The Indian primary market has witnessed a significant uptick in activity with four major initial public offerings (IPOs) drawing a combined total of bids worth ₹2,50,000 crore (approx. $29.98 billion). The offerings, which include Flair Writing Industries, Gandhar Oil Refinery, Tata Technologies, and Indian Renewable Energy Development Agency, have seen a substantial portion of the investment coming from High Net Worth Individuals (HNIs). These investors have contributed ₹62,000 crore in leveraged bids, accounting for a quarter of the total amount.
The leveraged investments by HNIs stand in sharp contrast to the retail investors, who are capped at a maximum application size of ₹2 lakh, limiting their ability to leverage. Since the Securities and Exchange Board of India (SEBI) implemented a lottery-based allotment system for oversubscribed issues in April 2022, non-institutional investors have been more cautious. The average leveraged bid has settled at around ₹10 lakh, according to Equirus Capital.
These leveraged positions are typically financed through high-interest loans, with rates ranging from 13% to 24%, and are taken over short periods of three to six days. This is a result of SEBI's accelerated listing timelines, which necessitate a quicker turnaround for investments.
Additionally, the Reserve Bank of India's (RBI) regulations have played a role in tempering IPO financing. The central bank has imposed a restriction limiting loans to ₹1 crore per borrower for each issue. Ambit Capital pointed out that this measure has contributed to a reduction in overall IPO financing activity.
The recent flurry of IPOs and the aggressive investment strategies of HNIs indicate a robust interest in India's growing market sectors, despite the regulatory efforts to modulate the financing landscape.
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