Domestic mutual funds (MFs) have taken lead over other institutional investors when it comes to participation in Initial Public Offerings (IPOs) of shares. Fund managers have subscribed to shares in anchor book in almost all of the recent IPOs, data show.
(Anchor investors are institutional (big-money) investors that are invited to buy shares ahead of the IPO to provide confidence to potential IPO investors. There is a reserved quota for anchor investor buying. Anchor investors cannot sell their shares for 30 days from the date of allotment; other IPO investors are allowed to sell on the listing day.)
MFs have picked as much as 100 per cent of shares in the anchor quota in Precision Camshafts IPO. In absolute terms, they have subscribed to Rs 1,060 crore worth of shares out of the available Rs 1,800 crore in the anchor segment (see table). The rest of the shares were lapped up by insurance companies and Foreign Institutional Investors (FIIs). Besides participating in the anchor segment, MFs have also participated in the rest of the IPO process by buying shares.
It is worth noting that the total investment by fund houses in IPOs is a third of the total net investment made by equity mutual fund schemes so far this calendar year. The year 2016 has so far witnessed a lukewarm investment of Rs 3,200 crore by fund houses in stocks.
Fund houses most active in making investments in new share issuances include SBI Mutual Fund, HDFC Mutual Fund, ICICI Prudential AMC, Birla Sun Life Mutual Fund, Sundaram Mutual Fund, UTI Mutual Fund, and Reliance Mutual Fund.
IPOs like that of Precision Camshafts, Teamlease Services, Ujjivan Financial Services, Equitas Holdings, and Thyrocare Technologies were the most invested by fund houses. In Precision, mutual funds took away almost everything available for anchor investors. Equitas Holdings was the second-most invested as fund houses took 68 per cent of the issued shares reserved for anchor investors. In case of Teamlease and Quick Heal, the figures stood at 67 and 66 per cent, respectively. HealthCare Global Enterprises was the poorest in terms of MFs' participation, at merely 14 per cent.
The last two years have seen robust inflows in the MF equity segment of over Rs 1.5 lakh crore. There has been a lot of talk among fund managers about shrinking the list of good companies to invest in. They have been of the view that there is a need for more good companies to come to the market where the incremental flows can find their way. Currently, the top 10 most invested stocks, which include HDFC Bank, ICICI Bank, Axis Bank, Larsen & Toubro, Reliance Industries, and Infosys, have seen an allocation of a fourth of the total equity assets of mutual funds.