The average retail application amount has increased 50% after the Securities and Exchange Board of India (Sebi) doubled the investment limit in initial public offers (IPOs) to Rs 2 lakh. The average investment by retail investors has increased to Rs 98,600 from about Rs 66,000, as per FE study.
?The quantum jump was expected as people were under-investing when the limit was Rs 1 lakh,? Edelweiss head retail broking Kedar Despande said. ?The average investment could have gone up even higher had both the issues (MOIL and SCI) not taken place simultaneously,? he added.
About eight share sales (IPOs and FPOs) have taken place so far after the new investment cap came into effect in November. However, data is available only for two offerings?MOIL and Shipping Corporation of India. For the study, FE compared average retail investments in all government offerings for the current fiscal.
The average investment by retail investors in the MOIL IPO was about Rs 1.1 lakh, while it was about Rs 88,000 for SCI. The average retail investment in government offerings in the current fiscal otherwise have been in the range of Rs 55,000 to Rs 73,500. About 30% and 21% retail applicants in the issues of MOIL and SCI respectively applied at the top end of the retail limit which is Rs 2 lakh. ?It is a good move by the market regulator as retail investments in IPOs was going up,? said S Subramanian, MD?investment banking, Enam Securities.
However, not everyone is convinced. ?Wealthy investors are eating into the quota of retail. That?s why we are seeing such high subscription in the retail portion,? Prithvi Haldea, chairman & managing director, Prime Database. ?They have crowded out the small investors, which is a big dampener.?
According to Haldea, retail participation is typically higher in government offerings and it would be interesting to see how investment pans out for private issuances. The capital market regulator in August had proposed to enhance the retail individual investor?s limit from Rs 1 lakh to Rs 2 lakh in public issues. Sebi in its discussion paper had cited three reasons for increase the limit namely attracting large number of retail application in large-sized issues, chunk of retail applications from retail investors coming at the top end of the investment cap and increase in the country?s headline inflation.