All three initial public offerings (IPOs) that hit the market on Monday were lapped up by investors. Bajaj Housing Finance’s mega share sale was subscribed over two times, generating bids worth Rs 10,000 crore already. The Rs 230-crore offering by Tolins Tyres too garnered nearly two times subscription, while the Rs 500-crore IPO of Kross, an original equipment manufacturer for tractors and heavy commercial vehicles, was subscribed 90 per cent. Meanwhile, the Rs 170-crore IPO of Shree Tirupati Balajee Agro Trading Company, an industrial packaging products company, which closed on Monday, garnered 124 times subscription. PN Gadgil Jewellers’ Rs 1,100-crore issue opens for subscription on Tuesday.
Despite all these issues getting bunched up together, most are witnessing strong demand. Industry players said this is a sign of a lot of liquidity available on the sidelines.
Industry players expect the IPOs of Bajaj Housing Finance and PN Gadgil Jewellers to garner huge oversubscriptions. This optimism towards these two issues is also reflected in their grey market premium (GMP). Currently, shares of the Bajaj group mortgage lender are changing hands at a 90 per cent premium, while PN Gadgil’s GMP is hovering around 50 per cent. The GMP for Tolins and Kross is around 20 per cent each.
“There is no irrational exuberance when it comes to the mainboard IPOs. Most issues are by good-quality businesses. Also, there is a lot of due diligence and discussions over pricing by institutional investors, mainly mutual funds. Even though the secondary markets are at all-time highs, the investors in the primary market have shown discipline and are taking efforts to understand the businesses and analyse the pricing,” said Bhavesh Shah, managing director and head of investment banking, Equirus.
Market players expect cumulative bids between Rs 2 trillion and Rs 3 trillion for the four IPOs that hit the market this week, which are looking to raise a combined Rs 8,390 crore.
Some see an impact on the secondary market performance as these issues are expected to suck out huge liquidity.
“Given the high demand for issues like Bajaj Housing and PN Gadgil, there could be some impact on surplus available for secondary market trading. If global markets remain stable, we may not feel the impact. However, if the global risk-off triggered by disappointing US jobs data continues, we could see some pressure on the domestic markets as well,” said an investment banker.
“Large issues used to suck out liquidity in the past. But it’s no longer the case because of the robust inflows into the market every month, both via direct equity investments and through mutual funds. Moreover, the ASBA mechanism has given more flexibility to move funds,” said Ambareesh Baliga, independent equity analyst.
ASBA, or Application Supported by Blocked Amount, is a system where the IPO application amount remains in the bank account unless an investor gets an allotment.
Also, with the market regulator Sebi halving the IPO timelines from six days to just three days, the funds remain blocked only for less than two working days for those applying on the last day of the issue.
First Published: Sep 09 2024 | 6:18 PM IST
