Banks and financial institutions have a lot of money. There are very few loan takers in the time of Covid. In view of this, banks invested a lot of money in the IPO that came this year. It has invested as a Qualified Institutional Buyer (QIB). So far this year, their investment in IPO has become the highest in four years.
According to information received from the markets, banks and financial institutions have invested Rs 870 crore in IPO so far this year. In 2020, there was sluggishness in the IPO market amid the uncertainties created by covid, but even during that time banks invested Rs 698 crore in it. In 2019, Banks and financial institutions invested Rs 461 crore.
In 2017, India Inc raised a record amount through an IPO. That year, banks and financial institutions had invested Rs 4,548 crore as QIBs. According to the data, companies have raised Rs 27,417 crore through IPO in 2021 so far. Last year Banks raised Rs 26,108 crore, in 2019 Rs 11,036 crore and in 2018 Rs 30,615 crore.
According to experts, banks have been investing money in IPOs from their treasury book i.e. investment funds for the past several years. Most banks take permission to invest up to Rs 300-500 crore. Out of this, up to Rs 50-100 crore has been invested in the IPO market.
The general perception is that banks generally do not invest in IPOs for long term gains. Their entire focus is on getting the listing profit from them. However, the year 2019 was an exception, when banks floated the issue of troubled Sterling & Wilson.
Sachin Chandiwal, MD, DAM Capital, says, "Earlier, we used to run after banks to invest in IPOs. Now they are running after us. There has been a sharp jump in Treasury investments by banks since September 2020. There are two reasons for this, one is they have access to cash and second, investing in IPO is giving good returns.
IDBI Bank, ICICI Bank, SBI, Axis Bank, Bank of India (BOI) and Bank of Baroda (BoB) were among the major banks that invested heavily in IPO this year. Most of the banks put money in public issues of strong financially sound companies.
A market expert said that banks had invested money in the issue of companies like Clean Science, Lakshmi Organics, Sona Comstar. However, doubted that banks may have invested money in Zomato's IPO. Institutions said that at present the details related to this are awaited.
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