In light of the influx of liquidity and the lack of loan concessionaires, banks and financial institutions have increased their investments in initial public offerings
(IPOs) through the qualified institutional buyer (Bank), touching their lowest level which is four years so far in 2021.
According to a Mint analysis based on data obtained from the Prime Database, banks and financial institutions have almost doubled their IPO investments to ₹ 870 crore this year from ₹ 461 crore in 2019. Last year, despite the stagnation of the primary market for more than six months Due to uncertainties related to the pandemic, banks and financial institutions have injected ₹
698 crore into IPOs.
So far, data showed in 2021, IPOs was raised ₹27,417 crore compared to ₹ 26,108 crore last year, ₹ 11,036 crore in 2019, and ₹ 30,615 crore in 2018, respectively.
This analysis does not include the top investments and IPOs which are launched by government-run companies such as Garden Reach, MSTC, RVNL, IRCTC, Mazagon Dock, and Lithika Infrastructure.
For the past few years Banks has been investing in IPOs through their treasury books. They get internal approval for ₹300-500 crore and invest ₹50-100 crore in IPOs. But their main objective is to gain listing gains. In 2019, only exception back then was, when all the banks bailed out Sterling and wilson’s IPOs after struggling to navigate.
“Earlier, we used to chase banks for investment in IPO. Now, they chase us. Since September 2020, banks have seen a significant uptick in treasury investment by banks. Partly this is because of surplus liquidity and partly because some of the issues are giving good returns," said Sachin Chandiwal, managing director, DAM Capital (erstwhile IDFC Securities).
"Investing in an IPO is not necessarily about incorporating profits. We mainly look at the business model and the quality of the management. Banks have invested in IPOs such as GR Infra, MTAR Technologies, Happiest Minds and IndiaMart because of the quality of the IPO. In the case of GR Infra, no other good infrastructure company other than L&T. Therefore, banks find it a good proposition. Banks can have different points of view when it comes to investing in IPOs for startups like Zomato. " Said a second banker familiar with importing.
Credit- Livemint Hindustan Times
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