Private companies follow PSUs

Mumbai: Offering a special discount to retail investors, with the lead given by the public sector, has become the new norm in the primary market to attract large number of small investors into the market. Recent initial public offers (IPOs) from Inox Winds and Adlabs Entertainment saw their retail portion getting subscribed multiple times after providing a special discount to retail investors. 

The portion reserved for retail investors in Inox Wind was subscribed 2.15 times while the retail portion in Adlabs IPO was subscribed 1.37 times. “Providing discounts to retail investors in IPOs acts as an incentive for retail investors to come into the market. Also, good post listing performance helps in improving the overall primary market sentiment.” 

“Since the pricing is always a sensitive issue in any public offer, IPO’s that are fairly priced will help attract a lot of small investors into the market,” said Pranav Haldea, managing director, Prime Database. Experts added that the private sector is taking cue from state owned enterprises, which have been providing special discount to retail investors during the government’s stake sale process.

The government’s recent stake sale in Rural Electrification Corporation (REC) through the offer for sale route saw robust participation from retail investors as they were given an additional 5 per cent discount from their bid price. The retail portion was subscribed 9.02 times. 

“The private sector is taking a cue from the government’s practice of providing special discount to retail investors. The special discount will always act as an incentive for retail investors to come into the market. This will also act as a cushion in the event of share prices falling below the issue price after getting listed. So discount provides a certain degree of comfort to small investors,” said Arun Kejriwal, director, Kejriwal Research and Investment Services (KRIS).