With just one day to go before the follow-on public offering of Rural Electrification Corporation (REC) closes, the issue?s floor price of Rs 203 is at a discount of 4.7% to the current market price.
On Monday, the REC stock lost under 0.5% and closed at Rs 213. On the day when the issue was priced, the government had offered a discount of 7.75%. At the floor price of Rs 203, the issue size would be close to Rs 3,500 crore. The portion of the issue reserved for retail and high net worth investors and employees, of around 50%, has been subscribed to the extent of just 9.37%, according to early evening data on the National Stock Exchange (NSE).
Overall, the FPO has been subscribed by 0.59 times, receiving total bids for over 10 crore equity shares, against the offer size of 17.17 crore shares. The portion reserved for qualified institutional buyers has been subscribed 1.09 times, with bids coming at Rs 215, Rs 210, Rs 205 and Rs 204, respectively.
According to market sources, Life Insurance Corporation of India has submitted bids worth Rs 200 crore at a price of Rs 204, just a rupee above the floor price. When contacted, a senior LIC official declined to comment since the issue is still open for subscription. So far banks and insurance companies are major investors in the REC FPO, with banks submitting bids worth over Rs 800 crore.
According to latest shareholding pattern available with the stock exchanges, HDFC standard Life Insurance Company and FID Funds Mauritius Ltd hold 1.09% and 1.02% stake, respectively, in REC.
The maximum number of bids, in the institutional segment, for 5.04 crore shares came at a price of Rs 204 while total bids for over 21 lakh shares were at a price of Rs 215.
The Rs 8,400 crore NTPC issues, which the government had priced at a 5% discount to the market price, too had seen very poor response from the retail and HNI segments. When the issue finally closed, the retail portion had been subscribed only to the extent of 0.16 times while the HNI portion saw a subscription of 0.43 times.
Meanwhile, in highly volatile trade, the domestic equity indices on Monday came off by over 1% from their intra-day high on profit-taking to end the day with just marginal gains. The BSE Sensex closed at 16,237, gaining 45 points or 0.28% after hitting the days high of 16,423. Similarly, the NSE Nifty, after touching an intra-day high of 4,912, finally ended the trading session at 4,856, marginally up by 0.24% or 11.50 points. The provisional figures from stock exchanges showed that foreign institutional investors sold equities worth Rs 102 crore while the domestic institutional investors bought net equities worth Rs 117 crore.
On the primary market, the trend is clearly showing investor preference towards reasonable priced small-ticket issues. Since the free float factor in a small-ticket issue generally tends to be low, experts feel that there are lesser chances of heavy selling on the listing day and hence investors are able to make quick listing day gains.
For instance, the Rs 140 crore initial public offer of Man Infraconstruction Ltd that closed on Monday was subscribed 62.33 times with the offer receiving bids for over 29 crore shares against the offer size of 46.53 lakh shares. Previously, the Rs 103-crore IPO of ARSS Infrastructure Projects was subscribed by over 48 times. The IPO saw heavy participation from high net worth investors’ with the portion reserved for them getting subscribed by 125 times, the qualified institutional buyers category by 49 times while the retail portion was subscribed 19 times.