Unprecedented interest in D-Mart IPO: Institutional, wealthy investors overbid hundreds of times

By: | Published: March 10, 2017 5:26 PM

Avenue Supermart’s Rs 1,870 crore IPO got subscription figures unheard of in Indian primary markets, with the institutional and high-networth individuals flocking to get in on what’s turning out to be the hottest equity issue. The issue closed with a mind-boggling overall subscription of about 105 times

Avenue Supermarts, D-Mart, Initial Public Offering, NCD, Neville Noronha, Kotak Mahindra CapitalAt the end of Friday’s bidding, the portion reserved for QIBs (qualified institutional bidders) was subscribed by a whopping 144.61 times, while non-institutional high-networth individuals portion was bid for about 278 times. (Image: Reuters)

Avenue Supermart’s Rs 1,870 crore IPO got subscription figures unheard of in Indian primary markets, with the institutional and high-networth individuals flocking to get in on what’s turning out to be the hottest equity issue.

The issue closed with a mind-boggling overall subscription of about 105 times, stock exchanges data showed. At the end of Friday’s bidding, the portion reserved for QIBs (qualified institutional bidders) was subscribed by a whopping 144.61 times, while non-institutional high-networth individuals portion was bid for about 278 times. The figures make the retail participation look pale, which, at 7.15 times subscription against the reserved size, is also huge by market standards.

Ahead of the public issue, the company raised Rs 561 crore by issuing 1.87 crore shares at the top end of the price band to 35 anchor investors, including General Atlantic Singapore, Fidelity, Franklin Templeton, Goldman Sachs, JP Morgan, HSBC, Motilal Oswal and UTI, among others.

Several analysts have recommended subscribing to issue given the company’s strong financial and operational profile, and its promising growth record over the years. TV news channels report that the street is abuzz with high interest into the issue from institutional investors, with the QIB portion of the issue expected to receive 75-100 times subscription.

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D-Mart, India’s most profitable supermarket chain, is looking to raise the money to retire part of its debt, redemption of non-convertible debentures, purchase of fit-outs for new stores and general corporate purposes.

The company is promoted by Radhakishan Damani, the veteran stock market trader and investor who had been in the Forbes list of wealthiest people. Damani and his family own 91.34% equity stake in Avenue Supermarts (pre-issue).

D-Mart has a strong presence in Maharashtra and Gujarat, and also operates stores in Telangana, Karnataka, Andhra Pradesh, Madhya Pradesh, Chhattisgarh, NCR, Daman and Rajasthan.

Most analysts have praised the company’s business model, and hence the growth it offers to the investors. The company maintains low-cost operations, owns the stores rather than renting them and thus saving on rental costs, keeps improving product assortment based on its own data analytics, and seems to saturate the territory and then achieve profitability. Analysts say it follows the same business approach as Wal Mart of the US.

The public issue, which is open for subscription at Rs 295-299 per share, closes on Friday, March 10. 50% of the shares are reserved for qualified institutional buyers (QIB), 15% for high net-worth individuals (HNIs) and 35% for retail investors.

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