The follow-on public offering (FPO) of Tata Steel failed to reach the half-way subscription mark on Thursday, the penultimate day of the issue. The issue got subscribed 48%, receiving bids for 23 million shares against 48.67 million on offer, at the end of the second day.
The portion reserved for qualified institutional buyers (QIB) saw about 67% subscription.
The non-institutional investor or the HNI category witnessed subscription to the extent of 80%. Meanwhile, the retail portion was subscribed around 20%.
Merchant bankers are expecting majority of investors to invest on friday, the last day of the offering.
?Normally, investors come in on the last day as there is no incentive to invest earlier. Only people who have to demonstrate the issue (read institutions which have an interest in the success of the issue) invest in the initial days,? said S Vishvanathan, managing director and chief executive officer, of SBI Capital Markets. With 100% upfront money requirements for QIBs, most institutions usually prefer investing on the last day.
“The issue happened at short notice and brokers were not given enough time to market the issue,? Ajay Seth, head of primary markets at Enam Securities.
?So far the response has been decent. Typically, the last day subscription is five times more than that of the previous day?s,? he added.
“The response for follow-on share sales is usually lukewarm. There is not much euphoria to invest in the Tata Steel FPO as there is only 4% difference in the issue price and the current market price. And given the current volatility, it is uncertain that the gains will be sustained for the next two weeks,? Kedar Despande, head retail broking, Edelweiss
On Tuesday, the company had raised Rs 508 crore from 33 anchor investors by allocating 8.3 million shares at the top end of the price band of Rs 594-610 per share. The anchor book witnessed eight times more response than the shares on offer.
Tata Steel aims to raise anywhere between Rs 3,386-3,477 crore through the FPO, which will lead to an equity dilution of 6.31%.
The steel maker will utilise the issue proceeds on debt repayment and expansion of its Jamshedpur unit.
The Tata Steel offering is being managed by Kotak Mahindra, Citigroup Global, Deutsche Bank, HSBC, RBS, SBI Capital and Standard Chartered. New shares of Tata Steel are expected to list on February 4.