Introduction

IPO or Initial Public Offerings are a popular investment avenue. Through IPOs, you can buy shares of a company for the first time before it's traded publicly. It is the company's way of acquiring funds from the capital market while marking a new path in its growth journey. It is a sign of the company being profitable. When you subscribe to an IPO, you become a part of the IPO subscription data of that particular company. It is a metric that reflects the demand for a company's share among investors. Let's explore what IPO subscription data is, how it's calculated, and the way you can leverage it.

What is IPO subscription data?

The IPO subscription data represents the number of times an IPO has been subscribed against the total shares available. It covers subscriptions among various categories of investors. In basic terms, it tells you if an IPO is oversubscribed or undersubscribed to help you gauge its performance.

Where is IPO subscription data available for investors?

You can access the IPO subscription data in real-time on two prominent stock exchanges in India. You can visit the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) website. On the homepage of these sites, click on the 'Bid Details' section. You will find it under the 'Market Data' menu. Then, select the company you want to check the IPO allotment status of. Brokerage platforms also provide real-time subscription updates throughout the IPO period.

How is an IPO subscription Structured?

IPO subscription data is presented category-wise or day-wise. Here's a breakdown of how that works:

·        Category-wise structure

Under this structure, the IPO subscription rates are presented as per investor categories. They include qualified institutional buyers, non-institutional investors, retail investors, and employees or other reserved categories that the company chooses.

·        Day-wise Structure

In this type of structure, the IPO subscription rates are updated daily throughout the IPO bidding period, typically over 3 to 5 days. This helps you track the progression of demand for IPO in real time. Each day, the subscription numbers are disclosed, giving you insights into how quickly different categories of investors are bidding on the shares.

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You can also view the total subscription without any categorisation to check the undersubscription and oversubscription rates.

How Does IPO Subscription Help Investors?

Understanding and analysing IPO subscription data will help you make informed decisions thanks to the following advantages:

·        Intel on market sentiment

The subscription ratio indicates the demand for public shares of a company. If an IPO is heavily oversubscribed, you can confirm the strong market interest. It suggests that the investors are optimistic about the company's future performance and see long-term value in the stock. It helps you make decisions while you buy a share of the company. It is worth noting that oversubscription does not guarantee that the stock will perform well after post-listing. In some cases, IPO might be overhyped, leading to inflated subscription numbers.

·        Judgment on IPO pricing

A high subscription rate can sometimes suggest that the IPO pricing is attractive. When demand is high, the price band set for the IPO might seem reasonable. On the other hand, if the IPO is undersubscribed, the reason may include the price being too high or concerns about the company's fundamentals. Paying attention to such pricing dynamics helps you make better judgments on the IPO and the company's performance in the market.

·        IPO allotment chances

If you are a retail investor, the oversubscription rate in different investor categories will affect your chances of receiving an allotment. The higher the oversubscription, the smaller your chances of receiving the number of shares you apply for. Hence, tracking the subscription data in real time helps you adjust your expectations. For example, if an IPO is oversubscribed by five times in the retail category, you are likely to receive only 20% of the shares you applied for.

·        Forecast of IPO performance

The IPO subscription data is a good indicator of the company's position in the stock market. You can use this information to predict how well a company's listing may perform post-listing. However, avoid relying only on one parameter, as historically, some highly subscribed IPOs have performed well post-listing, while others have not. It is best to study subscription data alongside other financial indicators to decide on holding your shares after the IPO is listed.

Conclusion

IPO subscription data acts as an essential tool to help you understand the market perception of a company going public. By keeping an eye on this metric, you can gauge the demand, assess pricing, and make informed decisions on how to approach the IPO. Make sure to combine this data with adequate financial insights and company analysis. Also, stay on top of real-time information daily to take note of any sudden changes and make quick adjustments to your IPO subscription.

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