The FPO from Power Grid Corporation Limited received excellent response and was oversubscribed in each category. The overall subscription was 6.74 times. The issue was in a price band of Rs 85-90 and had a discount of Rs 4.50 for retail and employees. The size of the issue was 78.70 cr shares and it would garner Rs 7,083 crs at the upper band of the issue price. The issue consisted of a fresh issue of 60.18 cr shares and an offer for sale of 18.52 cr shares. The level of subscription in each category is given below.

The closing price of Power Grid on the BSE was Rs 98.90 up Rs 2.75 or 2.86%. In the futures segment on the NSE the price closed at Rs 94.40 up Rs 1.60 or 1.72%. The markets were quite flat on Friday therefore any price change should only be attributed to the FPO of Power Grid and nothing to do with the general markets. The open interest in Power Grid has also risen on Friday from 9.86 cr shares to 12.27 cr shares. This is an increase of a whopping 24.43%. This indicates that people have taken advantage of the arbitrage available in selling futures against expected allotment. HNI bidding was quite subdued till 3pm and was less than 4 times till then. In the last hour the segment was oversubscribed just under 10 times at 9.7 times. The attraction was that the maximum possible allotment price would be Rs 90 and an allotment of just about 20% of shares assuming 5 times subscription would still give a profit of Rs 4 per share. Assuming an HNI bid for 10,000 shares he would be allotted 2000 shares on which he would at Rs 4 per share make a profit of Rs 8000, on a total investment of Rs 9,00,000 giving a return of 0.88% in just about 15 days. This translates into an annualised return of 21.62% and as such risk free. With the oversubscription becoming 9.7 times in the same example he will get 1030 shares and his profit would be 4,120 and his annualised return 11.14%.

The story does not end here but would continue into Monday and Tuesday as he needs to cover up the extra shares that he had sold. He needs to buyback the 900 shares in which he would lose a minimum of Rs 1 per share or Rs 1000 and reduce his gains to Rs 3,120 or 8.43% which could at best be described as bank FD returns. We have not calculated any interest on this investment. Based on this assumption and calculation I believe that Power Grid shares would be fairly active on the next two days and the possibility that futures prices rise in the coming days is almost a certainty.

Primary markets are virtually dead and if anything this FPO has kindled a ray of hope in this market. The 5% discount to retail is certainly a sweetener and one hopes this continues in other issues to follow. Secondly the pricing itself was attractive and left quite a bit on the table, making it worthwhile to apply.