Over the past five years, approximately 45.5% of IPOs across both the mainboard and SME (small and medium-sized enterprises) segments have been oversubscribed by more than 10 times in the retail segment, according to Prime Database.
Mainboard IPOs See Growing Interest
For mainboard IPOs, the percentage of highly oversubscribed offerings rose from 38% in 2019 to 58.2% in 2024 so far. SME IPOs saw an even greater increase, with oversubscription jumping from 27% in 2021 to 97% in 2024.
Retail Investors Drive Massive IPO Activity
Retail investors have shown a lot of enthusiasm in 2024, particularly for SME IPOs. Bajaj Housing Finance, for example, saw 5.9 million retail applications, the highest for an IPO this year. On average, there were 1.56 million applications for mainboard IPOs and 0.18 million for SME IPOs, a significant rise from the previous year.
Top Mainboard IPOs by Retail Participation
Some of the most popular IPOs of 2024 include Bajaj Housing Finance with 5.9 million applications, Premier Energies (3.5 million), BLS E-Services (3 million), Gala Precision Engineering (2.99 million), and Exicom Tele-Systems (2.78 million).
Skyrocketing Demand from Retail Investors
The total value of shares retail investors applied for was 280% higher than the actual IPO size for mainboard IPOs. In the SME sector, the figure was an extraordinary 7,224% higher in 2024.
SME IPOs Attract Unprecedented Retail Attention
Pranav Haldea, Managing Director of Prime Database Group, expressed concern over the rising retail interest in SME IPOs. He noted that the average number of applications per SME IPO surged from 408 in 2019-20 to 213,000 in 2024. Haldea attributes this surge to the lure of high returns, despite risks highlighted by exchanges and regulators.
Limited Allocations Despite High Demand
Even with high interest, retail investors find it harder to secure IPO shares. Retail allocation dropped to 27.8% and 22.8% of total IPO mobilization on the mainboard in 2023 and 2024, respectively. For SMEs, allocations were 43.2% in 2023 and 38.3% in 2024.
Listing Gains Fuel Continued Investor Enthusiasm
A Mint analysis showed that median listing gains for mainboard IPOs increased from 18.1% in 2021 to 21.2% in 2024. The SME sector saw a more dramatic rise in gains, from 3.1% to 46.9% in 2024.
Retail Investors Focus on Short-Term Gains
Haldea explained that most retail investors are attracted to IPOs for short-term profits, not long-term investments. A SEBI study revealed that 42.7% of shares allocated to retail investors were sold within a week of listing. This figure rises to 50.7% within a month and 60.5% within a year.
Caution Ahead for the IPO Market
Despite the current boom, experts warn that the IPO market may slow down soon. G. Chokkalingam, founder of Equinomics Research, pointed out that the primary market is cyclical and often tied to small and mid-cap stock performance. When valuations peak, corrections follow, leading to a slowdown in IPO activity.
A Possible Pause, But Another Boom Expected
Chokkalingam believes the current IPO rush may take a break soon, but he expects it to return when the small and mid-cap sector experiences its next boom.
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