L&T Finance Holdings limited launched its maiden issue to raise Rs 1,245 crs in a price band of Rs 51-59. The issue received excellent response and the anchor book was done at a price of Rs 56. The environment has become challenging and even though the book was built at Rs 59 the company chose to effectively offer a discount to the now shareholders of the company by pricing the issue at Rs 52.

This should become an eye opener for companies and merchant bankers for the future to price the issue. Here is a company which has its issue subscribed 5.34 times and garners support at the top end of the price band but chooses to price the issue almost at the bottom end of the price band. Against this we have companies which get just about subscribed but price the issue at the top end so that they get some extra money from the public.

A recent example of this is the issue from Bhartiya Global ?Infomedia Limited which was subscribed a mere 2.06 times and did not rteceive a single application from QIB’s priced the issue at the top end of the price band of Rs 82, when the band was Rs 75-82. The net result, the share fell a staggering 62% on day one. Yet another example is that of Readymade Steel Limited which had tapped the capital; markets with an issue in the price band of Rs 90-108. The issue was subscribed a mere 1.68 times with QIB’s subscribing a mere 0.03%. The issue priced at the top end of the price band at Rs 108 and the listing day saw the share fall over 38%.

Very clearly the function of issue pricing is a joint exercise between the promoters of a company and the merchant bankers. Wherever the issue of goodwill and sustainability comes in there would be a soft corner for the investors. I believe this is a shining example which needs to be duplicated by promoters and other merchant bankers to make this market a more healthier place.

There would be a second price discovery happening on Tuesday the 26th of July when the company does its anchor allocation. It is expected that this would happen around the pre-IPO price with a variation of Rs 1 on either side. This should become a fair price discovery and should be the final price at which shares are allotted in the IPO.

The net issue is for Rs 1245 crs and has a reservation for employees of Rs 50 crs and for non-institutional and corporate shareholders of L&T of Rs 120 crs. The net issue of Rs 1075 crs would be split between QIB’s, HNI’s and retail investors in the ratio of 50%, 15% and 35% respectively.

There is a grey market premium of between Rs 5-6 currently in the shares of L&T Finance Holdings Limited. IF the issue gets priced at the upper band of Rs 59, the street expectation would be that the share should trade and sustain at a minimum of Rs 67-68 on listing day which looks difficult and extremely expensive. This price is derived at by adding the expected price fixed by the company of Rs 59 with the premium of Rs 6 and an expected premium on listing of Rs 2-3.

If instead of the top end of the price band the company prices the issue at Rs 55 or 56, the listing price would have to sustain at Rs 64-65 which looks doable. One hopes that a company which is tapping the capital markets after sixty one years would look at the interest of its shareholders and the track record of the group when it finalises its price band.

In conclusion I believe a final price would be one which takes care of the pre-IPO price of Rs 55 and the price at which anchor investors are allotted on Tuesday.The issue would be analysed post the announcement of the anchor investors allocation price.

Retail limit now stands increased to Rs 2 lakhs and the benefit of better allocation would be available to them. The price brand at first glance looks attractive and would be discussed in detail in the article to be posted on the website on Thursday.

Bajaj Corp Limited today announced the price band for its IPO as Rs 630-660. The issue opens on Monday the 2nd of August and closes on Wednesday the 4th of August for QIB’s and on Thursday the 5th of August for other bidders. The issue size is 45 lac shares of Rs 5 each. The issue would raise Rs 283.5 crs at the lower band of Rs 630 and Rs 297 crs at the upper band of Rs 660.

Bajaj Corp sells product under license from Bajaj Sevashram Limited. The company sells hair oil and other FMCG products and its famous flagship product is Bajaj Almond Drops Hair oil.

Engineers India Limited which is tapping the capital markets with its FPO today announced the price band as Rs 270-290. The issue opens on Tuesday the 27th of July and closes on Friday the 30th of July. The size of the issue is 3,36,93,660 shares and the issue would raise Rs 909.73 crs at the lower band and Rs 977.12 crs at the upper price band.

Retail investors and employees will be given a discount of 5% on the issue price. The closing price of the share on Friday was Rs 337.65. At this price the discount being offered at the lower end of the price band is Rs 67.65 or 20% while at the upper band the discount offered is Rs 47.65 or 14.11%.

The share price will correct itself tomorrow once the markets open but at first cut this price look attractive and investors are likely to make money at these prices. The issue would be analysed post its road show today.

Parabolic Drugs Limited which is launching its IPO to raise Rs 200 crs from issue announced its IPO price between Rs 75-85. The issue would at the lower price band of Rs 75 see an issue of 2.6666 cr shares and at the upper price band of Rs 85 would be for 2.35 cr shares. The IPO size includes an offer for sale of 20,25,702 shares by private equity investors.

The issue opens on Monday the 14th of June and closes for QIB’s on Wednesday the 16th of June and for all other investors on Thursday the 17th of June.

Intrasoft Technologies Limited announced the price band for its IPO which opens on Tuesday the 23rd of March and closes on Friday the 26th of March. The issue is for 37 lakh shares and the price band is Rs 137-145. The issue will raise Rs 50.69 at the lower end of the price band and Rs 53.65 crs at the upper end of the price band.

The company is better known as the website 123 greetings.

Man Infracon Limited has announced a price band of Rs 242-252 for its public issue of 56,25,150 shares. The issue opens on Thursday the 18th of February and closes on Monday the 22nd of February 2010.