Coffee Day Enterprises Limited the holding company of CCD or Café Coffee Day was subscribed but not without its share of hiccups. The company had launched its fresh issue to raise Rs 1,150 crs in a price band of Rs 316-328. Considering the fact that this is a holding company structure and the company has investments in a listed company which is valued at market rates of roughly Rs 2,500 crs, the issue was considered expensive. Readers would be aware that well known holding companies like Tata Investments and Pilani investments trade at a discount of 45-50%. Further this company on a consolidated basis is yet to make profits.

The company had allotted shares to anchor investors at a midway price of Rs 322. Considering this as a benchmark and the fact that two out of three categories remained under subscribed, or half the issue was under subscribed, the anchor investor’s allocation price becomes the ceiling price for the company. Shares would be allotted no higher than this price.

The retail portion was subscribed 90% and this has been achieved after active grey market where application forms were purchased. The local term for application forms is “Koshtak” and forms for one lot and for 2 lacs were purchased. The average application size moved up substantially because of this form purchase and the same was at 98.81 shares or 2.19 lots which is substantially higher than 1.2 average in recent issues. This means considering the buyback and therefore no price risk people have applied for the maximum in the retail category.

This means that all those who have applied in the retail category would be sellers on day one and the shares would get transferred to those whom the application forms were sold. This means there would be huge volume on day one when CCD is listed and there would be huge delivery based trades as well.

The other category which remained undersubscribed was HNI and here a mere 54% of the bucket size was subscribed. Besides the usual ‘being expensive’ issue the margin for loan against application was in double digits which made the funding cost higher and a not too active grey market ensured no easy exit for the HNI. This made the issue unattractive for the leveraged investor.

Details of the subscription are given below:-

From the table above it is more than clear that QIB’s have saved the day and they would need to be more than willing to buy more on listing day as well.

The first of the mega issues in the festive season has come and gone and the issue had a torrid time. Let’s hope the two which open in about ten days’ time have a smoother passage.