Edelweiss MF removes subscription limit on IPO fund

It has been a low year for IPOs so far, with only three companies listing on Indian exchanges since the start of 2022.

Edelweiss Mutual Fund on March 23 announced the removal of subscription limits for its recently listed IPO fund.

The fund, as the name suggests, invests in companies foraying into the capital markets through initial public offers (IPOs).

Edelweiss had earlier imposed an investment cap of Rs 1,00,000 per PAN, which took effect on February 1, 2022. However, the fund house has clarified that the portfolio's liquidity profile is "comfortable" now, and hence it is doing away with this limit.

In its official note, it stated that "with the equity markets having corrected since last month, some quality businesses in the recently listed IPO universe are seeing meaningful correction and are now available at attractive valuations".

As a result, "we have decided to remove the limit on subscriptions which will allow investors to take benefit of this correction and build positions in the fund for long term", it continued.

Having delivered around 28.84 percent CAGR returns over the last three years, the recently listed IPO fund has reportedly been "very selective while investing in IPOs and has averted some overpriced and bad businesses that got listed in recent times", thereby helping investors make the most of post-listing gains from the IPOs of some of the recently listed and fundamentally solid businesses.

In comparison, its benchmark index, namely the India recent 100 IPO Index generated around 14.93 percent returns over the same period. This means that while a sum of Rs 10,000 invested three years ago in the Edelweiss recently listed IPO fund would have yielded Rs 21,402 presently, the same amount invested in the benchmark index would have grown to Rs 15,187 over the three-year period.

Muted IPOs

It has been a low year for IPOs so far, with only three companies listing on Indian exchanges since the start of 2022. With the global markets waiting out the stressful financial period sparked by the ongoing Russia-Ukraine crisis, major Indian IPOs in the pipeline currently include LIC and Oyo Rooms.

However, many experts also note that the IPO mania, which began in 2021, is fizzling out. Companies like Paytm and PolicyBazaar, whose IPOs had been much-touted are currently trading significantly below their offer price. For instance, Paytm's stock is now trading at around Rs 520, more than 70 percent below its offer price.

Notably, 2021 was a blockbuster year for IPOs. Fundraising by around 63 companies via IPOs had crossed a record Rs 1 lakh crore for the first time ever, standing at Rs 1,18,704 crore.