All at Lower end of price band
NMDC FPO opened for subscription yesterday and received very poor response. This is probably because people believe two things, one the current market price is not the correct price simply because there is hardly any floating stock and secondly the price at which the shares are being offered are expensive compared to the peers, locally and internationally.
The issue is for 33.224 cr shares and on the first day subscription for 5.712 cr shares or 17% of the issue have been received. The bid book shows that at cut off which is allowed only to retail, there are bids for 9.61 lac shares. At the lower end of the band at Rs 300 there are bids for 299 lac shares and at one rupee higher there are bids for 258.78 lac shares. This means between 301 and Rs 300, there are bids for 557.89 lac shares out of a total of 571.19 lac shares.
If you add to the above the retail portion it means that between 350 and 302 there are bids for only about 3.70 lac shares. What is surprising is the approach of retail investors and HNI’s. In the case of REC, the difference between the floor price and the market price was a mere Rs 6 or 7 or roughly 3 to 3.5% and there was no discount to retail, yet the issue received support. The HNI oversubscribed his portion by almost twice looking at this small difference and actually hedged himself by shorting the futures.
In the case of NMDC there are no futures but there is a discount of about 21% in the closing price of the share on BSE as of Wednesday of Rs 379.85. Further the retail is also eligible for a discount of 5% on the discovered price which at a bare minimum would be Rs 15.
Retail investors are becoming smarter and have realised that this share does not offer appreciation in the medium term at current prices and are therefore not subscribing to the same. There is as of yesterday no subscription in the HNI category whatsoever.
I continue to reiterate my stand that the issue is overpriced and offers nothing to the investor. Investors should avoid the issue at the current price band.
