Tata Capital and LG IPOs Set to Strain Secondary Markets Amid Record Fundraising Week
Domestic institutional investors are set for a record test this week as India’s initial public offering (IPO) calendar ramps up, with fundraises expected to exceed ₹30,000 crore—the largest in a single week this year. Nearly 90% of this total will come from just two mega issues: Tata Capital’s ₹15,511 crore IPO and LG Electronics India’s ₹11,607 crore offer-for-sale (OFS). The scale of these offerings is likely to put pressure on the secondary markets, where buying support could temporarily weaken.
Although equities closed higher for a second consecutive session on Friday, market experts caution that the rally may lose momentum. “Secondary markets will see some sluggishness due to a liquidity crunch, especially in midcaps and smallcaps,” said Pankaj Tibrewal, founder of Ikigai Investments.
Liquidity Crunch Explained
The numbers highlight the challenge: the institutional portion of Tata Capital and LG—assuming a 50% allocation to qualified institutional buyers (QIBs)—works out to around ₹13,559 crore. By comparison, mutual funds typically have only about ₹8,000 crore available per week, based on net monthly inflows of ₹30,000–40,000 crore this year and ₹33,400 crore in August.
Combined, the two IPOs will absorb a significant portion of the average weekly firepower of around ₹33,000 crore available with all domestic institutions, including mutual funds, banks, insurers, and pension funds.
Foreign investors add another layer, but their capacity is limited. Despite selling nearly ₹2 lakh crore in secondary markets this year, they have only invested ₹40,000 crore in IPOs, far short of what the two mega issues demand.
Other IPOs on the Horizon
The week starting October 6 will see a flurry of other IPOs, including:
Rubicon Research – ₹1,377.5 crore, opening October 9
Canara Robeco AMC and Canara HSBC Life Insurance – media reports suggest sizes of ₹3,000–5,000 crore each
WeWork India – ₹3,000 crore, open until October 7, currently seeing modest subscription levels
Additionally, a cluster of SME IPOs is lined up, further adding to the capital absorption in primary markets.
Impact on Secondary Markets
Large IPOs often crowd out secondary markets by drawing both institutional and retail attention. “IPOs of large companies do create enthusiasm. Many recent issues have also left capital for retail investors to absorb,” said Umesh Agrawal of 360 One WAM. Viral Shah of Nuvama Wealth added, “When there’s an IPO rush, the secondary market does feel pressure.”
Still, analysts do not expect a sharp decline in equities. “Liquidity rotation is happening in a measured way,” noted Agrawal. Sector-specific trends may soften the impact: “Corrections in banks and IT have created pockets of opportunity, while festive demand and GST cuts support consumer electronics,” Shah observed.
Near-Term Outlook
However, the diversion of cash toward IPOs is likely to keep secondary market moves subdued in the near term. As Tibrewal summed it up: “Money supply influences the secondary market. If all new liquidity flows into IPOs, the listed market temporarily loses steam.”
Investors should therefore brace for a week where primary markets dominate capital flows, while secondary market activity remains muted, at least until these mega IPOs are absorbed.
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