Leading Investment banks that handle IPO proceedings acting as lead managers and many more have approached the Indian Market regulator SEBI to consider reducing the retail offer quota in IPO with large issue sizes and seeking greater allocation to institutions and rich individuals.
At present, 35 percent of an IPO is set aside for retail investors, while qualified institutional buyers (QIBs) have 50 percent, and non-institutional investors (NIIs), including high-net-worth individuals, are allocated 15 percent.
These issues and concerns were cited after recent major well-awaited and hyped IPOs like Hyundai Motors, Hexaware Technologies, and Swiggy received mixed responses from the investors with the retail quota being under/duly subscribed cited by valuation, market sentiment, and others.
In a recent interview, an investment banker stated that”Several companies planning large IPOs fear that the 35 percent retail reservation may remain undersubscribed, potentially dampening overall market sentiment and listing performance.”
The matter was discussed in a recent meeting between Sebi officials and bankers, and the regulator has sought data from the bankers supporting their contention. Listed below are 3 IPOs that recently made their debut and struggled to draw investors’ interest following multiple concerns.
Hyundai Motors
Hyundai Motor India Ltd which is the third largest auto original equipment manufacturer (“OEM”) in the world based on passenger vehicle sales, came out with India’s biggest IPO starting on October 15, 2024 and ending on October 17, 2024, with a book built issue of a whooping Rs. 27,870.16 Crores.
Despite Hyundai Motors’ strong brand reputation, the IPO received a tepid response from the public as the offering was quite large and entirely offer for sale where the proceeds would go directly to the stake sellers rather than into the company for the betterment of operations, debt reduction, expansion, and other corporate purposes.
Other reasons involve volatile market conditions and offering shares of the company at a High valuation of 26 times as against its competitors like Maruti Suzuki, which was the market leader valued at a P/E of 22x and an industry average of 24.41x.
At the end of day 3 the Initial Public Offering was fully subscribed by 2.37x with retail participation being just 0.5x, followed by Non-Institutional Buyers and Qualified Institutional Buyers subscribing just 0.6x and 6.97x, respectively.
Swiggy
Swiggy Ltd is a new-age, consumer-first technology company offering users an easy-to-use convenience platform to deliver Food, Grocery, Household goods, and many more came out with its IPO in 2024 with a built issue of Rs. 11,327 Crores, which consisted of fresh issue for Rs. 4,499 Crores and an offer for sale of Rs. 6,828.43 Crores, with bidding starting on November 6, 2024, and ending on November 8, 2024.
At the end of day 3, the offer received a mixed response from the retail and high net worth individuals by subscribing 1.14x and 0.41x respectively, followed by Qualified Institutions 6.02x and the entire issue subscribed by 3.59x.
Well-awaited Swiggy Ltd’s IPO didn’t receive the expected response from the public, followed by its continuous losses, high operational costs for technological advancement, expansion, and marketing to offer services at competitive prices for outpacing its peers like Zomato, Zepto, and others.
Other reasons involve volatile market conditions, demanding high future valuations for its offer, valuing the company at ~$11.3 billion against its competitor Zomato valued at a market capitalization of ~$13 billion, which had turned profitable from the last 7 quarters, with a market share of ~58 percent as against swiggy’s 34 percent as per Reuters.
Hexaware Technologies
Hexaware Technologies Ltd, engaged in the business of global digital and technology services with artificial intelligence, launched an IPO with a built issue of Rs. 8,750 Crores, which consisted entirely of an offer for sale, with bidding starting on February 12, 2025, and ending on February 14, 2025.
Hexaware Technologies was delisted in 2020 because its promoter, Baring Private Equity Asia (BPEA), sought to take the company private, to make long-term strategic decisions without regulatory constraints quarterly earnings pressure, and other reasons.
At the end of day 3 due to weak sentiment of the IPO, investor caution amid concerns over valuation and it being an entire offer for sale resulted in a weak retail participation with retail subscription being 0.11x followed by Non-Institutional Buyers and Qualified Institutional Buyers subscribing just 0.21x and 9.55x respectively, and the total subscription stood at 2.79x.
| IPO | Issue Size(Cr) | Issue Price(per share) | Listing Price, Premium/Discount | Returns |
| Hyundai Motor India | ₹ 27,870.16 | ₹ 1960 | ₹1934 (-1.3%) | (7%) |
| Swiggy | ₹11,327 | ₹ 390 | ₹ 420 (7.7%) | (28%) |
| Hexaware Technologies | ₹8,750 | ₹ 708 | ₹ 745 (5.3%) | (4%) |
Written by: Bharath K.S
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