Given that getting an IPO allotment for a retail investor is as good as flipping a coin, Edelweiss Recently Listed IPO Fund looks like a good bet on IPOs. The fund has managed to beat benchmarks consistently. Tell us how you go about selecting IPOs?
The fund was established to provide retail investors with systematic exposure to high-growth IPO companies at an early stage, prior to their inclusion in standard benchmark indices. Our core investment philosophy revolves around acquiring growth stocks at reasonable valuations. We primarily target companies that are secular growth leaders, challengers, or dominant players gaining market share, which constitute approximately 80% to 85% of the portfolio. Additionally, we selectively invest in cyclical IPOs also benefiting from favorable industry tailwinds.
For retail investors the standard metric is GMP. For an average Do you even consider it before applying for an IPO? And why so?
Retail investors frequently resort to alternative metrics such as GMP due to limited IPO access, often resulting in short holding periods and low conviction investments, as noted in SEBI studies. However, GMP lacks transparency and depth, rendering it an unreliable indicator for demand-supply dynamics. Our investment decisions are grounded in fundamental analysis, corporate governance standards, and valuation assessments, enabling a more informed and sustainable investment approach. Our research precedes public subscription and includes participation in anchor investor allocations.
On an average, how long is your holding period after the stock gets listed? Which is the oldest holding among all your portfolio stocks?
As a thematic fund, we allocate approximately 80% of assets to the most recent 100 listed IPOs while maintaining up to 20% in older IPOs that continue to contribute positive alpha. These selections are predicated on their sustained relevance and strong performance within our portfolio framework.Can you share examples of recent IPOs that turned into successful holdings for the fund, and what you saw in them early?
We have participated early in several promising IPOs, across diverse sectors such as automobiles, consumer internet, retail, and life sciences. These were selected for their robust fundamentals, sectoral leadership potential, and capacity to establish market dominance over time. For instance, one of our key investments was in the automobile sector, during a phase when industry sentiment was subdued. Despite subdued investor participation in IPOs at the time, we identified early signs of cyclical recovery and strategically built our position throughout the downturn. Today, this sector represents one of our largest holdings, reflecting the sector’s ongoing revitalization.
Do you look out for listing day gains as well in case the listing day price is well beyond your expectations?
When listing day gains exceed our valuation targets, we may consider reducing exposure. Nevertheless, our investment philosophy prioritizes fundamental analysis over short-term market momentum
Given the high risk associated with IPO investing, what kind of investor profile should consider allocating to this fund?
This fund addresses the primary challenges of IPO investing — selection, subscription, and scalability — especially for retail investors. It offers early access to a diverse range of high-growth opportunities frequently overlooked by traditional mutual funds schemes due to their absence of IPOs in conventional benchmark indices. We recommend investors adopt a minimum investment horizon of three to five years, preferably via systematic investment plans (SIPs).
How do you see the IPO market evolving in India, and what does that mean for the opportunity set available to your fund?
The IPO market is expected to remain robust, with over 61 companies currently approved by Sebi and an additional 45 awaiting clearance. This extensive pipeline broadens the investment universe for high-conviction ideas and supports sectoral diversification. As India advances toward a $10 trillion economy, emerging companies and sectors will increasingly seek capital market access, presenting sustained, multi-year opportunities for our fund, albeit through varying market cycles.
How excited are you about the IPO pipeline in India with companies like NSE, Tata Capital, LG India, Groww and Jio Platforms planning listings in the next 1 year? Will it be a problem of plenty for you or the more the merrier?
The forthcoming IPOs encompass several high-caliber companies across sectors including financial services, consumer electronics, telecommunications, and fintech, enabling broad sectoral diversification and thematic investment plays. Our rigorous selection framework allows us to efficiently navigate the expanded IPO landscape, enhancing our capacity to identify high-quality investment prospects rather than complicating the process.
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