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Can Retail Investment Be a Guiding Point for Choosing IPOs?

05 September 20236 mins read by Angel One
We conducted research and discovered that IPOs, in which the retail subscription exceeds 5 times the retail quote, have higher chances of achieving a positive listing.
Can Retail Investment Be a Guiding Point for Choosing IPOs?
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Retail investors have a strong affinity for IPOs due to the potential for quick listing gains. However, it is important to note that while IPOs can offer significant profits, there are instances where these offerings can result in substantial losses right from the first day of trading, making them potential wealth destroyers.

In recent years, retail investors have developed a fervent affection for Initial Public Offerings (IPOs), demonstrating a growing interest in participating in the public debut of companies. Traditionally, IPOs were seen as exclusive opportunities reserved for institutional investors and wealthy individuals. However, with the rise of online brokerages, accessible information, and a democratization of investing, retail investors are now enthusiastically joining the IPO bandwagon.

In our analysis of 564 IPOs observed which were launched between 2018 and 2022, we categorized them into two groups based on their size: IPOs with an issue size exceeding Rs 200 crore and IPOs with an issue size below Rs 200 crore. Among the 155 IPOs with a larger size, 100 IPOs yielded positive returns (more than 1%), while the remaining 55 IPOs generated either flat or negative returns. There were more IPOs with smaller sizes, totaling 409, and out of these, 247 IPOs resulted in positive returns, while the remaining 162 IPOs showed either flat or negative returns.

IPO Size of more than 200 Crores
Retail Subscription 

(x times)

IPO Count IPOs count with Positive Returns IPOs count with Negative Returns
NO Subscription                   4                               3                                 1
< = 1x               27                           12                               15
1x to 5x               50                           18                               32
6x to 10x               19                           15                                 4
11x to 30x               36                           33                                 3
31x to 50x               11                           11                                 –  
50x to 100x                   6                               6                                 –  
> = 100x                   2                               2                                 –  
Total             155                         100                               55

 

IPO Size less than 200 Crores
Retail Subscription (x times) IPO Count IPOs count with Positive Returns IPOs count with Negative Returns
NO Subscription               15                           10                                 5
< = 1x             104                           50                               54
1x to 5x             145                           77                               68
6x to 10x               35                           21                               14
11x to 30x               53                           36                               17
31x to 50x               14                           12                                 2
50x to 100x               16                           15                                 1
> = 100x               27                           26                                 1
Total             409                         247                             162

Based on the aforementioned data, it is evident that IPOs with retail subscriptions exceeding 30 times have generally yielded positive returns, with a lower number of IPOs showing negative returns. Notably, among IPOs with an issue size exceeding Rs 200 Crore, none have resulted in negative returns on their listing day.

These were the top Performer IPOs during 2018-2022 on their listing day:

Company Name Listing Date Issue Price Issue Size (Crore) Retail Investor (x times) Total Subscription (x times) Open Price Close Price % Change on Issue Price
Paras Defence And Space Technologies Limited Oct 01, 2021 175 170.78 112.81 304.26 475 498.75 185
Latent View Analytics Limited Nov 23, 2021 197 600 119.44 326.49 530 488.6 148.02
Burger King India Limited Dec 14, 2020 60 810 68.15 156.65 115.35 138.4 130.67
IRCTC Limited Oct 14, 2019 320 645.12 14.83 111.91 644 728.6 127.69
Happiest Minds Technologies Ltd Sep 17, 2020 166 702.02 70.94 150.98 351 371 123.49

 

These were the worst Performer IPOs during 2018-2022 on their listing day:

Company Name Listing Date Issue Price Issue Size (Crore) Retail Investor (x times) Total Subscription (x times) Open Price Close Price % Change on Issue Price
One 97 Communications Limited Nov 18, 2021 2150 18300 1.66 1.89 1955 1564.15 -27.25
Abans Holdings Limited Dec 23, 2022 270 345.6 0.4 1.1 270 216.05 -19.98
RateGain Travel Technologies Limited Dec 17, 2021 425 1335.74 8.08 17.41 364.8 340.5 -19.88
Rainbow Children’s Medicare Limited May 10, 2022 542 1580.85 1.38 12.43 506 450.1 -16.96
Shriram Properties Limited Dec 20, 2021 118 600 12.72 4.6 94 99.4 -15.76

 

IPOs with Huge Retail Subscriptions and their return over listing price on their listing day:

Company Name Listing Date Issue Price Issue Size (Crore) Retail Investor (x times) Total Subscription (x times) Open Price Close Price % Change on Issue Price
Latent View Analytics Limited Nov 23, 2021 197 600 119.44 326.49 530 488.6 148.02
Paras Defence And Space Technologies Limited Oct 01, 2021 175 170.78 112.81 304.26 475 498.75 185
Nazara Technologies Limited Mar 30, 2021 1101 582.91 75.29 175.46 1971 1576.8 43.22
Happiest Minds Technologies Ltd Sep 17, 2020 166 702.02 70.94 150.98 351 371 123.49
Easy Trip Planners Limited Mar 19, 2021 187 510 70.4 159.33 206 208.3 11.39

IPOs (Issue size less than Rs 200 crore) with Huge Retail Subscriptions and their return on their listing day:

Company Name Listing Date Issue Price Issue Size (Crore) Retail Investor (x times) Total Subscription (x times) Open Price Close Price % Change on Issue Price
Olatech Solutions Limited Aug 29, 2022 27 1.89 680 598.82 51.3 53.85 99.4
Arham Technologies Limited Dec 15, 2022 42 9.58 482 450.03 60 63 50.0
Anlon Technology Solutions Limited Jan 10, 2023 100 15 447 428.62 251.1 263.65 163.7
Baheti Recycling Industries Limited Dec 08, 2022 45 12.42 436 347.53 120 114 153.3
Concord Control Systems Limited Oct 10, 2022 55 8.32 424 202.41 109.95 115.4 109.8

Recent data reveals a shift in the behavior of retail investors, showcasing their increased astuteness in identifying IPOs worth investing in. This represents a departure from the previous trend, highlighting a noteworthy transformation in retail investor decision-making.

Still, to navigate IPOs successfully, retail investors should conduct thorough research on the company, its industry, and potential risks. It is essential to understand the lock-up period and diversify their portfolio to mitigate risk. Setting realistic expectations, staying informed, and considering professional advice can help investors make informed decisions. Being prepared for volatility and thinking about investment horizons are also crucial. By following these tips, retail investors can approach IPOs with a greater understanding and increase their chances of making well-informed investment choices.

 

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