Mutual funds make the most of IPOs

Godrej Agrovet shares ended their debut on markets with 29% gain over issue price. Prataap Snacks is up 28% in a few days of listing. Dixon Technologies has zoomed 51% already. Retail investors going the mutual fund way need not feel jealous about peers making a killing in hot IPO listings. Mutual fund managers have made their share of money by investing in public issues that have witnessed stellar post-listing gains. While short-term listing gains should not be the motive for long-term MF investors, funds through their stock selection process ensure that easy pickings are not missed. Making hay For a long-time, IPOs were considered a get-rich-quick scheme. Investors often used leverage (i.e. borrowed money) to bid for IPO share allotment and would wait for listing day gains. When a stock gained more than the leverage cost on debut, it was a darling for traders and punters. When the stock crashed on debut or stayed flat, the risky game did not pay off. Sebi has brought a slew of reforms to make the IPO market a safer and transparent. For instance, it introduced ASBA, reduced the listing time, and changed the allotment system. After a lull in the markets, IPO buzz started becoming louder from 2014. A gush of new found and sustained liquidity, thanks to copious MF inflows, have ensured that stock prices have risen fast. With investor sentiment upbeat, companies have regularly tapped the IPO-avenue to raise money. While an ordinary investor, may not get enough share allotment in IPO that have been subscribed many times over, mutual funds have a corner seat. Mutual funds not only qualify as institutions, they have also used the anchor round in IPOs to corner shares. For instance, Reliance Capital Trustee (connected to Reliance MF) was among the anchor investors in Godrej Agrovet. HDFC MF, ICICI Prudential MF, Kotak MF, Reliance MF, Axis MF and UTI MF were anchor investors in the SBI Life Insurance IPO. Overall, mutual funds, since April 2017, have invested in quite a few IPOs. The public issues where MFs have built up their biggest positions (in number of shares) include HUDCO where the stock has gained 40% since IPO, ICICI Lombard General Insurance, and AU Small Finance