The IPO market is changing. The SEBI study shows it clearly.
In April 2022 two things happened: RBI capped NBFC funding for HNIs at ₹1 crore, and SEBI moved from pro-rata to lottery for HNI allocations. Big-ticket HNI applicants per IPO dropped from 626 to 20. Oversubscription in the HNI category fell from 38x to 17x. Exit rates within one week of allotment dropped from 70% to 25%.
HNIs are buying less but holding longer. The market seems to be working the way it’s supposed to.
The old game was leverage. HNI applicants borrowed from NBFCs to fund applications, because under pro-rata, allotment scaled with size. Put in ₹100 crore of borrowed money, get a meaningful allotment, sell on listing day, repay the loan, keep the spread. The interest was a few days at a high rate; the listing gain covered it when the flip worked. RBI’s ₹1 crore cap broke the funding leg of that trade in one stroke.
SEBI’s lottery change broke the other leg. Once size stopped helping, borrowing to apply big made no sense. That is how you get from 626 big-ticket applicants per IPO to 20.
Leveraged flippers had to sell within days to repay the loan, which is why 70% used to exit in the first week. At 25%, what remains is real money with a longer horizon. Less froth in the headline, better price discovery underneath.
The reforms did not reduce HNI interest in IPOs. They removed the borrowed interest. What remains is closer to actual demand.