These 10 IPOs were a hit with retail investors; experts warn lure of listing gains is risky

The domestic primary market has been awash with initial public offerings (IPOs) in the wake of the coronavirus pandemic.

Many of them saw strong subscriptions, especially from the retail investors as they did not want to miss the opportunity when the market sentiment is bullish.

Data from a popular financial portal Chittorgarh.com shows that there were at least 10 IPOs this year which saw more than 15 times retail subscriptions.

The IPOs of Nureca, Nazara Technologies and Easy Trip Planners saw retail subscriptions of 166.65 times, 75.29 times and 70.4 times, respectively, data from Chittorgarh.com showed.

Here are some of the IPOs that were oversubscribed by retail investors in 2021.

The lure of listing gains

Market observers and analysts point out that retail investors are flocking the primary market largely for listing gains.

"Almost all the recently listed IPOs witnessed huge retail investors’ interest. These IPOs have awarded investors with decent listing gains, which is in a way bolstering investor sentiments and making them try their luck in the primary market," Likhita Chepa, Senior Research Analyst at CapitalVia Global Research said.

Apart from listing gains, increasing awareness, improving trading infrastructure, growing prominence of discount broking and faster online payment systems are also pushing retail participation to record highs, she said.

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While the lure of listing gains may be the biggest factor, analysts also say the IPO rush has been triggered by a strong bull run in the Indian stock market.

"The large liquidity sloshing around and the listing gains of past IPOs are the key reasons for the IPO market doing well," said Deepak Jasani, Head of Retail Research, HDFC Securities.

"Moreover, in these disruptive times, investors are hopeful that new players would be more capable of adapting to changing times compared to the already listed players. The fact that there is little existing float available in these businesses, some of which may be in niche areas also helps build the hype," Jasani said.

Brokerage firm Prabhudas Lilladher highlighted that like seasoned and institutional investors, retail and first-time investors have also been bullish on IPOs as companies like Avenue Supermart, Dixon, Affle, Indiamart Mesh, IRCTC, Nureca, Happiest Minds and many more have not only given good listing gains but have created excellent wealth for investors who remained invested for long term.

"Prospects of catching potential multi-baggers or earning quick gains in the form of blockbuster listing gains is driving the investors to IPO, and ease of applying through digital platforms is just accelerating it," Prabhudas Lilladher said.

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities, said low-interest rates on fixed deposits and other saving instruments along with listing gains on IPO were bringing retail investors to the primary market.

New-age tech companies are providing investors an opportunity to be part of their fast growth story, while herd mentality is also playing its part, Chouhan said.

IPO frenzy has inherent risks

Mindless shopping in the primary market may be harmful in the long run for retail investors, analysts warn.

As the market is teeming with positivity, companies with weak fundamentals, too, have entered the market whose prospects do not look bright.

"An area of concern in the market now is the frenzy in the IPO market where retail investors are applying for IPOs and OFSs without any consideration of fundamentals and future prospects," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"The goal is just to make money on the listing. Many retail investors are likely to lose money in the future from some of these issues," said Vijayakumar.

Retail investors who have not seen cycles in the markets may get shocked whenever markets turn down. Periodic profit-taking may help, though one may not totally exit, Jasani said.

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