Bajaj Housing's IPO saw 16% of bids rejected in a UPI mandate backlog

Bajaj Housing Finance, India's second-largest home financier by assets, ran one of the largest IPOs in recent history over September 9-11, 2024 — and the payment rails buckled. Close to 9 million people applied, and 16% of bids were rejected, the highest rejection rate since the Life Insurance Corporation IPO in 2022, when 2 million bids were axed. Brokerages, investors and analysts told The Ken most rejected bids came from UPI users, the route a majority of Indian retail investors prefer since the regulator introduced it for IPO payments in November 2018.

The mechanics were mundane: UPI-app mandate notifications — the approvals that let an applicant's bid be paid — got stuck in a backlog. Applicant Aaraynsh Singh, a 27-year-old entrepreneur who had set aside Rs 5-10 lakh and recruited friends and family, stared at his screen into the final hour on September 11 and the notification never popped. Investors blamed brokerages, the stock exchanges and NPCI, the UPI operator; by The Ken's reporting, the responsibility actually lay with the sponsor banks appointed by the financier, which retail demand had swamped.

UPI is the payment route a majority of Indian retail investors prefer, so every mandate bottleneck scales directly with applicant demand.

Demand reached close to 9 million applicants in a three-day window, and the sponsor banks responsible for pushing mandates through were swamped.

Blame initially fell on NPCI, brokerages and exchanges, but the stalled mandate notifications queued at the sponsor banks the issuer had appointed.

In retail offerings the payments plumbing is the issuer's infrastructure: whoever the sponsor banks blame, the issuer appointed them and the rejections carry its name.

The stock doubled from its issue price when it listed on September 16, 2024 — sharpening the sting for applicants whose bids never went through. The 16% rejection rate stood as the worst since the 2022 LIC IPO, a benchmark for how a hot offering can break its own payment plumbing.