With foreign institutions putting in big-ticket applications, the over Rs 7,028-7,442 crore follow-on public offering (FPO) of the state-run Power Grid Corporation of India (PGCIL) has been subscribed nearly 10 times. Applications worth Rs 70,000 crore were received till Thursday evening.
Despite borrowing costs soaring in a tight money market, high net worth individuals (HNIs) have applied for the FPO in large numbers resulting in the quota reserved for them being subscribed 1.63 times. The issue saw applications for 8.2 billion shares against the 841 million shares on offer.
The portion reserved for qualified institutional buyers(QIBs), comprising foreign investors, mutual funds and insurance companies, was subscribed 18.52 times, receiving 4.5 billion bids, of which about 60% came from foreign investors. The quota for small investors, who have time till Friday to bid, received 72% subscription. Retail investors can bid for shares worth up to Rs 1 lakh.
Among the bigger foreign institutional investors (FIIs), Fidelity, Templeton and GIC have put in bids.
?All large global marquee names have participated in this issue,? said an investment banker, adding that around 10-15 large-sized applications of over $500 million each had been submitted.
According to Sandeep Adukia, president of Religare Finance, the response from HNIs has been fairly good and it would not be right to compare the PGCIL issue with that of Coal India.
?Interest rates have been rising for some time now, but HNIs have been borrowing at rates as high as 18%,? Adukia observed. ?PowerGrid is a defensive counter and, therefore, the price is not expected to fluctuate wildly. So investors could gain even after paying a high interest rate,? explained Prasanth Prabhakaran, president of retail broking at IIFL.
HNIs typically borrow between Rs 5 lakh and Rs 5 crore and the borrowing cost varies depending on the amount borrowed.
With Commercial Paper (CP) rates up sharply in the past few weeks, NBFC have been borrowing at anywhere between 13-14%. For an investor, an interest rate of 14-15%, for about ten days, would translate into a cost of around Rs 5-6 per share.
Among them, the top Non Banking Finance Companies (NBFCs) are hoping to lend around Rs 7,500 crore?Rs 8,500 crore to HNIs wanting to subscribe to the PGCIL issue, because the FPO is expected to be oversubscribed by 7-8 times. For the Coal India issue, NBFCs are understood to have collectively lent around Rs 25,000 crore.
The last day for HNI applications is Friday. Meanwhile, the Power Grid stock closed 0.74% lower on Thursday at Rs 101.25. A total of 7.8 million shares were traded in the counter, about 60% lower compared to Wednesday.