October has turned into one of the busiest months the primary market has seen this year, and the Jio IPO sits at the centre of it. Roughly a dozen companies are lining up public issues, and investors face a steady stream of decisions in a short span. Keeping track of every Upcoming IPO can feel like a full-time job, yet the real challenge is not information but restraint. Choosing carefully among many options is a skill, and this month is likely to test it.
A Market in Full Swing
Industry reports show 96 issues have mobilised over ₹1.1 lakh crore so far this fiscal, including 35 in September alone. This reflects the strong appetite of corporates to tap public capital while the mood remains bullish. It also reflects the ongoing commitment of Indian households to channel savings into equities on a regular monthly basis and growing participation across age groups.
Earlier this month, HD Fire Protect launched a ₹712 crore issue with a price band of ₹258 to ₹271 and Fusion CX followed it with a ₹702 crore offering priced between ₹275 to ₹289. Tonbo Imaging, Bonfiglioli Transmissions and Sahajanand Medical Technologies were due to open their issues on 15 October. Among others due to open in the coming days are Zetwerk Manufacturing Business, Avaada Electro and Paras Healthcare, which is proposing an issue of about ₹1,800 crore.
The Liquidity Squeeze Nobody Mentions
The influx of multiple issues can lead to a liquidity squeeze, as funds which would have gone into one application cannot be applied to another. Institutions, which have the same dilemma on a far larger scale, and a huge offering can also suck in considerable liquidity over the span of a few days, affecting the ability of individual investors to sell and buy on a secondary market.
To individual investors, this means laying out a monthly budget for applications and sticking to it. Decide on the amount that you are prepared to deploy in total during the month and then apportion it sensibly. If there is a huge issue in your sight, leave yourself some room so that you are not forced to miss out on a more appealing smaller one. It is possible to apply to only one, if you feel most comfortable doing so.
Quality Over Quantity
While it may seem tempting to apply to everything, bear in mind that the quality of issues offered in recent months has been generally good. A rising market tends to elevate the appeal of weaker propositions, and the quality of offerings can vary significantly. Take the time to research the sector, the credentials of the company, the proposed use of proceeds and the reputation of the lead managers.
Smaller and medium-sized offerings can be more vulnerable than their larger counterparts due to thinner markets, a concentrated customer base or aggressive promoter pricing. By contrast, a very large offering from a well-established group, while potentially expensive, is likely to have been analysed by a wider range of investors. Neither category is inherently safer – each requires its own scrutiny of the fundamentals.
Reading Subscription Data Wisely
The subscription data released daily across an issue can provide pointers on the demand for the scrip, but can also be misleading. Institutional subscriptions tend to come in on the final day, and a slow start is often indicative of a sluggish performance overall. Retail subscriptions can appear strong simply because so many individuals apply on the closing day without conviction.
Equally, you should not be tempted to assume that an oversubscribed offering is destined to rise on its listing. Many heavily subscribed issues have opened flat or lower when the broader market has turned weak around the listing date.
Building a Rhythm That Lasts
Disciplined investors often share a few common characteristics. They have a written checklist. They do not apply to issues on the spur of the moment, prompted by social media frenzy. They take a critical look at past applications and accept their mistakes. Most importantly, they understand that a missed opportunity is always a better alternative to a poorly planned one. The coming days will see headlines about record sizes, a frenzy of bidding and the first-day returns of issues. These will take place against the backdrop of individual decisions made by investors with different objectives and risk appetites. If you build a personal set of rules before the frenzy begins, you can enjoy the thrills of a bullish market without it overriding your good judgement. Patience and preparedness often triumph over impulsive action when it comes to investing.
