Shares of Hindustan Aeronautics Limited (HAL) debuted on the bourses and had a poor start. The company had tapped the capital markets through an offer for sale of 3,41,07,525 shares in a price band of Rs 1,215-1240 with a discount of Rs 25 to retail investors and eligible employees. There was no anchor allocation being a government company.

The issue was just under subscribed and received bids for about 99% of the total issue. The QIB portion was subscribed 1.73 times, HNI portion subscribed 0.03 times, Retail portion subscribed 0.39 times and employee portion subscribed 0.21 times. The company allotted 3,35,32,320 shares which was 98.31% of the offer for sale.

Life Insurance Corporation of India Limited was allotted 2,34,07,104 shares which was 69.80% of the total allotment. There are 1,94,019 retail investors who own 43,87,692 shares at an average of 22.61 shares. The lot size was 12 shares.

HAL allotted the shares at the lower end of the price band at Rs 1,215. This effectively meant that the allotment price considering the discount was Rs 1,190 for retail and eligible employees.

The company has announced an interim dividend of Rs 8.25 for the current year and has sought special permission from SEBI for not conforming to the rules. The record date for the dividend would was 30th March which means you cannot buy shares to get the same. Further it is effectively for those who were allotted shares in the IPO.

The discovered price was Rs 1,169 on the BSE and Rs 1,152 on the NSE. The high of the day was 1,184 and Rs 1,184.95 respectively. The low was Rs 1,117.60 and Rs 1,121. The close of the day was Rs 1,128.35 on the BSE, a loss of Rs 86.65 or 7.13%. On the NSE the close was Rs 1,132.85, a loss of Rs 82.15 or 6.76%.

The combined traded volume was a mere 19.08 lakh shares which was 5.69% of the final IPO allotment size. Delivery volume was 4.49 lakh shares which was 23.53% of the traded volume and 1.34% of the IPO size. The weighted average of the days trade on BSE was Rs 1,156.28 while it was Rs 1,157.71 on the NSE. Considering the fact that the share price fell in the last half hour and closed below the weighted average, indicates that the share could be under selling pressure in the coming days.

The share performance was below par and considering the fact that there has been no FII interest in the same, the price seems a little bit tentative. Secondly LIC already owns 70% of the public float, reducing its ability to purchase any further.

ICICI Securities Limited which had tapped the capital markets with its offer for sale of 7.72 cr shares in a price band of Rs 519-520 received poor response and was therefore forced to prune the size of offering. Call it an irony but grapevine has it that the rush of the IPO was to save on the long-term tax which would be applicable with effect from 1st April 2018. Whether they would be able to save on the same or not is still debatable, the pruning of the issue by Rs 500 crs more than makes up for the estimated loss that the government coffers would have had.

The DRHP filed in December 2017 had an issue size of 6.44 cr shares which was increased to 7.72 crs in the RHP of March 2018. This clearly shows that the valuation which ICICI Bank was expecting from the market for its subsidiary ICICI Securities Limited has been reduced significantly.

Secondly the brand ICICI Securities Limited has a triple offering in bank, demat and trading account on a highly successful digital platform ICICI Direct.Com. This platform as claimed by the company has 3.9 million operational accounts. Assuming a mere 10% of these account holders chose to subscribe to a minimum lot of 28 shares in the issue of ICICI Securities Limited we are talking of 109.20 lakh shares which would be 1.48 times the Retail bucket.

One wonders why a profit-making company with a strong track record and the franchise of India’s first digital platform did not have the comfort of its own customers. There are enough examples where ICICIC Direct.Com has single handed subscribed to the retail portion of a number of issues. Here they chose to take a simpler way out of allocating 75% to QIB’s, 15% to HNI’s and 10% to retail, in an issue where they have a strong retail base. Surprised at the decision.

To top it they believe that having a battery of merchant bankers will ensure that the QIB portion is done. The anchor book was well subscribed and received with 3.30 cr shares being allocated to 33 anchor investors comprising of 58 entities. After this response the balance of the QIB book was subscribed a mere 1.04 times. For the six merchant bankers put together it is a matter of shame that they could not do this. Secondly if the pricing was wrong and they have reduced it once between December and March, they should have the courage to reduce it further and get the issue subscribed in totality. This dismal performance of 78% subscription for a subsidiary of ICICI Bank is indeed unacceptable. And finally, what is the guarantee that on listing the price of Rs 520 will hold? If it does and tanks who would be responsible?