What was the subscription story

Out of the four IPOs that closed during the latest week, 2 IPOs got reasonable response. The CarTrade Tech IPO was subscribed 20.29 times while the Aptus Value Housing IPO was subscribed 17.2 times. However, the Nuvoco Vistas IPO was subscribed by just about 1.71 times while the Chemplast Sanmar IPO was subscribed just 2.17 times. What really explains this measured response to the IPOs after a fabulous response to the four IPOs of Exxaro, Windlas Biotech, Devyani and Krsnaa in previous week? 

Boredom or size?

One argument was that the plethora of IPOs had created surfeit of investments in the market and had led to investors becoming generally indifferent. There was also the issue of size. Nuvoco Vistas was a Rs.5,000 crore IPO while the Chemplast Sanmar IPO targeted to raise Rs.3,850 crore. If you add up the 4 IPOs in the current week, the total capital raising was to the tune of Rs.15,000 crore, which automatically reduces the appetite in the market. As retail flows dry up, the funded HNI applications also tend to take a back seat. In a way, the market was just not prepared for it. 

Liquidity was another issue

While liquidity may not really be an issue for QIBs, it is definitely an issue for the retail and HNI investors. In the current week, all the 4 IPOs had closed by 12 August. By that time, the refunds for the non-allotted shares of last week were not received. HNI investors, who had opted for funding, would have logically been able to liquidate their investments only after listing. Experts felt that the IPOs in the current week were designed without focusing on the most important aspect of availability of liquidity. At the end of the day, it was the locked-in funds that made a real dent on levels of IPO oversubscription. 

Investors have been selective

The two issues that got a tepid response were Nuvoco Vistas and Chemplast. The common thread between the two IPOs is that both were listed stocks. Nuvoco, is part of the Nirma group, which had opted to delist in 2012. Similarly, even Chemplast Sanmar had delisted at an average price of Rs.15 in 2012 and now the same promoters were raising funds at over 7-times that price. Currently, the SEBI rules only prevents delisted names from relisting for a period of 3 years. But, investors were largely skeptical about the logic of such companies that relist when the market conditions are bullish. At the end of the day, liquidity was certainly a major issue, but there was also investor selectivity at play!