India's IPO Boom: Record Deals, Who Sells, Retail Odds

The boom has kept going. In the six months just ended, the first half of India's fiscal year, 78 mainboard IPOs raised ₹94,205 crore, a record for any first half, despite volatile markets and just ₹3,794 crore in the opening quarter. The pipeline is larger still: 145 companies hold SEBI approval to raise about ₹2.78 lakh crore, and 102 more are waiting for approval to raise about ₹1.87 lakh crore. SEBI is India's market regulator, roughly the equivalent of the SEC.

India leads the world on IPO count, not size

367Indian IPOs last yearMost of any country (EY)

$22.9BRaised in IndiaUS raised $45.5B

₹4.65 lakh crPipelineApproved or awaiting SEBI

Where does IPO money go: fresh issue or offer for sale?

An IPO can do two different things. In a fresh issue, the company creates new shares and keeps the cash. In an offer for sale (OFS), existing shareholders sell shares they already own, the money goes to them, and the company gets nothing. Most Indian IPOs combine both, and in this boom selling has been the larger part.

Only 37% of last year's IPO money went to the companies

Mainboard IPOs, last year₹175,901 cr

• 37%₹64,406 crFresh capital to companies
• 45%₹79,030 crSold by private promoters
• 12%₹20,643 crSold by PE/VC funds
• 7%₹11,822 crSold by other holders

Even the fresh money mostly didn't pay for new factories. Prime says only 31% of last year's fresh capital was for expansion, new projects or machinery. Paying off debt took 26% and working capital 23%. So roughly ₹20,000 crore, about 11% of everything raised, was earmarked for new capacity. The pattern is old. SEBI's study of 144 IPOs listed in the almost three years before this boom began found that 65% of the money raised came from offers for sale.

Several of the biggest deals were pure sales. Hyundai Motor Company and LG Electronics each sold part of their Indian units without issuing a single new share. NSDL, a share depository, and NSE itself were pure sales too.

Four of the seven biggest deals raised nothing for the company

Offer for saleFresh issue

510152025₹30K cr0

₹27.9K cr

HyundaiOffer for sale₹27.9K crFresh issue₹0.0K crTotal₹27.9K cr

₹22.6K cr

NSEOffer for sale₹22.6K crFresh issue₹0.0K crTotal₹22.6K cr

₹15.5K cr

Tata CapOffer for sale₹8.7K crFresh issue₹6.8K crTotal₹15.5K cr

₹12.5K cr

HDBOffer for sale₹10.0K crFresh issue₹2.5K crTotal₹12.5K cr

₹11.6K cr

LG IndiaOffer for sale₹11.6K crFresh issue₹0.0K crTotal₹11.6K cr

₹11.3K cr

SwiggyOffer for sale₹6.8K crFresh issue₹4.5K crTotal₹11.3K cr

₹4.0K cr

NSDLOffer for sale₹4.0K crFresh issue₹0.0K crTotal₹4.0K cr

HyundaiNSETata CapHDBLG IndiaSwiggyNSDL

Selling isn't a scandal: founders and funds have to exit some time. But know who is on the other side of the trade. A parent selling 100% of an issue is choosing the price at which it sells you part of its business.

Which mega-IPOs have listed, and what's still coming?

From Hyundai to Jio: two years of mega-listings

1. 2 yrs agoHyundai Motor India lists₹27,859 cr, India's largest IPO
2. 3 weeks laterSwiggy listsFood delivery, loss-making
3. 15 months agoHDB Financial, NSDL listHDFC Bank sells ₹10,000 cr
4. A year agoTata Capital, LG India listLast year's first- and third-largest
5. 7 months agoPhonePe pauses IPOMarkets hit by Middle East war
6. 5 months agoFlipkart IPO deferredWalmart wants profits first
7. Last monthNSE lists on BSE₹22,563 cr, all OFS
8. NextJio IPO set to openAbout $3.8B, all fresh issue

Three of the most-watched names are still to come:

• Jio Platforms, Reliance's telecom and digital arm, filed its draft prospectus and received SEBI's go-ahead about six weeks ago. Reuters reports it plans to open the IPO within weeks and list about a week after that, raising about $3.8 billion. That would be India's largest IPO. Unusually, it is entirely a fresh issue of up to 27 crore new shares, with no OFS. Our Reliance breakdown covers what Jio is worth to Reliance shareholders.
• PhonePe, the Walmart-backed payments app, paused its IPO about seven months ago, as the Middle East conflict hit markets. TechCrunch reported it had aimed for a valuation of around $15 billion, and that bankers had suggested closer to $9 billion. Tiger Global and Microsoft planned to sell their entire stakes.
• Flipkart's IPO is on hold. Inc42, citing Moneycontrol, reported a few months ago that Walmart wants it to reach EBITDA breakeven (roughly, operating profit) in the current fiscal year first.

NSE's own IPO shows how the cycle has cooled. The country's biggest exchange sold ₹22,563 crore of shares, all OFS, at ₹1,785 each. The offer was 5.71 times subscribed overall but only 1.39 times in the retail portion. It closed its first day at ₹1,818, just 1.8% above the issue price.

Do Indian IPOs make money after listing day?

It depends on whether you got shares at the IPO price or bought on day one. Prime's review of last year's listings says 54 of 102 IPOs were trading above their issue price at year-end, with an average return of 8%. The average first-day gain fell to 10% from 30% the year before. The table below covers eight of the biggest listings of the past two years.

*NSDL close is from the session before. NSE closing prices unless marked BSE.

Taking a simple average of the eight, someone who got shares at the issue price is up about 1%. Someone who bought at the first day's close is down about 17%. The gains went to the people who were allotted shares and sold early.

Buying at the first day's close lost money in six of eight mega-IPOs

From issue priceFrom day-one close

−60−40−20204060%0

−0.8%6.9%

HyundaiFrom issue price−0.8%From day-one close6.9%

−36.9%−46.1%

SwiggyFrom issue price−36.9%From day-one close−46.1%

20.1%−49.0%

Bajaj HFFrom issue price20.1%From day-one close−49.0%

−18.9%−28.6%

HDBFrom issue price−18.9%From day-one close−28.6%

−7.2%−20.7%

NSDLFrom issue price−7.2%From day-one close−20.7%

−1.7%−3.0%

Tata CapFrom issue price−1.7%From day-one close−3.0%

56.2%5.3%

LG IndiaFrom issue price56.2%From day-one close5.3%

−2.3%−4.1%

NSEFrom issue price−2.3%From day-one close−4.1%

HyundaiSwiggyBajaj HFHDBNSDLTata CapLG IndiaNSE

Make a guess

Bajaj Housing Finance listed two years ago at a 136% first-day gain, closing at ₹165 against a ₹70 issue price. Where is it now relative to that first-day close?

Tap your guess

Down more than 25%Your guessDown up to 25%Your guessUp to 25%Your guessUp more than 25%Your guess

−01234567890123456789%From day-one close

Spot on.Close, a little low.Close, a little high.Way off, too low.Way off, too high. It was −49%.

At ₹84.08 at the latest close, it is 49% below its first-day close. Anyone allotted shares at ₹70 is still up 20%.

Prime argues these averages "burst the myth" that IPOs are always overpriced, and every yearly batch from the five years before last year is still up on average. But the averages are simple ones, start from the issue price, and fade. The batch from two years ago was up an average of 44% at the start of last year and 21% by its end: by our calculation a 16% fall, while the Nifty 50 (India's main large-company index) rose about 10% over the same stretch.

Retail investors seem to understand this, because most sell quickly. The same SEBI study found that 54% of IPO shares allotted to non-anchor investors (by value) were sold within a week of listing, and individuals had sold 70% within a year.

How do anchor investors and the grey market premium work?

Two signals drive most IPO hype. Anchor investors are institutions such as mutual funds, foreign portfolio investors (FPIs) and insurers, allotted shares the day before the issue opens. They can take up to 60% of the institutional portion, and half their shares unlock after 30 days, the rest after 90. Hyundai's anchors put in ₹8,315 crore and NSE's ₹6,746 crore. Last year, anchors bought 35% of all IPO shares, and for the first time domestic mutual funds (14.44% of the money raised) outbid FPIs (13.99%).

Spot the red flag

Here are the key terms of LG Electronics India's IPO. One line tells you the company got none of the ₹11,605 crore. Tap it.

LG Electronics India IPO

Issue size: ₹11,605 crore Price: ₹1,140 per share; lot of 13 shares Sale type: offer for sale only Retail quota: 35% of the net offer Anchor investors: ₹3,474 crore

Tap the phrase you think is the tell.

Spotted it.Not that phrase. In any Indian prospectus, check the fresh issue and offer for sale amounts before anything else.

• “Issue size: ₹11,605 crore” This is how much was sold, not who received it.
• “Price: ₹1,140 per share; lot of 13 shares” This sets the minimum bid at ₹14,820. It says nothing about where the money goes.
• “Sale type: offer for sale only” Every share came from LG Electronics Inc., the Korean parent, so all the proceeds went to it.
• “Retail quota: 35% of the net offer” This is the standard retail share for a profitable company.
• “Anchor investors: ₹3,474 crore” This is how much institutions committed before the issue opened, not who received the money.

Explain every phraseHide the other explanations

The grey market premium (GMP) is an informal, unregulated price at which dealers trade IPO shares before they list. A GMP of ₹100 means the grey market expects the stock to trade ₹100 above the issue price. No exchange publishes it, and it reflects sentiment, not value. LG's GMP ranged from ₹30 to ₹415 (36%) and the stock opened 50% higher. Tata Capital's ranged from ₹30 down to ₹1, and it listed at ₹330, ₹4 above its issue price. NSE shows how fast it swings.

The grey market valued NSE shares at up to ₹2,105. They listed at ₹1,800

Now₹1,743

Issue₹1,785

Listed₹1,800

Grey-market high₹2,105

₹1,800₹2,000

What are the odds of getting an IPO allotment?

This is where most retail investors misjudge IPOs. In India a retail individual investor bids up to ₹2 lakh. Profitable companies must offer at least 35% of the net offer to retail; loss-makers like Swiggy can offer at most 10%. When the retail portion is oversubscribed, SEBI's rules give the minimum lot to as many applicants as possible, chosen by lottery. Everyone else gets nothing. So bidding for 13 lots instead of one doesn't improve your chances.

Worked example: LG Electronics India

• The retail portion was 3,55,61,796 shares. Divided into 13-share lots, that's 27,35,522 lots, so at most about 27.4 lakh people could get shares.
• Retail investors submitted 54.49 lakh applications, the most of any IPO last year.
• Your chance was about 27.4 ÷ 54.5 ≈ 50%, whether you bid ₹14,820 for one lot or ₹1,92,660 for thirteen.
• The headline retail subscription was 3.55 times, higher than the 2-to-1 ratio of applicants to lots, because many people bid for several lots. Headline multiples overstate your competition.
• One lot bought at ₹1,140 and sold at the day-one close of ₹1,689.90 made ₹7,149. A 50% chance of that is worth about ₹3,600 per application.

Your allotment odds depend on how many people apply

Pick the retail subscription and the average lots each applicant bids for

Retail subscription

2×5×10×25×50×

Average lots per bid

1 lot1.8 lots3 lots

Chance of getting one lot50.0%90.0%100.0%20.0%36.0%60.0%10.0%18.0%30.0%4.0%7.2%12.0%2.0%3.6%6.0%

0.0%+40.0%+50.0%−30.0%−14.0%+10.0%−40.0%−32.0%−20.0%−46.0%−42.8%−38.0%−48.0%−46.4%−44.0%in line with LG Electronics Indiaabove LG Electronics Indiaabove LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiaabove LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics Indiabelow LG Electronics India

LG Electronics India 50.0%

2.0%100.0%

Close to LG's bidders

The same calculation for Bajaj Housing Finance gives worse odds: 13,69,158 lots and 58.66 lakh retail applications, or about 23%. Each winning lot made about ₹20,330 on the first day. That's an expected value of roughly ₹4,700 per application.

The odds favour you when demand is weak. NSE had 55,12,640 retail lots but only 38,41,852 applications across every category, so every valid retail applicant got shares. It now trades below its issue price. You get full allotment in the deals institutions didn't want and a lottery ticket in the ones they did. Economists call this the winner's curse, and it's why retail IPO returns trail the averages.

The better your odds, the worse the deal

23%Bajaj Housing oddsDay-one gain +136%

50%LG India oddsDay-one gain +48%

100%NSE oddsNow below issue price

Why did SEBI tighten the rules on SME IPOs?

India's SME boards (NSE Emerge and BSE SME) let small companies list with lighter rules. Two years ago they had become a lottery. That year the average SME IPO drew 1.88 lakh retail applications, up from 297 four years earlier. Retail portions were oversubscribed 251 times on average, and the average first-day gain was 60%. The best-known example: Resourceful Automobile, a Delhi Yamaha dealer with two showrooms, drew bids for more than 400 times the shares in its ₹12 crore issue.

SME first-day gains collapsed after the peak

3 yrs ago38%

2 yrs ago60%

Last yr12%

Past 6 mos17%

SEBI changed the rules early last year:

What SEBI changed for SME IPOs

Before

• Minimum bid about ₹1 lakh
• No minimum profit
• No cap on insider selling
• Proceeds could repay promoter loans

vs

After the rule change

• Minimum bid about ₹2 lakh (two lots)
• ₹1 crore EBITDA in 2 of 3 years
• OFS capped at 20% of the issue
• Each seller limited to half their stake
• No repaying promoter or related-party loans
• General purposes capped at 15% or ₹10 crore

The froth has mostly gone. The average SME IPO last year drew 52,566 retail applications, retail subscription averaged 75 times and only 123 of the 267 SME IPOs were trading above their issue price by year-end. Issues got bigger and fewer: the average size more than tripled, from ₹13 crore five years ago to ₹43 crore last year, and in the first half of this fiscal year 137 SME IPOs raised ₹6,018 crore, 11% less than in the same six months a year earlier. The higher minimum bid was meant to keep small investors out, and most should stay out. The same appetite for risk shows up in India's F&O trading losses.

Are IPOs soaking up the money that would lift Indian stocks?

Indians invest roughly ₹30,000 crore a month through SIPs (systematic investment plans, or monthly mutual fund contributions). Yet the Nifty recently closed at 22,776, about 13% below the high it set in the first weeks of this year. The supply-overhang argument says new shares have absorbed that money. Over the same six months that set the IPO record, Indian companies raised a record ₹2.43 lakh crore in public equity, through IPOs, QIPs (share sales to institutions) and government stake sales. Six months of SIPs at that pace come to about ₹1.8 lakh crore. Of the ₹2.43 lakh crore, ₹1.29 lakh crore went to sellers, including ₹31,443 crore when the government sold part of its stake in LIC.

Check the claimThree claims about the IPO supply wave

ClaimIPO money is new investment in Indian business.Tap to checkMythMostly not. Last year, 63% of mainboard IPO money went to selling shareholders, and only about 11% was earmarked for new capacity.Flip backClaimForeign investors are simply fleeing India.Tap to checkPartly trueThey sold ₹2.30 lakh crore of listed stocks last year but put ₹73,000 crore into IPOs. They are moving money from listed stocks into new issues.Flip backClaimPromoters have been selling into the rally.Tap to checkFactPrivate promoters' share of NSE companies fell from 45.22% almost five years ago to a nine-year low of 40.58% at the end of the last fiscal year.Flip back

The argument holds up, but only partly. In each of the first two quarters of this year, mutual funds put a net ₹1.42 lakh crore into stocks while foreign institutions pulled out about as much, and new supply absorbed the rest. When a foreign parent like Hyundai or LG sells, the money can leave India altogether. But supply didn't cause the slump: the Nifty and Sensex fell about 9% in the month before PhonePe shelved its IPO, as the Middle East conflict hit, according to TechCrunch. And the selling has started to reverse: private promoters bought a net ₹36,336 crore of their own companies' shares in the latest quarter, the most in about four years, which Prime calls "a telling sign of the market bottoming out." Our piece on why the Indian stock market is falling covers the wider causes.

What could change this view?

Prime's averages are simple ones, so small issues with big gains can outweigh weak mega-deals, and our eight-stock table is a small sample taken in a weak market. Jio is entirely a fresh issue, so it may break the pattern, and a market recovery would lift recent listings. None of that changes the allotment maths.

Our read

IPOs aren't the problem. Paying the day-one price is. Across our eight mega-listings, allottees are roughly flat on average and day-one buyers are down about 17%. The boom's profits went to sellers and to lucky allottees who sold early.

Applying for a well-subscribed, profitable mainboard IPO has a small positive expected value: about ₹3,600 per application for LG and ₹4,700 for Bajaj Housing. Treat it as a lottery ticket with good odds, not a strategy, and don't buy on listing day because you missed out.

Stay out of SME IPOs, and don't treat the grey market as a forecast. With 100% OFS mega-deals, don't rush: six of the eight names in our table have traded below their issue price since listing, giving patient buyers a cheaper entry.

On supply: yes, record IPOs and promoter selling have absorbed much of India's domestic money, which helps explain why steady SIP inflows haven't lifted the index. But promoter buying in the latest quarter suggests the selling is easing. Favour IPOs where the company keeps the money.

Go deeper

• Reverse DCF: before you bid, work out what growth the IPO price assumes. That's the check that would have flagged Swiggy at ₹390.
• Management incentives and the proxy: when promoters and funds supply most of a deal, read who is selling, how much they keep and what lock-ups bind them.
• Dilution and buybacks: a fresh issue like Jio's 27 crore new shares changes your share of the company. This chapter shows how to measure it.

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