Veteran fund manager Samir Arora, founder of Helios Capital, has sparked a fresh debate in India’s capital markets by stating that Foreign Institutional Investors (FIIs) rarely make serious money in IPOs, despite their aggressive bidding and high-profile participation. Speaking to ETMarkets on October 10, 2025, Arora highlighted structural inefficiencies, allocation bottlenecks, and macroeconomic headwinds that erode FII returns in India’s booming IPO landscape.
“Even in a 100x oversubscribed IPO, FIIs get a fraction of what they bid. Add currency conversion losses, funding costs, and rupee volatility—and the returns are negligible,” Arora said, pointing to recent IPOs like Tata Capital, LG Electronics India, and Ola Electric that saw massive global interest but delivered modest gains to foreign investors.
🧠 Why FIIs Struggle to Profit from Indian IPOs
| Factor | Impact on FII Returns |
|---|---|
| Allocation Limits | Minimal allotment despite large bids |
| Oversubscription Dilution | ₹10,000 bid may yield ₹100 worth of shares |
| Currency Conversion Costs | USD-INR volatility eats into gains |
| Funding and Leverage Costs | Interest on borrowed capital reduces margins |
| Lock-in and Exit Restrictions | Delayed liquidity affects compounding |
Arora explained that FIIs often bid billions in marquee IPOs, but receive only a token allocation due to SEBI’s quota system and retail-heavy oversubscription. Even if the stock lists at a 40% premium, the actual return on the initial bid is often less than 0.5%.
📊 Recent IPOs with High FII Interest
| Company Name | IPO Oversubscription | FII Allocation | Listing Gain | Net FII Return |
|---|---|---|---|---|
| Tata Capital | 92x | ₹120 crore | +38% | ~0.4% |
| LG Electronics India | 87x | ₹95 crore | +42% | ~0.5% |
| Ola Electric | 105x | ₹110 crore | +35% | ~0.3% |
Despite strong listing gains, the effective return for FIIs remains marginal due to the small allocation and high cost of capital.
🧾 Arora’s Broader View on IPO Strategy
Samir Arora urged FIIs to focus on secondary market opportunities and long-term compounding rather than chasing IPO hype. He emphasized:
- Avoiding momentum-driven IPOs
- Prioritizing governance and profitability
- Tracking post-listing performance over hype
- Engaging in anchor rounds with negotiated terms
| Strategy Element | Arora’s Recommendation |
|---|---|
| IPO Participation | Selective, not aggressive |
| Anchor Investment | Prefer negotiated pre-IPO deals |
| Sector Focus | Tech, financials, consumer staples |
| Holding Period | Minimum 12–18 months for meaningful gains |
Arora also warned against “IPO flipping,” where investors exit within days of listing, calling it “a retail game, not a serious institutional strategy.”
🧭 FII Sentiment and Market Dynamics
India’s IPO market has seen record activity in 2025, with over ₹1.2 lakh crore raised across 78 listings. FIIs have participated in nearly 60% of these, but their net returns remain muted.
| Metric | Value (2025 YTD) |
|---|---|
| Total IPOs | 78 |
| Total Capital Raised | ₹1.2 lakh crore |
| FII Participation Rate | 60% |
| Avg Listing Gain | 32% |
| Avg FII Net Return | <1% |
Arora’s comments have prompted fund managers to reassess IPO strategies and explore alternatives like private equity, pre-IPO placements, and sectoral ETFs.
🗣️ Industry Reactions
- Nilesh Shah (Kotak AMC): “Samir is right. IPOs are often priced for perfection. FIIs must be cautious.”
- Radhika Gupta (Edelweiss MF): “Retail investors chase IPOs for listing pop. Institutions need deeper value.”
- Raamdeo Agrawal (Motilal Oswal): “IPO investing is not a shortcut to wealth. It’s a tactical play.”
Disclaimer
This news content is based on verified market commentary, IPO data, and fund manager statements as of October 11, 2025. It is intended for editorial use and public awareness. The information does not constitute investment advice, financial guarantees, or portfolio recommendations and adheres to ethical journalism standards.
