Power Grid Corporation Limited received excellent response from HNI’s and retail investors on the last day of subscription to the FPO. The issue was subscribed an overall 14.88 times. Readers would recall that the FPO from Power Grid Corporation was open from Tuesday the 9th of November and closed for subscription for QIB’s on Thursday the 11th of November and on Friday for all other investors. The issue was in a price band of Rs 85-90 and included a discount of 5% for retail investors and employees.

Details of the subscription by various categories of investors are as follows: –

The issue has received excellent response and two reasons have helped in this. The first is the success of Coal India and the profits made in that issue by all categories of investors. The second is the pricing which was attractive. The markets have fallen sharply in the last two days and Power Grid has also fallen. The closing price of Power Grid as of yesterday the 12th of November was Rs 99.60 a loss of Rs 2.40 compared to the previous week’s close of Rs 102 when the pricing of Power Grid was done.

The excellent response in the HNI category has pushed up the funding cost for leveraged players. Assuming a rate of interest of 16% for 9 days, and over subscription of 28.86 times, the interest cost works out to Rs 10.24, this makes the cost of acquisition higher than the current market price. Certainly there would be some withdrawals and for HNI’s to make profit the market price needs to move up from current levels.

In the retail category, oversubscription of 3.85 times than an investor who had applied for the maximum of 1105 shares buy paying Rs 99,450 would be allotted 287 shares assuming no technical rejection. At the current price of Rs 99.60, the retail investor would make a profit of Rs 2,755.2 on the price and Rs 1,291.50 on the discount offered to retail investors. This would make a total of Rs 4,046.70.

There was a rumour late on Friday that the retail limit has been raised to Rs 2 lakhs. There appears to be no confirmation of the same and if unfortunately such applications have been made the same would be treated as HNI applications and would be eligible for 77 shares at current calculation.

Market price of Power Grid post FPO would be of critical importance because of the response and cost involved for investors as a result of the over subscription. Listing is likely around the time of expiration of the November series.

Power Grid Corporation FPO which closed for QIB’s yesterday was very well subscribed. The response received was excellent and a total of 776,51,60,520 were subscribed against an offer of 41,91,89,323 shares resulting in an oversubscription of 18.52 times.

Two things have happened helping this response. The success that Coal India garnered in the subscription and post listing the returns it has given to investors is certainly the first reason. The second is the business in which Power Grid is involved in creating transmission lines and the fact that the returns are regulated and based on a fixed return on investment.

Subscription for HNI’s, retail and employee categories will close today and these segments will also see substantial interest coming in. As of yesterday the subscription in these segments was 1.63, 0.72 and 0.37 times respectively. The total subscription was 9.72 times. I believe this should move up to between 12.7 to 13.5 times overall.