Retail applications in IPOs drop 64% week-on-week amid fund crunch

The four IPOs launched this week managed to garner only a third of retail applications compared to last week amid paucity of funds.
 
The public offerings of CarTrade Tech, Aptus Value, Nuvoco Vistas Chemplast Sanmar saw subscriptions between 1.7 times and 20.3 times and attracted cumulative applications of 3.74 million.
 
In comparison, Devyani International, Krsnaa Diagnostics, Exxaro Tiles and Windlas Biotech had seen subscriptions between 22.5 times and 117 times with the number of applications crossing the 10-milllion mark.
 
Industry experts said the sharp drop in retail interest is more to do with lack of availability of funds and not so much a case of primary market sentiment turning sour.
 
“A substantially large sum was blocked in last week IPOs. As a result, the availability of funds for fresh applications was low. Besides, investors didn’t seem to be very upbeat on the issues that came in this week for reasons specific to each of them. I won’t say things have turned negative all of the sudden,” said Arun Kejriwal, founder of Kris Investments.
 
Investors had placed bets of more than Rs 1.7 trillion on the four IPOs last week. Industry players said the companies completed their allotment and refund process on Thursday. This helped in freeing up of funds which got deployed in Aptus Value Housing’s IPO, helping it generate 17 times subscription.

Some believe the latest correction in the broader market and falling grey market premiums also played on investors' minds.

“The BSE circular introducing additional levels of restrictions on trading activities was taken negatively by the Street, owing to which mid and small caps started correcting. After BSE clarified a few things the markets stabilised. The correction in markets over the last 2-3 days, impacted IPO subscriptions. However, things seem to have stabilized again. If the positive sentiment continues till the day of listing, the recently-concluded IPOs can see good listing gains,” said Ashish Chaturmohta, Director Research, Sanctum Wealth Management.
 
The average issue size for IPOs this week was nearly Rs 3,700 crore compared to just Rs 900 crore last week.
 
Close to 60 companies have filed with Sebi to launch their IPOs. Market players say the fate of many of these issues will depend on how the secondary markets perform over the next 4-6 months.