The BSE IPO index has hit a new high of 18,237.52, gaining 0.43% in Wednesday's intra-day trading, significantly outperforming the broader market. According to Business Standard, the BSE IPO index has outperformed the market by soaring 21% in the past six months, against a 6.8% decline in the BSE Sensex. This strong performance comes as the unofficial grey market continues to experience heightened activity with grey market premiums (GMP) reaching 25% for several upcoming IPOs, as reported by The Economic Times. The surge is driven by strong listing performance and increased investor confidence following recent successful market debuts.
August has witnessed exceptional IPO performance with average listing gains reaching 36% for issues launched in August, according to Equirus Capital's Bhavesh Shah. This represents a significant improvement from about 11% for all IPOs launched so far this year, as reported by CNBC TV18. The strong performance is attributed to more attractive pricing and higher margin of safety built into current offerings. Kotak Investment Banking's Kaushal Shah noted that around 13-14 IPOs worth more than ₹40,000 crore have come to the market in the last month alone, representing roughly 55-60% of all IPOs launched this calendar year. The improvement has been particularly visible with IPOs launched between July and August delivering average listing gains of around 25%.
Several upcoming IPOs are commanding significant premiums in the grey market. Behari Lal Engineering's GMP is trading at nearly 44% or ₹125 a share above its issue price of ₹285, following 118 times subscription to its IPO. Shiprocket Ltd's GMP is around 38% or ₹39 a share above its issue price of ₹97, after the IPO was subscribed around 99 times. Lalithaa Jewellery Mart's GMP is currently around 17% above its issue price of ₹201 with the IPO scheduled to close on August 19. Tempsens Instruments India's GMP stands at around ₹168 or 56% above its ₹300 issue price, with its IPO opening on August 20. Dhoot Transmission currently quotes at a premium of 65% over its issue price of ₹871 after its strong market debut.
According to The Economic Times, companies are now pricing their offerings more conservatively to ensure strong subscriptions and better listing performance. Equirus Capital's Bhavesh Shah explained that there's a lot of margin of error or margin of safety that is actually built in into the pricing, encouraging more companies to tap the primary market. Abhishek Ginodia, director at Altius Investech, noted that GMP is largely a function of IPO pricing, explaining that issues priced expensively earlier this year saw muted GMPs and modest listing gains. This strategic approach is contributing to the current surge in grey market premiums and investor confidence, with bankers attributing the strong gains to more attractive pricing and higher margin of safety for investors.
The momentum is expected to continue with highly anticipated mega-IPOs like Jio and NSE in the pipeline. Bhavesh Shah from Equirus Capital said India had already raised close to $7 billion through IPOs by August, against his expectation of around $20 billion for the full year. With several large issues in the pipeline, including Jio and National Stock Exchange, he expects the momentum to remain strong. Kaushal Shah from Kotak Investment Banking attributed the strong demand to several factors, including the fading of concerns around the West Asia crisis, corporate earnings and the monsoon. He also pointed to differentiated businesses and manufacturing companies as major attractions for investors, noting "there's a significant tailwind, especially with respect to the manufacturing sector." Market experts emphasize that while investors are becoming more selective, they are not necessarily unwilling to back loss-making businesses with strong growth stories.
