Mutual funds pump in nearly Rs 6,900 crore in IPOs in August

Prashant Tapse, an analyst at Mehta Equities, stated that the large investments by mutual funds are due to a steady inflow of money. With limited options, funds invest in the secondary or primary markets, and the current IPO market offers an opportunity to generate additional alpha for investors, he said while adding that funds often participate through the anchor route for confirmed allotments, leveraging short-term market opportunities.

This trend is expected to continue as long as the primary markets remain attractive to both investors and fund managers, said Tapse.

In Brainbees Solutions IPO, SBI Mutual Fund was the top buyer, investing Rs 1,880 crore, followed by Kotak Mahindra Mutual Fund and ICICI Prudential Mutual Fund with investments of Rs 299 crore and Rs 232 crore, respectively.

In the Ola Electric IPO, Mirae Asset Management Mutual Fund led with an Rs 849 crore stake, while SBI Mutual Fund and HDFC Mutual Fund invested Rs 497 crore and Rs 480 crore, respectively.

Incidentally, these IPOs have delivered substantial listing gains to mutual funds with Ola Electric surging 20 percent on its listing day and currently trading 45 percent above its issue price.

Brainbees Solutions jumped 46 percent on debut, while Unicommerce eSolutions soared 95 percent. Interarch Building Products and Orient Technologies rose 33 percent and 48 percent on their first day, respectively. Premier Energies skyrocketed 98 percent, and ECOS India Mobility gained 33 percent on listing day.

Paras Matalia, Fund Manager at SAMCO Mutual Fund, is of the view that mutual funds invest in IPOs to create value for investors, driven by the opportunity for gains. While the grey market premium often triggers a herd mentality among short-term investors, mutual funds focus on mainboard IPOs due to stricter governance and quality.

However, the current IPO surge appears exuberant, and a cautious, selective approach is necessary. Mutual funds invest in IPOs to benefit from both, listing day gains and the potential long-term growth of new companies. As long as there is value and growth potential, mutual funds will continue investing in IPOs, Matalia added.

Meanwhile, foreign investors invested around Rs 12,000 crore in IPOs during the month, according to data from NSDL.

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