Investors sell 54% of shares allotted in IPO in a week from listing: Sebi study

Non-institutional investors (NIIs) sold 63.3 per cent shares by value while retail investors sold 42.7 per cent shares by value, the study said.

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Individual investors sold 50.2 per cent shares (in value terms) allotted to them within a week from listing, the regulator said. (File Photo)

Indicating the “flipping behaviour” of investors, about 54 per cent of IPO (initial public offering) shares (in value terms) allotted to investors (excluding anchor investors) were sold within a week from listing, according to Securities and Exchange Board of India (Sebi) study.

Individual investors sold 50.2 per cent shares (in value terms) allotted to them within a week from listing, the regulator said. Non-institutional investors (NIIs) sold 63.3 per cent shares by value while retail investors sold 42.7 per cent shares by value, the study said.

“Mutual Funds tend to invest for longer period in IPO shares, whereas banks tend to sell swiftly. Mutual Funds sold about 3.3 per cent of allotted value within a week, as compared to 79.8 per cent for banks,” Sebi said. Investors, in general, show “disposition effect”, implying greater propensity to exit from the IPOs that exhibit positive listing gain than those that exhibit loss on listing.

“Individual investors sold 67.6 per cent shares by value allotted to them within a week, when returns were more than 20 per cent and sold 23.3 per cent shares by value, when returns were negative,” it said. 39.3 per cent of retail investors were from Gujarat, followed by Maharashtra (13.5 per cent) and Rajasthan (10.5 per cent).

“Almost half of the total allotted demat accounts that applied for IPOs during April 2021- December 2023, were opened in the post-COVID period (during 2021-2023).

The Sebi conducted the study in the wake of the increasing participation of retail investors and the heightened oversubscription in recent IPOs. The study encompasses data from 144 IPOs listed between April 2021 and December 2023, it said.

“Following Sebi’s policy interventions regarding non-institutional investor (NII) share allotment process and RBI’s guidelines on IPO financing by NBFCs in April 2022, there was a significant reduction in NII category oversubscription. Oversubscription under the NII category halved from 38 times to 17 times.

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The average number of applications from NII investors applying for more than Rs 1 crore in IPOs dropped from approximately 626 per IPO in the pre-policy period (April 2021 — March 2022) to around 20 per IPO in the post-policy period (April 2022 — December 2023).

The activity in the IPO market remained buoyant during FY22 to FY24, on back of stronger retail participation as reflected by number of applications and oversubscription. “Success of the IPOs was partly supported by overall positive market sentiments and was further boosted by strong post-listing performance in some of the IPOs,” the study said.

Of the 144 IPOs listed during April 2021- December 2023, 75 per cent IPOs (108 in number) delivered positive returns. As many as 26 IPOs delivered more than 50 per cent listing day returns. Although, there were some laggards post-listing, it did not deterred enthusiasm in new IPOs. As many as 92 IPOs were oversubscribed more than 10 times and only 2 IPOs were undersubscribed, Sebi said.