater the number of investors looking to sell.
“When IPO returns exceeded 20 per cent, individual investors sold 67.6 per cent of the shares by value within a week. In contrast, only 23.3 per cent of shares by value were sold when returns were negative,” the regulator said.
The study also showed a drop in oversubscription levels in the high-net-worth individual (HNI) category following the Rs 1 crore cap on IPO finance by Non-Banking Financial Companies (NBFCs) imposed by the Reserve Bank of India (RBI) in April 2022.
The average number of HNI applications for more than Rs 1 crore in IPOs dropped from approximately 626 per IPO in the pre-policy period (April 2021 – March 2022) to around 20 per IPO in the post-policy period (April 2022 – December 2023), the Sebi study showed.
The study also showed the geographical spread of IPO investors.
About 70 per cent IPO applicants come from just the top four states Gujarat, Maharashtra, Rajasthan and Uttar Pradesh. “The retail investors from Gujarat received 39.3 per cent of the allotment in the retail category, followed by Maharashtra (13.5 per cent) and Rajasthan (10.5 per cent). When it came to the HNI category, the allotment for Gujarat-based investors was even higher at 42.3 per cent, followed by Maharashtra (20.4 per cent) and Rajasthan (15 5 per cent).
The study showed nearly 48 per cent of the demat accounts that have received allotment for the 144 IPOs were opened between 2021 and 2023.
When it came to the qualified institutional buyer (QIB) segment, 65.4 per cent of the shares allotted in the main book were sold within a week and 87.8 per cent shares within a year of listing. The holding period, across the category of investors, was less in IPOs of less than Rs 1,000 crore.
First Published: Sep 02 2024 | 7:08 PM IST
