Ujjivan Financial Services Limited which had tapped the capital markets with its simultaneous offers listed on the bourses and gained 10%. The company had raised Rs 358.16 crs by way of a fresh issue and offered 2.49 cr shares by way of secondary offering in a price band of Rs 207-210. The company allotted 1,26,07,081 shares at Rs210 to 17 anchor investors comprising of 54 entities. All the shares were allotted to domestic QIB’s as FII’s are not permitted to invest in this issue as per RBI guidelines.

The issue received excellent response and was subscribed an overall 40.68 times with the QIB portion subscribed 33.84 times, HNI a massive 135.45 times and retail 4.02 times. The leveraged HNI cost per share was between Rs 48-49 implying that he needed a price in the market of Rs 258-260 to breakeven. On the eve of listing the grey market premium was about Rs 54-58 and HNI’s were very happy that there was a killing to be made. The first shock came when shares of Thyrocare listed on Monday and paper profits evaporated and turned into losses. The second shock came when shares of Ujjivan listed on Tuesday at Rs 227 on the BSE and Rs 231.90 on the NSE. This indicated that a potential loss of Rs 28-30 per share was staring at the face of very HNI.

Traded volume on the two exchanges was 579.42 lac shares which was 1.38 times the IPO size of 420.23 lac shares. The delivery volume was 165.38 lac shares which was 28.54% of the traded volume and 39.36% of the IPO size. If one were to consider the anchor portion which has a lock-in for 30 days the delivery percentage increases to 56.22%. the weighted average was Rs 234.05 on the BSE and Rs 234.55 on the NSE, implying that all those HNI’swho applied through leverage and sold at the average have lost Rs 24-25 per share or almost 10%. Key takeaway from the issue is that money making cannot be so easy and it is difficult making money.

From the table above one can clearly see that while retail; investors made 10% HNI’s lost 10%. It’s high time the regulator realised that HNI’s being allowed to apply for one time the whole issue is causing demand disruption and benefits just the finance companies and no one else. Until this act is changed we will have a vibrant grey market which is illegal and finance companies making multiple times the money that merchant bankers make.

Thyrocare Technologies Limited which had offered 1.07 cr shares in a secondary offering at a price band of Rs 420-446 and allotted at Rs 446 listed yesterday. The company had allotted 32.23 lac shares to 15 anchor investors comprising of 29 entities. The public issue was very well received and was oversubscribed a massive 73.55 times with QIB portion 73 times, HNI portion 225 times and retail portion 8.72 times.

The cost of funding was between Rs 180-190 per share depending upon the rate of interest. HNI Investors were sitting pretty till the date of listing as the premium in the grey market was about Rs 240-250. The share made its debut on Monday and the discovered price on the NSE was Rs 665 while it was lower at Rs 662 on the BSE. The share made its high almost immediately and then drifted down before closing at Rs 618.10 on the BSE and Rs 616.50 on the NSE. Investors made money but only those who applied with their own money. Those leveraged investors who thought making money was so easy and just borrowed and applied actually lost money. The weighted average of the day’s trade was Rs 623.99 on the BSE and Rs 625.02 on the NSE, implying a spread of under Rs 180 on either exchange. Add transaction costs and almost all leveraged investors would have lost money. However the financers of these transactions would be laughing their way and counting their profits as they have made a bomb. The total demand in the issue was a whopping Rs 16,000 crs plus from HNI’s and virtually risk free as even assuming a margin of 2%, the allotment was just around half a percent.

From the table above one can see that the total volume on the two exchanges was 155.38 lac shares which was 1.45 times the IPO size. Delivery volume was 42.07 lakh shares which was 27.06% of the traded volume and 39.13% of the IPO size. If one considers the fact that the anchor portion comes with a lock-in, the delivery percentage of non-anchor was a massive 55.90%. Assuming retail and HNI’s have cashed out in profit or loss it means that 25% of the book has delivered but the remaining shares can only come from QIB’s. It means making 40% return in about ten days would be tempting for anyone.

This brings me back to my favourite them of allowing HNI’s to apply for one time the whole book even though there allocation is either 10% or 15%. They do two three things which should rattle the regulator. Firstly they distort demand and give a skewed picture. Second they are the group of people who have a direct interest in their being a grey market which is illegal and any regulator should be unhappy about. Thirdly they have to sell on listing day irrespective of profit or loss and they therefore bring undue pressure on the share. They also make a good issue mediocre as has happened in the case of Thyrocare where a price discovery of Rs 665 against an issue price of Rs 446 was just not enough and the share fell.
One hopes that the regulator will someday realise what distortion one simple rule of SEBI is doing.

The secondary offering from Thyrocare Technologies which opened for subscription on Wednesday the 27^th of April and closed on Friday the 29^th of April received excellent support and was oversubscribed 73 times. The leveraged HNI subscribed his bucket size 225 times. And would still make money considering that the grey market premium is in the region of Rs 250. One wonders whether the present primary market is a nexus between the financers which are directly or indirectly an arm of merchant bankers and these leveraged investors who distort the demand and create such high subscription. One wonders whether SEBI has ever looked into this issue where a single individual from the HNI category where the bucket size is either 10% or 15% of the whole issue is permitted to subscribe to the whole issue. Secondly till today there hardly seems an instance where the spill over has happened from retail to HNI or QIB to HNI to warrant such subscription.

Thyrocare Technologies revised price band was Rs 420-446 and the issue was to raise Rs 479 crs at the top end of the band through a secondary offering. The detailed subscription in various categories is given below: –