HNIs opt out of the IPO

If you look at the granular break-up of subscriptions, the retail portion and QIB portion got just about fully subscribed. The issue was the HNI/NII portion, that was subscribed just 19%. There was a total absence of interest from HNIs and corporates and the funded applications. That actually hit the issue badly since HNIs have a 15% quota in an IPO and the other 2 categories were just about subscribed and could not absorb the HNI shortfall in the Star Health IPO. 

Falling short by Rs.839 crore

The Rs.7,249 crore IPO comprised fresh issue of Rs.2,000 crore and an OFS of Rs.5,249 crore. The QIB portion was fully subscribed and that was a major precondition for the issue to go through. While the anchor investors had put in Rs.3,217 crore the balance amount still fell short by Rs.839 crore. The OFS had to be reduced proportionately. The response was all the more surprising as the company is backed by Rakesh Jhunjhunwala as an early backer of the company and had a roster of big investors on its list. However, despite all these factors, the issue faced a forced OFS size cut to get the issue through. 

Optimistic valuations

The Star Health IPO was targeting a hefty valuation of Rs.51,000 crore, which was rather steep considering that it was essentially just a health insurance player. When there is so much optimism in the price, most funded applications tend to get wary as they need a decent listing for the cost of funding to get covered. That explains why the HNI portion had such a lukewarm show. In addition, the volatility in Paytm stock after listing has also created worries about large issues in the Indian market. All these concerns weighed and market must remember that it is impossible to repeat the stellar success of IPOs like Nykaa and Zomato in each large issue. 

Appetite for big ticket IPOs

Before Zomato set the tone for mega digital IPOs, there were always doubts about whether Indian markets could absorb large issues. Most of the large issues rely on the QIBs to sail through and in the case of Star Health, the issue could not proceed despite high levels of interest from global anchor investors. This is a question that will be asked time and again about the capacity of the Indian markets to absorb an IPO of this size, especially when there are a string of IPOs lined up. The last 2 IPOs of Paytm and Star Health have raised some questions about issue size, valuations and the timing of big-ticket IPOs. India must find answers for these queries! ©