Makes better sense to buy post FPO from market
Tata Steel Limited which has launched its FPO which opened on Wednesday the 19th of January and closes today for 5.7 cr shares in a price band of Rs 594-610. The company had earlier allotted 83.25 lakh shares to anchor Investors. With the issue closing today the response for the issue so far has been a little lacklustre with the overall issue being subscribed 0.48 times.
| Size of Issue | 5,70,00,000 Equity shares |
| Price Band | Rs 594-610 |
| Size of issue in Rs | Rs 3385.8 crs at lower to Rs 3477 crs at upper |
| Employee Reservation | 15,00,000 Equity Shares |
| Net issue to public | 5,55,00,000 equity Shares |
| QIB’s | 2,77,50,00 Equity shares including Anchor Investors |
| Anchor Investors | 83,25,000 Equity shares |
| Non Institutional Investors | 83,25,000 Equity shares |
| Retail Investors | 1,94,25,000 Equity shares |
| Discount to market price as on 17th Jan | Rs 28.90 or 4.63% at lower and Rs 12.90 or 2.07% at higher |
| Marketcap as of 17th January on BSE | Rs 56,198.92 crs at market price of Rs 622.90 |
| Equity Shares outstanding prior to the issue | 90,22,14,196 Equity Shares |
| Equity Shares outstanding post the issue | 95,92,14,196 Equity Shares |
| Marketcap post issue | Rs 56,977.32 crs at Rs 594 to 58,512.06 crs at Rs 610 |
| Book Running Lead Manager | Kotak Mahindra Capital Company Limited |
| Citigroup Global Markets India Private Limited | |
| Deutsche Equities (India) Private Limited | |
| RBS Equities (India) Limited | |
| SBI Capital Markets Limited | |
| Standard Chartered Securities (India) Limited | |
| Isssue Opening Date | Wednesday 19th January |
| Isssue closing date | Friday 21st January |
| IPO Grade | Grading not required as it is an FPO |
| Bid Lot | 10 shares |
| Bidding Amount for Retail | 320 shares at Rs 610 or Rs 1,95,200 per application |
Tata Steel is a well researched company and it has a very strong investor base. There is little point in discussing the company as it is well known and there are enough reports on the same available.
Objects of the issue
The objects of the issue are primarily to part finance expansion and repay some debt of the company.
| 1. | Part finance the company’s share of capital expenditure for expansion of existing works at Jamshedpur | Rs 1875 crs |
| 2. | Payment of redemption amounts on maturity of certain redeemable non-convertible debentures issued by the company on private placement basis | Rs 1090 crs |
| 3. | General corporate purposes |
Financials
The company is yet to announce its quarterly results for period ended October-December 2010. The updates that have been given on the website indicate that though volumes of steel produced and sold are more or less flat. The company states on its website that “Volumes of steel products sold declined marginally, and net sales expected to be flat compared to the second quarter. Operating results expected to decline somewhat in comparison to the second quarter due to increased raw material prices”.
Tata Steel would announce its quarterly results post the FPO and there is every possibility that the stock could weaken once the FPO is completed.
The comfort one seeks as a retail investor in an issue is the difference between the current market price and the price offered in the issue. Not much exists in this issue and therefore the comfort level is minimal.
Readers would be well advised to read the curtain raiser written on this issue last Saturday which would address issues regarding price and returns etc.
SEBI Disclaimer: – I do not intend to subscribe to the above issue
