Samhi Hotels to Sai Silks: Subscriptions drop as IPOs get bunched up

Deterioration in market sentiment, investment fatigue also to blame

Initial public offerings (IPOs) seem to be losing steam after a number of stellar market debuts in recent months.

The five IPOs that concluded this week received a lukewarm response from investors. The IPO of Samhi Hotels, which ended on Monday, was subscribed 5.6 times. The IPO of Yatra Online, which ended on Wednesday, managed to scrape through with just 1.6 times subscription. Similarly, the two issues that concluded on Friday -- Sai Silks and Signature Global -- were subscribed about 4.5 times and 12 times, respectively.

By comparison, the seven previous IPOs had garnered subscriptions between 20 times and 97 times.

In terms of number of deals, September is proving to be one of the busiest months for the domestic primary market: 10 mainboard IPOs have already concluded this month; one opened on Friday; and another two will open next week.  

Bankers said there was some investor fatigue because of many back-to-back IPOs. The recent activity was driven by the enthusiastic reception of earlier IPOs and a specific rule on quarterly financial disclosure. 

Companies that miss the window to launch their IPOs this month must update their draft red herring prospectus with figures from the April-June quarter. Regulatory guidelines stipulate that an IPO cannot proceed if the offer document’s numbers are older than two quarters.

Bankers said that updating the audited quarterly numbers could take at least four weeks, exposing companies to market volatility.

“The number of issues in a week has gone up. Many IPOs are happening now. It will mean that investors will get divided. Listing gains have moderated of late. The speculative crowd, which came for huge listing gains, has now reduced,” said Ajay Garg, founder of Equirus

Garg added that any issue with more than 10 times demand was a good subscription. “50-60x is a bit of an overkill.”

Moreover, there has been some correction in the market, which also works against higher subscriptions. The Nifty declined 2.6 per cent during the week, its biggest fall since February 2023. Similarly, the Nifty Midcap100 and Nifty Smallcap100 fell 1.7 and 2.5 per cent, respectively. Moreover, foreign portfolio investors (FPIs) were net sellers of ~5,697 crore this week. On Friday, they were sellers worth ~1,326 crore, according to provisional data from the exchanges. Bankers said the fizzling out of demand would help avert unnecessary exuberance. 

“It's positive. Otherwise, things get heated, and promoters start thinking they haven't priced the issue properly,” said Pranjal Srivastava, partner- ECM, Centrum Capital.

Despite the somewhat underwhelming response to the recent IPOs, bankers maintain an optimistic outlook. They said they didn't foresee a massive market correction, though some nervousness ahead of the elections was expected.

“IPOs will continue as there will be demand for issues at the right price. And domestic flows have yet to stop. There will be an appetite for good issues. IPOs may slow down but not stop as such,” said Srivastava.