Most IPOs get lapped up on day 1, Bajaj Housing subscribed over 2 times

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

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All the 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 2x subscriptions. The Rs 500-crore IPO of Kross, an original equipment manufacturer (OEM) 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.

The optimism towards these two issues is also reflected in their grey market premium.

Currently, shares of the Bajaj group mortgage lender are changing hands at 90 per cent premium, while PN Gadgil’s grey market price is hovering around 50 per cent.

The grey market price for Tolins and Kross is around 20 per cent each.

“There is no irrational exuberance when it comes to 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. They are making efforts to understand businesses and analyse the pricing,” said Bhavesh Shah, managing director (MD) & head - 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. These 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 the 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 application supported by the blocked amount (ASBA) mechanism has given more flexibility to move funds,” said Ambareesh Baliga, independent equity analyst.

ASBA is a system where the IPO application amount remains in the bank account until an investor gets an allotment.

Also, with Securities and Exchange Board of India (Sebi) halving the IPO timelines from six to three days, the funds remain blocked only for less than two working days. This is for those applying on the last day of the issue.