IPOs have high valuations and limited allocations, said Samir Arora, Founder of Helios Capital

Roshni Shekhar | 30 August, 2023

India’s Initial Public Offer (IPO) market has failed to lure in global investors after a series of high-profile failures. Global Investors are staying away from the Indian IPO market because it is “too hot right now,” said Samir Arora, Founder and Fund Manager at Helios Capital. 

Arora’s stance came when the Indian IPO market gained a little momentum after a slow start in 2023. There are 20 new companies seeking a Rs 15,000 crore fundraise in the primary market, as of August 2023, according to data compiled by Bloomberg. Although, that’s nowhere near Rs 58,346 crore raised in 2022.

“Good companies at reasonable valuations get so heavily subscribed that no one gets a good allocation. Bad companies no one wants” Arora said while adding that Indian IPOs are a waste of time and effort except for retail investors who are participating in them like buying a lottery ticket. 

Several recent IPOs have raised alarm bells, especially the high-profile IPOs since 2021, including Paytm, Delhivery, FSN E-Commerce Ventures (Nykaa), Policybazaar, and Zomato, which have all struggled to live up to their initial price levels post-listing.

“The valuation levels of Indian IPOs are generally too high due to keen interest of retail investors,” Arora said, adding that there are opportunities in the market but the risks outweigh the rewards. 

Arora’s concerns about valuation are rooted in the robust interest from retail investors and the presence of Private Equity (PE) funds as sellers during IPOs. This dynamic tends to keep IPO prices at levels higher than they might otherwise be.

The veteran investor believes that investors are unlikely to make a return on the IPO, which will in turn make the pricing more reasonable in the future.