Weak response from retail investors may hit QIBs
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Mumbai: The weak responses from retail investors for some of the initial public offerings (IPOs) could hit many of the qualified institutional buyers (QIBs) who have aggressively bid for the shares during the book-building process, say investment bankers, reports Apurv Gupta of the Economic Times. The retail portion of DB Realty's IPO received bids for less than 30 percent of the shares on offer. This means that the unsubscribed shares will be allotted to institutional investors, as the QIB has received bids in excess of the shares reserved for that category of investors. Last year, the retail portion of IPOs like Indiabulls Power, JSW Energy, DEN Networks, Godrej Properties and Cox and Kings were undersubscribed despite the buoyant mood in the secondary market. Brokers said that the aggressive pricing of issues is what had kept away retail investors in the past. Now, there is a choppy secondary market and the bunching of issues to contend with as well. "Investors will put their money when they find valuations tempting enough to make money. It is not that retail investors are not there in the market, but it is largely to do with the quality of some of the issues that had hit the market in recent times," S Venkatraghavan, Managing Director, IDFC-SSKI Investment Banking told the Economic Times. "Most HNIs or retail investors participate with a strategy to leverage and maximise their profits by way of listing gains. But if valuations are stretched, they would prefer to stay away," he says. HNIs looking for listing day gains have suffered losses more often than not, even in some of the high-profile public issues last year. Market observers say that in many of the small-, and mid-sized issues, institutional demand is not always genuine. "Companies and bankers ask some of the institutional players to bid for the issues with an agreement that they need not have to actually buy the shares. The idea is to show a strong QIB demand. So that HNIs and retail investors are tempted to put in their bids," says an investment banker on condition of anonymity. "It remains to be seen if the unsubscribed portion of the retail book is indeed allotted to institutional investors," he says.

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