India’s IPO investors grow smart, teach greedy firms a good lesson

Amit Mudgill
, ETMarkets.com|
Updated: Mar 30, 2018, 10.51 AM IST

India’s sizzling IPO mart has hit a road bump and the market regulator says there is a good reason for it, but it is not in its hands to address it. 

On Wednesday, when Sebi ushered in some landmark measures to improve corporate governance in domestic companies, its chief Ajay Tyagi said pricing could be a reason why IPOs have failed to draw investor response in recent times. 

Sebi on Wednesday approved 40 recommendations made by a panel led by Uday Kotak, Indian billionaire banker, without any modifications and accepted 15 others with minor tweaks in an attempt to improve governance standards. One of these recommendations mandates domestic companies to separate posts for CEO and managing director, which will immediately affect at least 145 of the top BSE500 companies, including India’s largest company RIL.

 In recent times, the domestic IPO market is being flooded with new offerings every week. While some issues seeking premium to listed their peers have managed to sail through, some others have failed to draw investors, suggesting fading investor appetite for such issues, mostly offers for sale. 

While equity benchmarks Sensex and Nifty50 are down 9 per cent from their peaks scaled at the end of January, the market witnessed a selloff in small caps and mid caps much earlier. 

This loss of investor interest has a pattern. Of the total 11 IPOs, six saw total subscription up to 2 times, four failed to draw enough HNI and retail interest, while HNIs gave a total miss to the remaining two. 

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