India's IPO market is currently experiencing a dramatic surge in last-minute bidding activity, signaling a significant shift in investor behavior. Instead of spreading their bids throughout the IPO window, an increasing number of investors are waiting until the final hours to submit their applications.
A recent analysis of subscription trends since 2022 indicates that a substantial 65% to 80% of all IPO applications are now concentrated on the last day of the bidding period. This pattern is evident across various major IPOs, ranging from Tata Capital to Lenskart, highlighting a fundamental change in the way Indian investors approach new listings.
Traditionally, the first two days of an IPO were characterized by steady accumulation of bids. However, these periods now account for a mere 20% to 40% of the total bids received, according to Prime Database, a market intelligence platform. In certain large offerings, such as Tenneco Clean Air, this skew is even more pronounced, with a staggering 93% of bids coming in on the final day.
Several factors contribute to this last-minute bidding frenzy. One key driver is the increasing sophistication and access to information among retail investors. With a plethora of online resources and real-time market data at their fingertips, investors are more empowered to make informed decisions and time their bids strategically. They actively monitor the subscription levels and market sentiment, waiting for the opportune moment to maximize their chances of securing allotment and potential listing gains.
Another factor fueling the trend is the fear of missing out (FOMO). As IPOs gain traction and generate positive buzz, investors who were initially hesitant may feel compelled to participate, leading to a surge in applications towards the end of the subscription period. This herd mentality can further amplify the last-minute rush, creating a self-fulfilling prophecy of oversubscription and heightened competition.
Moreover, the growth of domestic liquidity has played a crucial role in driving the IPO frenzy. A rapidly expanding pool of capital from domestic mutual funds, insurance companies, and individual investors now commands the IPO landscape, demonstrating an enhanced capability to accommodate large share offerings. Data from Prime Database reveals that domestic investors have invested significantly more in IPOs than foreign funds since the beginning of 2024, marking the highest proportion for any year where proceeds surpassed $11.3 billion.
The trend towards last-minute bidding also reflects a change in investment objectives. Many investors, particularly retail participants, are increasingly focused on short-term gains, seeking to capitalize on listing day pops rather than holding shares for the long term. This "listing gains" mentality encourages investors to wait until the last minute to assess the potential for quick profits, further exacerbating the bidding frenzy.
However, this last-minute rush also carries potential risks. The concentration of bids on the final day can lead to oversubscription, making it more difficult for individual investors to secure allotment. Additionally, the intense competition can drive up valuations, potentially leading to post-listing underperformance if the underlying fundamentals do not justify the high prices.
Despite these concerns, the Indian IPO market remains robust, driven by strong investor sentiment and a favorable economic outlook. The increasing participation of domestic investors, coupled with a growing appetite for new listings, has positioned India as one of the most active IPO destinations globally. As the market continues to evolve, it will be crucial for investors to exercise caution, conduct thorough due diligence, and avoid being swayed by the last-minute bidding frenzy.
