The Indian investors? trust in government of India (GoI) was tested once again when the initial public offering (IPO) of Rural Electrification Corporation (REC) closed for subscription on Friday.
Amidst uncertain primary and secondary markets, the state-run REC received very good response from investors leading the IPO to get subscribed by over 28 times on the last day of its issue on Friday. Though the issue may have received encouraging response from bigger investors, the category reserved for the retail and high networth investors (HNIs) was undersubscribed.
The issue received bids for 429.96 crore shares as against 15.62 crore shares on offer. The portion reserved for qualified institutional buyers (QIBs) got subscribed by over 6.5 times while that for non institutional investors (NIIs) was under subscribed by 0.76 times. Also, the retail segment was under subscribed by 0.78 times, while that reserved for the employees was subscribed by 0.71 times.
The issue offered shares in the price band of Rs 90-105, got fully subscribed within 27 minutes of the opening on February 19. The issue constitutes approximately 18.18% of the fully diluted post-issue capital of REC.
The company proposes to utilise the net proceeds from the fresh issue to augment its capital base to improve its borrowing capacity in order to support the future growth in its assets.
The IPO came as the government mandated REC and Power Finance Corporation (PFC) to mobilise funds to ensure that viable projects do not suffer for want of funds as the government has drawn up plans to bridge the demand-supply yawning gap in power sector.