Power Finance Corporation Limited which had launched its FPO in a price band of Rs 193-203 was fully subscribed. The issue was open from Tuesday the 10th of May and closed on Thursday the 12th of May for QIB’s and on Friday the 13th of May for all other non-QIB bidders. The issue was subscribed a total of 4.34 times. The issue consisted of a fresh issue of 17.21 cr shares and an offer for sale by the Government of 5.738 cr shares making a total issue size of 22.92 cr shares. There was an employee quota of 2.75 lakh shares as well
The details of the subscription level in various categories are given below: –
| Category | Shares Offered | Shares Subscribed | Times |
| QIB | 114638937 | 793573340 | 6.92 |
| NII | 34391682 | 41439412 | 1.2 |
| Retail | 80247257 | 160165544 | 2 |
| Employee | 275464 | 249480 | 0.91 |
| Overall | 229553340 | 995427776 | 4.34 |
Looking at the response to the issue it appears very logical to expect the issue to be priced at the top end of the price band at Rs 203. The share has closed in the cash market at the BSE at Rs 215.85. The share price may fall from these levels considering the difference in the issue price and the market price, but the margin of safety is simply huge to expect any negative performance in this stock. Secondly there is a discount of 5% which would amount to Rs 10.15 per share assuming the top end of the price band is fixed at the issue price.
The retail subscription is more than the HNI portion and the only reason that HNI subscription was relatively poor was the fact that fresh positions in PFC were not allowed in the futures segment, making it difficult for HNI’s to hedge their position.
It is difficult to understand the phycology of HNI investors where in an IPO they take huge leveraged positions and are unable to sell their position in the premium market and most of the time losing money when the share lists on the bourses. A recent example was Muthoot Finance where the HNI portion was subscribed 60 times and the cost of leverage for a HNI investor was in the region of Rs 30. The share did not even touch the figure of Rs 200 which would have meant a gain of Rs 25. The share closed on Friday around Rs 165.
All in all the subscription for PFC FPO has been good and has set the divestment for 2011-12 in motion. Well begun is half done and let us hope that in future issues the government continues being considerate and liberal in the pricing of the issues.
