Interestingly, just last week, capital market regulator Securities and Exchange Board of India (Sebi) chairman UK Sinha had lashed out at the investment banking community, saying its credibility had taken a hit as retail investors had turned wary of public offers. The regulator said the bankers were not acting in the interests of retail investors, pointing out that the bulk of IPOs were trading below issue price. Sinha also said the regulator might put in place a formula for pricing issues unless the trend reversed. The regulator has initiated a discussion on whether promoters should compensate investors if the price of an IPO falls more than 20% of the issue price within three months of listing or even the stock underperforms benchmark indices the BSE 500 or S&P CNX 500 by 20%.
The general perception was that the issue was already over-priced, which is why the stock listed below the issue price, said a merchant banker, who didnt want to be identified. The issue was also weighed down by a cautious outlook on mobile tower operators, he said. While institutional investors did buy into the issue, there was no unfulfilled appetite, according to market-watchers.
Akhil Gupta, managing director and vice chairman, Bharti Infratel said it was too early to comment on listing price.
Bharti Infratel had allocated 2.8 crore shares to 18 anchor investors at R230 per share raising an amount of R651 crore. The anchor investors included Alliance Bernstein, Battery March, Clough Capital, Columbia Wagner, Morgan Stanley, Route One Capital and Sundaram MF, among others.
The dismal debut comes in the wake of decent listing gains by two other firms earlier this week. CARE Ratings, the second largest rating agency in India, had listed at a 23% premium over its issue price of R750, to close at R922.55 on the National Stock Exchange on Wednesday. Shares of PC Jeweller, on the other hand, gained 10.2% on its first trading day on Thursday.
The Bharti Infratel initial public offering, which closed for subscription on December 14, had received a lukewarm response from investors, with the overall issue getting subscribed just 1.3 times. The issue, the largest since Coal India (CIL) hit the markets more than two years ago, sailed through thanks to participation from institutional investors. The QIB portion had received a healthy subscription of 2.84 times but the issue did not elicit a robust response from non-institutional (0.29 times) and retail investors (1.3 times). According to news reports on Friday, the Delhi High Court would hear on January 30 a petition seeking inspection of records of market regulator Sebi on permitting Infratel to issue public offerings for its cell phone towers installations, allegedly without considering compliance with radiation norms.
The Bharti Infratel issue was assigned a 4/5 grading by ratings agency Crisil, indicating that the fundamentals of the issue are above average related to other listed equity securities in India. However, the stock was perceived to be expensive compared with global peers, given weaker business fundamentals and oversupply in domestic tower capacity.
We believe Bharti Infratels valuations are expensive. We expect mid-single digit Ebitda CAGR over FY12-14, and we believe that BIL has poor economics compared with global tower peers... Ambit Capitals analysts had written. The joint book running lead managers to the issue are DSP Merrill Lynch, JP Morgan India, Standard Chartered Securities, UBS Securities India. The book running lead managers to the issue are Barclays Securities India, Deutsche Equities India, Enam Securities, HSBC Securities and Capital Markets (India) and Kotak Mahindra Capital. The co-book running lead managers to the issue are BNP Paribas, DBS Bank, HDFC Bank and ICICI Securities.
* Bharti Infratel issue subscribed 1.3 times overall
* QIB portion subscribed 2.84 times, non-institutional investors portion 0.29 times, retail portion 1.3 times
* The company raised R4,118.01 crore, of which about R1,388 crore was from retail investors and R2,078 crore from qualified institutional buyers and HNIs
* The price band of the IPO was Rs.210-240
* Total discount to retail investors was Rs.10