Retail Investors Boost IPO Odds via Parent Shares

Retail investors in India are using a smart strategy to increase their chances of getting shares in popular initial public offerings (IPOs).

Normally, applying for IPOs is very competitive, with many more applicants than available shares.

To improve their odds, investors are buying shares of the parent companies of firms that are going public.

Some IPOs reserve a small portion of shares for existing shareholders of the parent company.

This shareholder quota is much smaller than the regular retail category, so there are fewer applicants and better chances of getting shares.

However, this strategy only works well if the parent company's stock is reasonably priced and there hasn't been a big price increase before the IPO.

Recent examples include Bharat Coking Coal, ICICI Prudential AMC, and NTPC Green Energy, where investors saw good results using this approach.

But it doesn't always work, especially if the parent company's stock is already expensive.