Dalal Street is on fire. Three out of four stock sales that opened on Wednesday were oversubscribed on the first day itself, a feat last seen 27 months ago, with high net worth individuals (HNIs) and small retail investors leading the charge.
The initial public offering (IPO) of Tata Technologies Ltd, the first Tata group company to list after 19 years, attracted maximum investor interest, witnessing a subscription of 6.5 times. Gandhar Oil Refinery (5.66 times) and Flair Writing Industries (2.3 times) also attracted great interest, while Fedbank Financial Services, a unit of Federal Bank, saw a relatively lukewarm response, with only 0.39 subscription on Day One.
On 4 August 2021, Devyani International, Windlas Biotech, Exxaro Tiles and Krsnaa Diagnostics were subscribed 1.93 times, 2.52 times, 4.1 times and 1.55 times, respectively.
Demand for the shares currently on offer is likely to remain elevated, given the gray market premium of 77% in Tata Tech, 38% in Gandhar, 23% in Flair, 4% in FedFina and 30% in Indian Renewable Energy Development Agency (Ireda). . ). Ireda’s share sale opened on Tuesday.
Moderate pricing of these issues has attracted HNI and retail interest, analysts said.
“Merchant bankers and promoters are pricing things in a way that leaves something for the investor, which is why we are seeing HNI and retail interest,” said Viral Shah, head of asset management company 360 ONE Wealth. He cited the estimates of Tata Technologies. at a price-earnings (PE) multiple of 25 times one-year forward earnings versus peers like KPIT Technologies (80.3 times) and L&T Technology Services (37.47 times). Similarly, Flair Writing’s PE multiple was around 24 times that of peer Cello stands at 40.56 times.
The other reason for the higher non-institutional interest is the small size of subjects. For example, in Tata Technologies, it stands at ₹456 crore, while bids on the first day were received for ₹5,334 crores. In the case of Gandhar Oil, vs ₹75 crore, the HNI portion received bids for ₹577 crore on the first day. On Flair, against the reserved part of ₹89 crore for HNI share, for which bids have been received ₹260 crores.
A third reason is secondary market buying by domestic institutions and retail investors. “Historically, a strong secondary market has been a positive indicator for IPO success,” said Pranav Haldea, managing director, Prime Database Group. “IPOs listed at such times tend to list at a premium and see oversubscription from retail investors.”
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On the institutional side, while foreign portfolio investors (FPIs) have traditionally played a dominant role in IPOs, domestic institutional investors (DIIs), particularly mutual funds, have gained prominence recently. This provided a counterbalancing force to FPIs, ensuring the successful execution of at least the smaller IPOs even without strong support from foreign investors, he added.
The institutional book for Tata Tech was subscribed 4.08 times, with offers for 42.9 million shares against a 10.5 million offer; Gandhar Oil Refinery was subscribed 1.35 times, with bids for 8.02 million shares against 5.93 million shares offered; and Flair subscribed only 0.53 times, with bids for 2.17 million shares against a 4.12 million bid.
The retail book for Tata Technologies was subscribed 5.4 times with 100 million shares being offered against the 18 million on offer, Gandhar Oil Refinery was subscribed 6.9 times with 74 million shares being offered against the 10.7 million offer, and Flair was subscribed 2.87 times with 20.6 million shares tendered against the 7.2 million offered.
(tagsTo Translate)Dalal Street
