From 2003 To 2023, How Settlement In IPO Market Has Taken Huge Shift? Zerodha's Nithin Kamath Explains

Leading stock brokerage, Zerodha's co-founder Nithin Kamath was exhilarated as he took to his X handler to appreciate the massive flow of money in five IPOs between November 20th to November 24th. A staggering Rs 2.6 lakh crore were pumped into five firms that looked to raise about Rs 7,379 crore through an initial public offering. Kamath highlighted there has been a paradigm shift in the settlement of IPOs from 2003 to the current times.

Where it took 16 working days for the process of an IPO to complete two decades ago, it has now been reduced to just 3 days after the closure of the public offer. In simple words, after an IPO closes in the primary market, it just takes three working days to carry out allotment of shares, refunds, credit in demat accounts and finally the listing.

Through his X handler, Kamath said, "After a long time, we have had massive activity in the IPO market, with Rs 2.6lk cr blocked in bank accounts for IPOs worth Rs 7.6k cr."

He was referring to five IPOs namely Tata Technologies, Flair Writing Industries, Fedbank Financial, Gandhar Oil Refinery, and the Indian Renewable Energy Development Agency (IREDA). All of them have oversubscribed with Tata Technologies IPO which was the first public offer of Tata Group in 19 years, receiving the most love from investors across categories.

Tata Technologies IPO oversubscribed by 69.43x with bids of 312.65 crore which amounted to Rs 1.56 lakh crore at the issue price of Rs 500. The company planned to raise to Rs 3,042.51 crore.

Meanwhile, Flair Writing IPO subscribed 46.68 times with bids of 67.28 crore worth Rs 20,453.12 crore at the upper price band of Rs 304 per share, against the issue size of Rs 593 crore. Whereas, the Fedbank IPO fully subscribed by 2.2 times with bids of 12.3 crore worth Rs 1,722 crore at the upper price band of Rs 140 per share against the issue size of Rs 1,092.26 crore.

Furthermore, Gandhar Oil IPO oversubscribed by 64.07 times with bids of 136.1 crore equity shares worth Rs 23,000.9 crore at the upper price band of Rs 169 per share, against the offer size of Rs 500.69 crore.

Moreover, the IREDA IPO oversubscribed by 38.8 times with bids of 1,827 crore equity shares aggregating to Rs 58,464 crore at the upper price band of Rs 32 per share against the offered size of Rs 2,150.21 crore.

There was also an SME IPO which was launched from November 22-24 to list on NSE Emerge. This would be Rockingdeals Circular Economy which oversubscribed by breathtaking 143.99 times against its issue size of Rs 21 crore.

Reminiscing the olden times, Kamath said, "If this was 2003, it would take 16 working days (or ~1 month), and the entire money would have moved to investment bankers and cost investors (an interest forego) at least 0.5% (assuming 6% pa) or Rs 1300 crores."

He further explained that T+16 became T+12, T+6, and from Sep 2023 it is T+3 (~1week).

Adding he said, "Now, the money never leaves the bank account until allotment. While institutional investors might miss out on interest income with money blocked in current bank accounts which don't yield any interest for those 3 days, retail investors continue to earn the interest from their savings accounts during the IPO process."

Lastly, he said in his thread, "In almost every aspect, capital market regulations in India have improved phenomenally over the last 20 years, especially in the last five years."

All these IPOs will be listed on stock exchanges BSE and NSE.

As per NSE FAQs, an IPO is an important step in the growth of a business. It provides a company access to funds through the public capital market. An IPO also greatly increases the credibility and publicity that a business receives. In many cases, an IPO is the only way to finance quick growth and expansion. In terms of the economy, when a large number of IPOs are issued, it is a sign of a healthy stock market and economy.

A corporation may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is the largest source of funds with long or indefinite maturity for the company, it added.