Bajaj Housing Finance IPO’s record-breaking subscription presents a more concerning scenario compared to the ₹12-crore IPO of Resourceful Automobile, an SME company, which attracted bids worth ₹4,800 crore.
The ₹6,560-crore IPO of Bajaj Housing Finance set a new record, with subscriptions exceeding ₹3 lakh crore. The IPO was oversubscribed 63.61 times, receiving bids for over 4,628 crore equity shares, against the 72.75 crore shares available on the BSE and NSE. At the upper end of the price band, the applications for Bajaj Housing Finance shares were valued at nearly ₹3.24 lakh crore.
Deepak Shenoy pointed out that such a massive volume of bids would result in the locking of approximately ₹3 lakh crore in bank accounts, which would not be accessible to investors in the event of a significant market downturn.
“This is way more scary than a little 2 showroom SME getting bids of 4000 cr. Because when you have 300,000 cr. locked in bank accounts, this much money is not available for people to buy if the market tanks in the next two days. Just two days, of course. Number way scarier tho,” Shenoy wrote in a post on X.
He emphasized that the systemic risk associated with the Bajaj Housing Finance IPO is significantly higher, while the outrage over the large oversubscription for the Resourceful Automobile IPO is misplaced.
“What i really wanted to say is, the outrage over a tiny ipo getting oversubed when you have asba from money in people’s own albank acs is stupid. If you wanna outrage, the systemic risk is higher in the bajaj ipo. But who cares yaar. Story mein dum chahiye,” he added.
Both IPOs, namely Bajaj Housing Finance IPO and the Resourceful Automobile IPO, use the ASBA (Application Supported by Blocked Amount) mechanism, wherein investors’ funds are blocked in their bank accounts but not debited until the shares are allotted. This results in the funds being temporarily unavailable for other market activities.
In the case of large IPOs like Bajaj Housing Finance, this can cause a significant liquidity squeeze, especially if market volatility increases during the IPO period.
For Bajaj Housing Finance IPO, ₹3 lakh crore worth funds are essentially locked in bank accounts for a few days. Shenoy argues that this creates a “systemic risk” as the sheer size of this IPO locks up such a large amount of capital that, if the market falls, there won’t be enough liquidity available for buying activity, potentially worsening the impact of a crash.
This kind of risk isn’t seen in smaller IPOs like that of Resourceful Automobile.
Resourceful Automobile IPO, while making headlines for being oversubscribed, was much smaller in size - ₹12 crore IPO attracting ₹4,800 crore in bids. The funds locked in this case are relatively small compared to the Bajaj Housing Finance IPO. Despite this, there was outrage all over due to the extreme oversubscription.
Shenoy dismisses this outrage as “stupid” because, even though Resourceful Automobile’s IPO attracted a significant number of bids relative to its size, the overall impact on the broader market was minimal. The funds locked in this case did not pose a systemic risk since they were small in comparison to larger IPOs like Bajaj Housing Finance.
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