Investing in an IPO? Go with the institutional players’ bet

Priya Kansara Mumbai | Updated on January 16, 2018


For issues oversubscribed over 5 times by QIBs and HNIs, former’s bets yield better returns

While it is the festive season for initial public offers and for investors putting money in IPOs, risk averse investors looking to invest their hard earned money and for long-term should go for bets taken by qualified institutional investors than high networth individuals.

Overall return (%)

Subscribed over 5 times

Top 10 oversubscription







Listing return (%)

Subscribed over 5 times

Top 10 oversubscription







Source: Prime Database

* Based on closing market price

QIBs’ bets mostly deliver better

Average return (so far compared to issue price) of issues sorted on the basis of highest QIB-based oversubscription (till five times) have been 58 per cent compared with 53.7 per cent in case of issues sorted on the basis of highest HNI-based oversubscription (till five times), according to data provided by Prime Database since April 2011.

However, the results have been largely skewed by NBCC (India) stock wherein QIB portion was subscribed by 6.7 times and HNI only by 1.7 times.

The stock has given a return of 138 per cent compared to its issue price of Rs 106. Excluding NBCC (India) the overall average return by QIBs comes at 55 per cent - close to 53.7 per cent by HNIs.

Even on the listing day, average return has been only slightly better for issues based on QIBs at 23.5 per cent compared with 21.3 per cent by HNIs. Number of companies oversubscribed by over five times stands at 29 in case of QIBs and 32 in case of HNIs.

Top ten issues — an exception

The top ten most oversubscribed IPOs (by QIBs and HNIs separately) show a different trend wherein HNIs bets have yielded far better returns than QIBs.

The average overall return so far for issues, which have seen highest oversubscription by HNIs, is 73 per cent, while it is 51 per cent in case of QIBs. On the listing day too, the bets placed by HNIs have given little higher average return of 39 per cent compared with 36 per cent by QIBs.

For example, Sharda Cropchem and Wonderla Holidays had seen just 23 times and 12 times oversubscription by QIBs, respectively but huge response from HNIs (252 times and 159 times, respectively. Both stocks have given phenomenal returns in the range of 130-224 per cent compared to their issue price.

“QIBs do not invest more than 20-30 times and don’t go after every issue while the HNIs whole business is to gain in the IPO including margin funding. The more the grey market premium, more the leverage and higher the oversubscription,” said U R Bhatt, managing director at Dalton Capita Advisors (India).

Advanced Enzymes Technologies sees biggest interest in last five years

Advanced Enzyme technologies’ IPO saw the highest QIB oversubscription at 39 times since April 2011 and second highest oversubscription on the basis of HNI category at 392 times. The company’s IPO, which came in July 2017, has been oversubscribed the most (since April 2011) on an overall basis at 81.5 times.

On the listing day (August 1), the stock debuted at a premium of 35 per cent and ended the session with gains of 31.5 per cent. Since then, the stock has already given return of around 58 per cent — fifth highest in 2016 so far and among the top 30 issues giving highest returns in last five years — compared to its issue price of Rs 896.

Published on September 14, 2016

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