A record 7.66 million initial public offering (IPO) mandates were created through the unified payments interface (UPI) in July amid strong retail investor interest in the primary market, according to data released by the National Payments Corporation of India (NPCI), the umbrella entity for retail payments in India.
The figure for July was almost 4 times higher than that of June, when 1.94 million mandate creation requests were made through UPI.
July proved a blockbuster month for IPOs with the likes of Zomato tapping the capital market. The company’s IPO garnered 3.2 million retail applications, the bulk of which were made through UPI. There were also IPOs of GR Infraprojects, Clean Science, and Tatva Chintan which saw a large number of applications.
Of the 7.66 million mandates created in July, only 532,943 or 6.94 per cent were executed.
Mandate creation is when a customer blocks an amount in the bank account for an IPO application. And, mandate execution is when the customer has been allotted shares for which the funds are debited.
The country’s largest lender State Bank of India (SBI) received the maximum mandate creation requests of 1.9 million, followed by HDFC Bank with 1.3 million, ICICI Bank with 930,423, Bank of Baroda with 636,907, and Axis Bank with 503,810.
In June, five companies launched IPOs, cumulatively raising Rs 9,923 crore and in July six companies tapped the market via IPOs, raising Rs 14,629 crore.
At present, retail applicants who have trading accounts with bank-backed brokerages can apply through their 3-in-1 accounts. Such accounts seamlessly link the bank account, demat account, and trading account. Meanwhile, those who have accounts with a standalone broker have to apply through the UPI route. Typically, a little over a third of the applications in any IPO come through the UPI route, while the majority still comes from 3-in-1 accounts. Market players expect the share of UPI-based applications to grow as discount brokers are gaining market share.
Besides, there has been a substantial improvement in the rate of decline of UPI IPO mandates at banks over the last month.
SBI saw an approval rate of 87.98 per cent. Other PSBs like Bank of Baroda, Bank of India, Union Bank of India, Punjab National Bank, Canara Bank, and Central Bank reported approval rates of 86.91 per cent, 90.71 per cent, 85.72 per cent, 99.71 per cent, 88.14 per cent, and 91.48 per cent, respectively.
Market observers say there is a strong possibility of UPI IPO mandates exceeding July’s tally this month.