Domestic mutual funds have emerged as key players in setting valuations for initial public offers (IPOs) above Rs 3,500 crore. Their growing influence is bringing much-needed sanity to the market, as they push back on high valuations and demand fair prices.
Top mutual funds, including HDFC MF, SBI MF, Nippon MF, ICICI Prudential MF, and Axis MF, have become essential participants in large IPOs, with a significant portion of the issue reserved for them. This has made them price setters, allowing them to negotiate better terms and ensure that companies leave some gains on the table post-IPO.
The trend is evident in recent large issues of new-age loss-making companies, where mutual funds have successfully resisted high valuations. With a cash pile of over Rs 1.2 lakh crore and 40 straight months of inflows, mutual funds are wielding their power to drive better returns for their investors.
Retail investors, who make up 26-46% of the issue, are also benefiting from this shift, as mutual funds drive a hard bargain on their behalf. Merchant bankers, who once dominated the IPO process, are now finding it challenging to sell to mutual funds, who are chasing returns fueled by retail money.
The days of inflated valuations and easy fundraising may be behind us, as mutual funds bring a dose of reality to the market. With their growing clout, they are ensuring that companies are valued fairly, and investors get a better deal.
(With inputs from NDTV Profit)
