Initial Public Offerings (IPOs) with issue sizes below ₹5,000 crore have delivered better returns for investors, both on listing day and in the following months—raising questions over the current allocation strategy in larger IPOs.
According to recent data shared by analysts and highlighted in a SEBI consultation paper released on July 31, smaller-sized IPOs have consistently outperformed their larger counterparts. In contrast, public issues above ₹5,000 crore have often offered subdued gains or flat post-listing performance.
SEBI Proposes Increase in QIB Share, Tweak in Retail Quota
In light of this trend, the Securities and Exchange Board of India (SEBI) has proposed certain modifications to the IPO allocation framework, especially for large-sized issues.
Key proposal highlights from SEBI’s consultation paper:
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Increase Qualified Institutional Buyers (QIB) quota from 50% to 60% in large IPOs.
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Enhance the share of mutual funds within the QIB bucket.
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No direct reduction in retail quota yet, but changes may indirectly impact retail investor participation in large IPOs.
The move is intended to ensure better price discovery, smoother allocation, and more stable post-listing trading patterns—especially in large-cap IPOs which tend to see high investor participation but deliver limited upside.
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Performance Trends: Small vs. Large IPOs
Market data shows a clear pattern:
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IPOs below ₹5,000 crore saw higher listing gains, better post-listing returns, and stronger investor interest across all segments.
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In contrast, larger IPOs often underperform, especially those with excessive valuations or subdued demand from retail and high-net-worth individuals.
This has prompted analysts and regulators alike to evaluate whether retail quotas in large IPOs should be revisited, to better reflect demand and market dynamics.
Quick Neutral Analysis
The SEBI proposal follows a data-backed trend that smaller IPOs generate better value for investors, while larger IPOs often disappoint in terms of returns.
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Increasing QIB allocation may bring more institutional discipline and potentially reduce volatility.
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Retail investors might still benefit indirectly through mutual fund exposure in QIB segments.
As the consultation paper awaits feedback, SEBI’s move signals an effort to optimise IPO outcomes for all investor classes, particularly in high-value public offerings