Retail gets smarter while investing in IPOs

An interesting observation is the general retail apathy towards IPOs. Most of the recent IPOs have seen good interest from HNIs and Institutions but very lukewarm response from the retail. One reason for this is that most of the IPOs have been aggressively priced and have left very little scope for listing gains to be made by retail investors. A number of recent IPOs including JSW Energy, NHPC and India Bulls Power have been priced at a very high valuation. Most of them have listed at a discount to their Issue Price and have made investing in IPOs look a very avoidable option.

However it is not as if investors are following a herd mentality in their approach to IPOs. During these expensive times there have been IPOs which have been attractively priced and have been lapped up by investors. Cox & Kings, Oil India and more recently DB Corp have seen good interest in the retail portion compared to JSW Energy. The reason is that these IPOs left scope for listing gains.

Hence we feel that Indian Retail Investors are finally showing signs of maturity and are not lured by tall claims of ambitious companies and their aggressive investment bankers.

This is truly a very positive development as future IPOs are likely to be priced at more reasonable levels as retail participation is very important for good volumes and stability in the share prices after listing. In the end, thanks to a competitive market place, the common investor will emerge as a winner as he will get primary issues at the right price.