Mandate creation through UPI dips in sync with muted IPO show in September

Mandate creation through Unified Payments Interface (UPI) for initial public offerings (IPO) dipped further in September amid moderation in primary market activity.

About 3.03 million mandates got created through UPI, down 48.3 per cent compared to last month, according to data released by the National Payments Corporation of India (NPCI), the umbrella entity for retail payments in India.

Last month, only five companies launched their maiden offerings, cumulatively mopping up Rs 6,887 crore.

The preceding month saw 5.86 million mandates being created, down 24 per cent month-on-month (MoM) despite August being the best-ever month in terms of mobilisation in nearly four years, with eight IPOs cumulatively raising Rs 17,841 crore, the most since November 2017.

In July, a record 7.66 million mandate creation requests were made through UPI on the back of blockbuster IPO of food delivery firm Zomato. The IPOs of GR Infraprojects, Clean Science, and Tatva Chintan also saw huge success.

Mandate creation is when a customer blocks an amount in the bank account for an IPO application.

When it comes to mandate execution — transactions where an investor gets allotment of shares, in September, 395,400 or 13 per cent of all the mandates created through UPI got executed. In August, more than 1.32 million mandates, or over 22 per cent of the mandates created got executed. In July, only 532,943 mandates, less than 7 per cent of the 7.66 million mandates created got executed.

Country’s largest lender State Bank of India (SBI) received the maximum mandate creation requests of 792,367 in August, followed by HDFC Bank with 463,521, ICICI Bank with 338,109 requests, and Bank of Baroda with 288,865 requests. Also, these top four banks in terms of mandate creation requests saw 267,793 mandates executed, which constituted 67.72 per cent of the total mandates executed in September.

When it comes to the rate of decline of UPI IPO mandates at banks, there has been considerable improvement in the past few months, especially after NPCI started publishing the monthly data on its website. In September, SBI saw an approval rate of 88 per cent. Other public sector banks like Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank, and Central Bank reported approval rates of 87.82 per cent, 93.14 per cent, 92.52 per cent, 91.80 per cent, 92.61 per cent, respectively. This is almost at par, if not better when compared to the private sector banks.

The investor frenzy, especially of retail investors, which was seen in July due to the listing of Zomato was missing in August as well as in September. Among the five companies that debuted on the exchanges, Paras Defence and Space Technologies Limited was the most successful IPO and registered the highest ever oversubscription and a record listing day gain. In August, eight companies debuted on the bourses, and in July six companies mopped up Rs 14,629 crore, with online food-delivery unicorn Zomato raising Rs 9,375 crore.

The pipeline for the rest of the year also looks strong. Go Airlines and Vijaya Diagnostic are expected to launch their offerings in the near term, while Paytm, Policy Bazaar, and Nykaa could tap the market during the latter part of the year. The government is also supposed to come with the IPO of the largest insurer in the country — Life Insurance Corporation.