Indian IPOs attract ₹2,50,000 crore with HNI leveraged bids

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Indian IPOs attract ₹2,50,000 crore with HNI leveraged bids
Credit: © Reuters.

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.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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