IPO funding at record
low rates of 7%; but stocks must list at over 50% for decent returns
High net-worth
individuals (HNI) binged on record low rates of finance to bid aggressively in
2 just-concluded IPOs but the shares will have to list at premiums of over 50%
each for the investors to make reasonable returns.
Snowman Logistics and
Sharda Cropchem closed within weeks of each other and were major success in
terms of oversubscription from retail and HNIs.
The HNIs' portion in
the case of Snowman was oversubscribed 222 times while it was 251 times in the
case of Sharda Cropchem.Cheap IPO funding at never-before-seen rates of 7% was
largely responsible for the massive demand as brokerages continued with their
practice of using SEBI's new norms to cut down on rates.
Domestic brokerages
provided loans at 7% compared with 12% to 14% two years ago. Rates have been
coming down since 2011 when market regulator SEBI introduced a facility called
ASBA which allowed HNIs and institutional investors to bid for as many shares
as possible while the payment would happen only for those shares that are
allotted. It enables an HNI to buy stocks even if he can not put up the entire
money .All big brokerage houses use this tool to fund their clients.
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