The IPO from Parag Milk Foods Limited (Parag) which had tapped the capital markets with its simultaneous fresh issue to raise Rs 300 crs and an offer for sale of 205.72 lakh shares in a price band of Rs 220-227 remained undersubsctibed. This issue had compulsory 75% allocation to QIB’s. The company allotted the full 60% of the QIB portion to 17 anchor investors comprising of 22 entities. The only striking thing about the allocation was that domestic mutual funds except Tata were conspicuous by their absence. Tata was allocated a massive 23.33% of the entire anchor allocation of 151.03 lakh shares.

The issue opened on Wednesday the 4^th of May and was supposed to close on Friday the 6^th of May. The issue failed to collect the required amount of subscription from QIB’s and was able to garner roughly Rs 120crs worth of subscription against Rs 240 crs required post anchor allocation. The HNI and retail portion were oversubscribed. Quite surprising considering the fact that as much as Rs 343 crs was received through anchors already. Secondly markets are at this point of time quite buoyant.

The issue has been extended by the mandatory three days and would now close on Wednesday the 11^th of May. The revised price band is now Rs 215-227 where the lower band has been reduced from Rs 220 to Rs 215 and the upper band kept unchanged. It is presumed that extending the same by three days is because the management and merchant bankers feel the issue would now be subscribed and therefore revised the price. However it would be a tragedy for investors if these people after failing to complete the issue in the first innings are taking a second shot, and then pricing the issue at the top end. Nothing prohibits from doing so but it is morally wrong and against the interest of investors. The issue must not be priced at the top end of the band.

There were two issues in the last twelve to fourteen months where the issue was extended, price lowered and then the issue went through. In both cases the price at which shares were allotted were at the revised lower band. The issues being referred to are Adlabs Entertainment Limited where the original price was Rs 210-221 after anchor allotment at 221, was repriced to Rs 180-215 and then shares alloted at Rs 180.

The second case which is comparable and has many similarities and happens to be from the same sector as well is Prabhat Dairy Limited. The issue from Prabhat Dairy limited was a simultaneous offer to raise fresh equity of Rs 300 crs and an offer for sale of 147 lac shares in a price band of Rs 140-147. There was no anchor allocation in the issue and the price band was revised downwards to Rs 115-126. There was a discount of Rs 5 for retail investors. The issue was undersubscribed and as the same was not under compulsory 75% for QIB was subscribed after reducing the offer for sale portion. The HNI portion was oversubscribed and the QIB and retail remained undersubscribed.

The same dairy industry, the same issue not getting subscribed at the first attempt, the price revision, raising the same Rs 300 crs as primary issue, discount to retail investors, located in adjoining districts in the rich cow milk belts are all events which are similar and the similarity is uncanny. One shudders what would happen next. To cut the suspense short, the price of Prabhat Dairy even eight months after the issue, remains below the issue price and the last traded price was Rs 105.60, a discount of about 10% to the issue price of Rs 115.

The allotment price in the case of Adlabs was Rs 180 and the last traded price was Rs 81.70, a discount of almost 55% to the issue price. What is stated above is mere fact but the similarity is uncanny.

When a price band is revised downwards in almost all cases the share price trades at a discount to the issue price thereafter. One needs to be careful in the present case as well.