The main objective of the fund is to invest in good new-age companies that are getting listed and have good potential to grow over a period.
Most initial public offerings (IPOs), in the recent past, turned out to be a successful investment for investors. From the Zomato IPO to the IPOs of Happiest Minds, Burger King, Route Mobile to Clean Science and many others, the list of top IPOs seems to be ever expanding. Several thousand crores have already been raised by several companies and start-ups and more is yet to come.
But, after applying for IPOs, there is no assurance that the investor gets the allotment. More so, as the IPO issues are getting oversubscribed several times over. For instance, many investors would be waiting to check the Devyani International IPO allotment status. As an investor, if you still want to take an exposure to the recently-listed IPOs, there is a way out.
Edelweiss Maiden Opportunities fund-Series 1 (a closed ended scheme) has been converted into Edelweiss Recently Listed IPO Fund (a open ended scheme) and is now open for investment (effective from June 29, 2021). The fund holds the shares of the recently listed companies and gives investors an opportunity to hold them in a single mutual fund scheme.
In an exclusive interview with Sunil Dhawan of FE Online, Radhika Gupta, MD & CEO of Edelweiss Asset Management Limited shares insights about the Edelweiss Recently Listed IPO Fund, how investors stand to benefit and the watchouts before investing in the fund. Excerpts:
If an investor fails to get allotment in an IPO, how does it help by investing in Edelweiss Recently Listed IPO Fund?
Edelweiss Recently Listed IPO Fund aims to participate in recently and upcoming listed IPOs on the index stock exchanges. The fund participates in select IPOs via anchor or QIB route and may also buy these companies after listing from the secondary market if they are available at an attractive price.
Many retail investors miss out on getting allotment in IPOs due to heavy over-subscriptions, they also miss out on buying good companies after listing due to lack of research and miss out on post listing gains. By investing in this fund the investor need not worry about access to good IPOs as the fund does it for her. The portfolio holds somewhere between 30 to 40 stocks at any given point.
As a mutual fund house, how does the allotment happen, especially in the case of over-subscription?
The allotment depends on a case to case basis. There is no assured allotment to any category of investors in an IPO. However, the fund aims to get exposure into a good company via multiple ways – Anchor and QIB quota during IPO and also form a secondary market after the listing.
Currently, it’s the IPO season and most of them are listing with hefty gains? Will all recently listed companies continue to be held in the portfolio and how will it be decided whether to exit/ trim or increase exposure to these IPO companies?
The fund follows a rigorous process while selecting IPOs to invest in. The fund doesn’t invest in every IPO that comes for listing. The average holding period in a good IPO after listing has been around 2 years, which is a reasonable period to benefit from post-listing gains from these IPOs.
Exiting or increasing exposure to such companies is based on pure fundamental analysis of the company and the value it can add to the portfolio. It also depends on other relative opportunities that may come across over the life of the fund.
Any important watchout that an investor needs to keep an eye on?
One important thing which investors should keep in mind while considering this fund is that it is not a fund that generates returns from listing gains of IPOs. The main objective of the fund is to invest in good new-age companies that are getting listed and have good potential to grow over a period. The aim is to generate the maximum return from post listing gains by holding these companies for a reasonable period after their listing.