The past few days have had a few IPO listings – IRFC, Indigo Paints and Home First Finance. Let’s have a look at how these IPO’s fared:
As you can see, due to high oversubscription gain as % of amount bid was much lower than listing gain %
We have considered listing price only and not beyond as our blogs on this topic focus on IPO opportunity and not market risk and return post listing. If you haven’t read that, have a look here. Home First price fell post listing (but remained above IPO price) and Indigo Paints price rose yet further post listing.
In our previous blog, we had maintained a positive view on (click on link to see blog) Home First Finance and Indigo Paints.
How actual numbers would have fared on the above IPOs. We have assumed some IPO bid amounts for easy illustration.
Home First Finance:
| Assumed bid amount (A) | 5,65,000 |
| Number of shares allotted (B) | 28 |
| Gain per share (C) | 101 |
| Overall Gain (D) = B * C | 2,828 |
| Gain as a percentage of amount bid (E) = D / A | 0.5% |
Indigo Paints:
| Assumed bid amount (A) | 40,00,000 |
| Number of shares allotted (B) | 10 |
| Gain per share (C) | 1,117 |
| Overall Gain (D) = B * C | 11,170 |
| Gain as a percentage of amount bid (E) = D / A | 0.29% |
The absolute amounts of gains look small but as said in our earlier blog, these come with limited short-term equity risk. When done systematically they add to the return on your savings bank a/c with some measured short-term equity risk for those comfortable with measured short-term equity risk.
A common problem : I applied but I did not get allotment 🙁
This happens because of oversubscription. Applications upto a certain threshold amount then have to face a lottery system so that minimum lot size of allotment (generally around Rs. 15,000) for each allotment is maintained.
For applications under lottery system, some would get no allocation (no return) and some higher allocation (higher return) greater than the gains % shown above. We don’t know how you fared in the lottery but over time it evens out. We will cover IPO allotment process in a future blog. But remember even if you did not get any allotment but have applied through ASBA a/c your cost of application is nil !
Is there a way to calculate that figure of INR 5,65,000? The “maximum” bid was limited to some INR 1.89 lacs or some such in the ASBA account.
5,65,000 in this case was arrived at by multiplying lot size (appx 15,000 for most IPO ) by no. of times of oversubscription in HNI category (39x in this case of Home First Finance)
You can apply for higher amounts under ASBA in HNI category with no cap. Make sure you move the balance from your liquid mutual funds and other savings ac into the ASBA a/c.