September's record IPO month, read closely

September was the busiest month of the year for main-board IPOs: 34 companies raised ₹39,380 Cr, against a market in which the Nifty was down about 14% for the year. Part of the rush was a deadline: one-time extensions to SEBI approvals ran out on 30 September.

Bigger, pricier, and paying less on day one

• One issue dominated. The NSE's ₹22,563 Cr offer was 57% of the month's total; the other 33 averaged about ₹507 Cr.
• Fresh capital was only ₹10,398 Cr. About three-quarters of the money went to selling shareholders.
• Valuations rose. The median P/E at the issue price climbed to 42.5x, from 33.7x in August, with a handful priced above 100x earnings.
• Listing gains shrank. The median listing premium fell to 5.9%, from 21.3% in August; several recent listings trade below their offer price.

The lesson for early money

When IPOs are priced at 40x earnings and list flat, the return in a company's life has been earned before the listing, by whoever bought in at a sensible multiple while the company was still private. An IPO investor at 42x is relying on the market to pay even more. A pre-IPO investor who entered well below listed peers has a margin of safety built in.

That is why each room on the desk shows the round's trailing and forward P/E against the listed peer set, and why the desk looks for companies before they are on any banker's calendar. The question is not whether a company will list, but at what price you were in when it did.