First IPO to list under new trading guidelines

MCX which had tapped the capital markets with its offer for sale issue of 64.27 lac shares is to list on the BSE on Friday the 9th of March 2012. The company had done an allocation to anchor investors and the issue was subscribed 54 times. The HNI portion was subscribed a staggering 150.35 times while the retail portion was subscribed 24.14 times. There were some withdrawals and rejections which reduced the HNI portion to 144.38 times. There were 1082 applications in all for a total of 13,37,85,258 shares. The retail portion saw a total of 4,24,697 applicants bidding for 5,06,39,022 shares resulting in an oversubscription of 23.42 times.

MCX would be the first IPO for the calendar year 2012. The issue price band was Rs 860-1032, and with such an overwhelming response it was but natural that the issue would be priced at the top end of the price band at Rs 1032. MCX would be the first issue which would be listed under the new guidelines laid out by SEBI. The issue would be subject to “Call auction mechanism” which would happen between 9am and 10am. In the first 45 minutes order entry, modification and cancellation would be allowed; ten minutes would be for order matching and trade confirmation while the last five minutes shall be the buffer for transition from pre-open to normal trading session. This discovered price would form the basis for the circuit filters which would be discovered price plus 20% and minus 20%.

I believe the discovered price should be in the band of 1350-1400. The grey market premium has ranged between Rs 300-400 and currently is in the region of Rs 365-375. The share should see decent volumes and would be a proxy play on the India story as it is a commodity exchange and would reflect expectations of how the economy performs.

The share was to be listed on the BSE only but in a surprise move the NSE has allowed the share to be traded on the NSE in the “permitted to trade” category. This means that MCX would not be accountable to the exchange in terms of disclosures and compliance and would not have to pay listing fees either. This move comes as a surprise considering the unpleasantness and matters which are under dispute, but is being done to protect market share.

The issue from MCX is listing afterHoli, the festival of colour, which signals the victory of good over evil. It could also be translated into infusing new vigour into the almost dead primary market in the country. It would be important for promoters and merchant bankers to realise and ensure that for an issue to be successful the pricing has to be reasonable offering scope for appreciation.

The successful listing of MCX would help in giving a fillip to the primary market.