Indian IPO market big hit with endowment funds

The IPO market has been abuzz with blockbuster performance of IPOs like D-Mart, which was oversubscribed 106 times and gained 102 per cent on listing. The primary market offerings have turned out to be big hits not only among domestic investors, but with foreign investors as well. In fact, the endowment funds of top American universities are betting big on Indian stocks, largely through the primary market route.

Endowment funds of universities are built on money received from donors or alumni and the earnings from investing these funds are used to run university. These funds have long term investment horizon. They have been forced to try their luck in emerging market equities having faced a dearth of profitable investment opportunities in the developed markets. The AUM of global university funds in Indian equities shot up by 74 per cent YoY to Rs 25.9 billion in January 2017. The university endowment funds were anchor investors in several recent IPOs such as Alkem Lab., BSE, Endurance Technologies, HCG, Inter-globe, PNB Housing Finance and Quess Corp. Their cumulative investments accounted for 1-10 per cent of the total anchor book of these IPOs.