Mutual Funds take advantage of the IPO season

The markets are at an all-time high and it’s raining IPOs on Dalal Street. In the last one year, the total issue size of all the IPO was over Rs 43,000 crores. According to the National Stock Exchange (NSE), 69.48 crores shares of Zomato Ltd were traded on day one, which accounted for a total transaction value of Rs. 8,625 crores.  Such massive trading volumes are only possible when institutional investors like Mutual Fund engage in it. During this IPO season, Mutual Funds are taking advantage of the short term windfall gains that IPOs are currently delivering. Let us see how mutual funds are making money from IPO investments.

Mutual Funds play in IPOs

Mutual Funds have been very active participants in the IPO market. The table below shows the number of schemes in each AMC that have invested in IPOs in the last one year. We have listed down the top 10 AMC who have applied for a maximum number of IPOs and all other AMCs that have subscribed have been clubbed together in ‘Others’.

Note:  

1. The numbers outside the brackets denote the number of schemes of that AMC which invested in the stock at the time of the IPO and the numbers inside the brackets denote the number of schemes which of that AMC still holding stocks of that IPO, as on 30^th June, 2021.
2. IPO released from 1^st June 2020 to 30^th June 2021 are considered.
3. REITs, InvITs, FPO and SME IPO are not considered in the list

 Below are some more inferences that can be drawn from the above table:

           *1 month holding was not over as on the date of the last portfolio disclosure

• From the above table you can clearly see that in the last one year, a whopping 1051 schemes have applied for the IPOs, of which only 582 schemes are currently holding on to those IPOs’ shares.
• There are 9 IPOs in which MF schemes have not taken an exit at all. And out of those 9 IPOs, 5 were released in the month of June 2021. Since anchor investors like Mutual Funds cannot sell their IPO investments within one month, the IPOs which were released in the month of June can only be sold off in the next month or later.
• Nippon was the most aggressive in IPO investment among the top 10 AMC. It applied for 23 IPO out of the 36 IPO released in the last 1 year.

Below is the list of the bottom 5 AMCs, i.e., those with the least number of IPO schemes applied for.

And here is the list of AMCs who have not applied for IPOs in the last 1 year.

Mutual Funds are definitely pumping money into IPOs to encash these opportunities. Are you also an active participant or still waiting in the wings? The table below shows a matrix of listing gain of the above mentioned 36 IPOs.

Of the total IPOs issued in the last one year, 72% were listed at a premium while 28% opened at a discount.

Conclusion

With the equity markets touching new highs, the IPO market has also become very vibrant with a host of companies waiting in the pipeline to be listed.  Currently, PFRDA doesn’t permit pension funds to invest in IPOs, but the PFRDA chairman has expressed that pension funds are missing on opportunities which IPOs are currently offering. So, shouldn’t you make hay while the sun shines?

You may also like to read: The Secret of picking attractive stocks when markets are at all-time highs

Disclaimer: The blog is for information purposes only and anything mentioned herein shouldn’t be construed as a fundamental reason to buy/hold/sell any stock. Furthermore, the information provided in the blog and observations made therefrom shouldn’t be treated as the extension of recommendations made on the other properties of Ventura Securities. We strongly suggest you to consult your financial advisor before taking any decision pertaining to your finances.  Asset allocation becomes extremely relevant.

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

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