MUMBAI: As much as 54% of the IPO shares get sold within a week of their listing, markets regulator Sebi has said.
In a study released on Monday, the regulator said the findings are based on a recent study by the Department of Economic and Policy Analysis, which has shed light on investor behaviour in initial public offerings (IPOs), which has found as much as 54% of the IPO shares get sold within a week of listing. This doesn’t include anchor investors selling, indicating a strong tendency for short-term profit-taking among IPO investors.
Of this, retail investors sold 42.7% of their allotted shares within a week, non-institutional investors sold 63.3% in the same period, suggesting that individual investors, mainly NIIs, are more likely to engage in short-term trading strategies.
On the behaviour of the institutional investors, the study says qualified institutional buyers showed more varied behaviour with some categories of them holding onto their shares longer, while exclusive QIBs (non-anchor institutional buyers) sold 65.4% within a week.
The study has seen a positive correlation between listing gains and percentage of shares exited. IPOs with gains exceeding 20% in the first week saw higher exit rates across all investor categories. The study saw higher percentage of exits were in those issues which had smaller issue size (below Rs 1,000 cr) but heavily oversubscribed, mainly among individual investors.
Recent policy changes since April 2022, including lottery-based allotment for non-institutional investors and restrictions on IPO funding, have had noticeable effects, says the study with the number of high-value applications falling significantly and so did oversubscription levels which declined from 37.5 times to 17.2 times.
The study reveals 70% of IPO investors were from 4 states -- Gujarat, Maharashtra, Rajasthan, and UP -- with Gujarat accounting for 39.3% of retail allotments. Addressing a CII event, Ashwini Bhatia, Sebi whole-time member, said over Rs 14,000 crore have been raised via SME listings and it is time for caution as there is no checks and balances.