The report says that around 80 percent of banks sell IPO Shares within a week of listing. This rapid exit strategy contrasts sharply with the approach of mutual fundswhich have the highest retention rate for IPO stocks.
“Mutual funds tend to invest for longer periods in IPO stocks, while banks tend to sell quickly. Mutual funds sold around 3.3 per cent of the allotted value in a week, compared to 79.8 per cent by banks,” the SEBI report said.
Market experts have expressed concern and questioned the logic of banks underwriting IPOs when they have to exit them within a week.
Ajay Bagga, banking and stock market expert, asks, “Why are banks investing in IPOs? The SEBI report mentions that banks sell 79 per cent of their IPO allotments in a week. Why are banks investing in IPOs? Casino profit by quote“Who are these banks? Has the Reserve Bank of India allowed this?” It further added, “The bigger question is why banks invest in IPOs and then sell 79 per cent of the allotted shares within a week. Banks have a fiduciary duty based on the trust of deposit holders. Investing in such ultra-short-term assets, driven by the hope of making profits on listing, is not a mandate for banks.” The SEBI report further adds that a similar trend is seen among other categories of investors in the IPO market. It notes that about 54 per cent of the IPO shares, in value terms, allotted to investors (excluding anchor investors) were sold in the week following the listing. Individual or retail investors also showed a similar pattern, with about 50.2 per cent of the shares allotted to them being sold within a week.
This suggests that a significant portion of the Market participants They focus mainly on short term gainstaking advantage of the immediate post-list surge rather than holding onto their shares for potential long-term gains.
The SEBI report highlights that between April 2021 and December 2023, there were 144 IPOs listed on Indian stock markets, of which 75 per cent (108 IPOs) delivered positive returns on the listing day. Surprisingly, 26 of these IPOs generated returns of over 50 per cent on their first day of listing.
Despite some IPOs underperforming after listing, enthusiasm for new IPOs remains strong. The report said 92 IPOs had demand exceeding supply by more than 10 times, indicating robust demand, while only 2 IPOs faced demand below supply. (ANI)
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.