IPO Power Shift: Domestic Funds Take Front Seat

India's booming market for initial public offerings (IPOs) is undergoing a decisive shift, with domestic institutional investors (DIIS) such as mutual funds, insurance companies, and banks establishing dominance over foreign players in underwriting new share sales.

- Sneha Shah & Mayur Bhalerao

Data from the past 24 months show DIIS are now responsible for at least 50% of the subscriptions in an IPO's anchor book-allocations made to select large investors at a fixed price before an offering opens, helping gauge demand and stabilize the deal.

That marks a sharp break from the days when foreign portfolio investors were the primary anchors in Indian public listings.

While global uncertainties have spooked foreign portfolio investors (FPIs), India's deepening capital markets have enabled midsize and large IPOS to sail through with strong institutional and retail participation, making new share offerings less susceptible to wider macroeconomic shifts.

FPIs have turned net sellers in India, offloading shares worth $31 billion (₹2.7 trillion) from October to July, while DIIS purchased shares worth ₹6.65 trillion.

When it comes to IPOS larger than Rs 1,500 crore, the participation of FIIS and DIIS remains broadly even.