Samir Arora says FIIs are not making serious money from IPOs. This is why

Even as foreign institutional investors (FIIs) flood Indian IPOs with billion-dollar bids, they don’t really make much money, says Samir Arora, founder and fund manager at Helios Capital Management. In a post on

“It is pertinent to point out that when the FII quota is oversubscribed by a hundred times in an IPO, FII investors are not really making serious money,” Arora said. “This is because for a bid of $100 he gets shares worth $1. If that stock rises 40%, he earns $0.4 for a bid of $100.”

Arora explained that the economy becomes worse when currency conversions are taken into account. “If FII makes a bid of USD 100, it will have to convert USD 100 to INR and then convert USD 99 of INR back to US$, which will cost around USD 0.2,” he said. A further weakening of the rupee, he warned, could wipe out any notional gain on the allotted shares.

For context, the Indian rupee has been hovering near its record lows of around 88.6850 per US dollar for most of this week. Meanwhile, the dollar index rose more than 1.5% this week, its strongest performance since November 2024.

Borrowed money, shrinking margins

Adding to the pressure, most foreign investors do not have money on hand for such bids. “Also, few financial institutions have $100 in cash lying around, so they typically borrow that money for four to five days and have to pay a financing charge on it (or give up the interest for that period),” Arora noted.

He added that while hedge fund managers closely monitor these expenses, many traditional long-only fund managers “don’t even know all the costs they incur when they ask their back office to make these bids so that life goes on.”

Arora’s comments come amid a wave of major listings in India’s primary market. LG Electronics India’s IPO was subscribed 54.02 times this week, while Tata Capital’s public offering attracted bids worth $1.24 billion, underscoring strong global interest in Indian equities despite tight valuations and a volatile currency.

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