Retail Participation in Equity IPO

OIL IPO closed today with QIB portion oversubscribed 53.83 times, NII 10.477 times, Retail 1.7642 and Employee reservation 0.267 times.
Despite a great response from QIBs, retail participation is very minimal. When we were at the peak of bull run, any IPO was getting over subscribed heavily by retail investors too. In fact, lot of demat accounts got opened before the Reliance Power issue.
This shows that Retail investors just put in their money in IPOs only based on sentiments and mostly for short term benefits.
Can we infer that retail investors are just behaving as traders based on sentiments and are yet to mature as investors?

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Mutual Funds said...

Well that's difficult to predict.. May be it the economy breakdown that's got them confused.

FinWin said...

I don't think so Retail investor have such short term views.

They have become more skeptical since you must have noticed there was huge demand from HNI almost 54x times at Rs 36 for NHPC. What happened on listing was they having invested borrowed money and their total cost being 42 they started liquidating otherwise, how can you explain when they queued up for IPO 54 for every one share @36 rupees. You don't see demand when available at sub 36 levels. Thus small retail investors are worried that HNI in bid to make a POP on listing there is huge volatility which normal investors can digest hence lower participation considering that IPO are becoming place for punters more rather than small genuine investors

FinWin said...

Agreed! Its difficult to predict and retail investors are surely confused.

However, just to justify the number or stats.

NHPC : HNI oversubscription 54.x
OIL : HNI oversubscription 10.x

NHPC : Retail over subscription 3.x
OIL : Retail over subscription 1.7x

So looks like HNI is down to 20% in OIL againt less than 50% in case of retail.

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