Thyrocare Technologies Limited –Share lists at 49%premium, closes at 38%

Thyrocare Technologies Limited which had offered 1.07 cr shares in a secondary offering at a price band of Rs 420-446 and allotted at Rs 446 listed yesterday. The company had allotted 32.23 lac shares to 15 anchor investors comprising of 29 entities. The public issue was very well received and was oversubscribed a massive 73.55 times with QIB portion 73 times, HNI portion 225 times and retail portion 8.72 times.

The cost of funding was between Rs 180-190 per share depending upon the rate of interest. HNI Investors were sitting pretty till the date of listing as the premium in the grey market was about Rs 240-250. The share made its debut on Monday and the discovered price on the NSE was Rs 665 while it was lower at Rs 662 on the BSE. The share made its high almost immediately and then drifted down before closing at Rs 618.10 on the BSE and Rs 616.50 on the NSE. Investors made money but only those who applied with their own money. Those leveraged investors who thought making money was so easy and just borrowed and applied actually lost money. The weighted average of the day’s trade was Rs 623.99 on the BSE and Rs 625.02 on the NSE, implying a spread of under Rs 180 on either exchange. Add transaction costs and almost all leveraged investors would have lost money. However the financers of these transactions would be laughing their way and counting their profits as they have made a bomb. The total demand in the issue was a whopping Rs 16,000 crs plus from HNI’s and virtually risk free as even assuming a margin of 2%, the allotment was just around half a percent.

Exchange Open High Low Close Net Change % Gain/loss Wt. Avg Volume Delivery Del %age
BSE 662.00 665.40 606.00 618.10 172.10 38.59 623.99 2678027 597986 22.33
NSE 665.00 665.00 605.80 616.50 170.50 38.23 625.02 12860078 3606791 28.05
Total               15538105 4204777 27.06

From the table above one can see that the total volume on the two exchanges was 155.38 lac shares which was 1.45 times the IPO size. Delivery volume was 42.07 lakh shares which was 27.06% of the traded volume and 39.13% of the IPO size. If one considers the fact that the anchor portion comes with a lock-in, the delivery percentage of non-anchor was a massive 55.90%. Assuming retail and HNI’s have cashed out in profit or loss it means that 25% of the book has delivered but the remaining shares can only come from QIB’s. It means making 40% return in about ten days would be tempting for anyone.

This brings me back to my favourite them of allowing HNI’s to apply for one time the whole book even though there allocation is either 10% or 15%. They do two three things which should rattle the regulator. Firstly they distort demand and give a skewed picture. Second they are the group of people who have a direct interest in their being a grey market which is illegal and any regulator should be unhappy about. Thirdly they have to sell on listing day irrespective of profit or loss and they therefore bring undue pressure on the share. They also make a good issue mediocre as has happened in the case of Thyrocare where a price discovery of Rs 665 against an issue price of Rs 446 was just not enough and the share fell.
One hopes that the regulator will someday realise what distortion one simple rule of SEBI is doing.

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