With stock picks shrinking, fund-laden MFs turn to IPOs

The recent uproar over mutual funds investing in Lenskart’s IPO despite lofty valuations grabbed attention, but it is hardly an isolated case.

- Srushti Vaidya

India's mutual funds are pushing more money into IPOs in search of better returns as they see robust flows.

(ISTOCKPHOTO)

Most mutual fund houses had participated in the IPO, and their investors took to social media questioning the rationale to invest in a firm with a steep valuation of 260x.

Squeezed by a sluggish, overvalued secondary market and a growing fear of missing out, India’s MFs are pushing more money into initial public offerings (IPOs) in search of better returns as they continue to receive robust flows.

MFs typically participate in IPOs as anchor investors or qualified institutional buyers (QIBs), routes also used by foreign institutional investors (FIIs), banks, insurers, alternative investment funds, and venture capital funds.