First IPO under new Sebi norms to hit market today

Mumbai, Nov 16 | Updated: Nov 17 2005, 08:15am hrs
The phenomenon of an initial public offer (IPO) getting oversubscribed within minutes of the issue opening for subscription may soon become a thing of the past.

The IPO of AIA Engineering Ltd, which hits the primary market on Thursday (today), will be the first public issue under the new allotment norms for qualified institutional bidders (QIBs) that were recently prescribed by the Securities and Exchange Board of India (Sebi) on September 19.

Experts say that there are chances that genuine QIBs might enter the fray only on the last day of the issue as the currency factor will also play an important role.

SP Tulsian, investment consultant, said, "When it comes to foreign investors, the currency factor also plays an important role. The public issue is generally open for 4-5 days and the currency exchange rate may change in the said period.

Also, the 10% up front margin can become a substantial amount."

According to the new guidelines effective from September 19, QIBs will have to pay 10% upfront margin at the time of submitting their bids. Also, allotment to them will be on a proportionate basis.

Further, 5% of the total QIB portion of 50% will be reserved for mutual funds, who will also be eligible for bidding in the balance 45%. It is to be noted that all the offer documents filed on or after September 19 will have to adhere to new allotment norms for QIBs.