It’s often said the retail interest level in an initial public offering (IPO) is a direct factor of the institutional appetite. Higher the demand from the savvy and well-informed institutional investor, the more the retail investor’s participation. The 2011 calendar year, however, proved to be otherwise: smaller investors burnt their fingers, while their larger counterparts sat on the sidelines.

According to a recent study by SMC Global Securities, 26 of the 39 public issues that hit the market this year did not even see the portion reserved for qualified institutional buyers (QIBs) fully subscribed. In other words, 67 per cent of the issuances reflected a clear trend of lack of conviction and confidence among institutional investors.

Interestingly, in a majority IPOs wherein QIBs stayed away, the offers were literally bailed out by high net worth individuals (HNIs) and retail investors. “HNIs and retail investors had shown unusually high levels of risk appetite as far as IPO investing is concerned during 2011," stated the research note. This spurt in risk appetite, however, came at a time when most issues failed to generate positive returns.

“Of the 39 public issues, only nine are trading above their issue prices. And, 30 are trading below their issue prices," stated the note. This huge wealth erosion might be attributable to tendencies of high pricing and lower quality of the issues, it added.

The year, which also saw the Indian benchmark indices featuring among the worst performers, saw a lot of small issues of less than Rs 100 crore in size. Seventeen public issues, or 64 per cent, fell in this category, a marked difference from some of the earlier years. On the other hand, there were only three issues of more than Rs 1,000 crore in size. Last year, 14 issues, with a size exceeding Rs 1,000 crore, hit the market.