ARSS Infrastructure Projects IPO receives unprecedented and overwhelming Support

Issue subscribed 47.62 times

ARSS Infrastructure Projects Limited which had opened its IPO on Monday the 8th of February and closed today, the 11th of December 2009 received unprecedented support. The issue was well supported in all categories and received excellent response. This issue has beaten all records for oversubscription since the IPO season began sometime in July /August 2009. The previous best was from Infinite Computer Solutions Limited which was subscribed 43.22 times.

What is really heartening to note is that ARSS has been subscribed by a higher ratio in each of the three categories in which shares were offered.

Category Shares Offered Shares Subscribed Times
QIB 1507317 74377365 49.3442
NII 251219 31283985 124.5287
Retail 753659 13979415 18.5487
Overall 2512195 119640765 47.62

The issue price band was Rs 410-450. The company has raised against its issue size of Rs 103 crs, bids for Rs 4900 crs. This clearly means that if issues are reasonably priced and offer value to investors, there is no shortage of liquidity. Pricing is the key issue and promoters and merchant bankers must realise this.

The cost of leveraged investors in the HNI category which saw an over-subscription of 124 times means that each share would have an interest component of Rs 214. This means that the share must trade higher than Rs 675 for the HNI to break even. This is a tall order by all means.

Let us see what the listing is like.

Hathway Cable and Datacom IPO subscribed

Hathway Cable and Datacom Limited which had opened its IPO on Tuesday the 9th of February and closed today, the 11th of December 2009 received support from the non-institutional investor category. The promoters of the company have been able to garner support from NRI’s and been able to receive the requite support tom see the issue through. The price band of the issue was between Rs 240-265 and support has come at the lower end of the price band. In all probability the issue would have to be priced at the lowest level of Rs 240.

The issue was very aggressively priced and had pricing issues because of the fact that it is a loss making company and it would be quite some time before the company starts making money. At the lower end of the price band the issue would raise Rs 666 crs of which the gross proceeds to the company would be Rs 480 crs. The objects of the issue need Rs 579.7 crs and there is a term loan component of Rs 50 crs which would mean that the company would have raised at the gross level Rs 530 crs. There are issue expenses to be deducted from the proceeds and very clearly there would be a substantial gap in the amount raised and the amount required for fulfilling the objects of the issue.

Category Shares Offered Shares Subscribed Times
QIB 11655000 16714925 1.4341
NII 2775000 11895750 4.2868
Retail 8325000 2292300 0.2754
Overall 22755000 30902975 1.36

The other issue which was on simultaneously has done exceedingly well and created new records, underlying the fact that if the issue is well priced, it attracts investors.

Rural Electrification Corporation FPO opens on Feb 19th

Rural Electrification Corporation Limited (REC) FPO opens on Friday the 19th of February and closes on Tuesday the 23rd of February 2010. The issue is for a total of 17,17,32,000 equity shares comprising of a fresh issue of 12,87,99,000 shares and an offer for sale by the government of India of 4,29,33,000 shares. There would be a reservation of 3,50,000 equity shares for the employees of the company. The net issue of 17,13,82,000 would have a reservation of 50% for QIB’s who would bid through the French auction, 15% for Non-institutional investors and 35% for retail investors. NII and retail investors would be offered shares at the floor price.

The share price of REC has fallen from the high of Rs 274.50 registered on 19th of January 2010 to a closing price of Rs 229.5 yesterday on 10th of February 2010. This would be the second FPO after the disaster of NTPC and it is widely expected that the retail and non-institutional category would be offered a discount like was offered to the employees in the case of NTPC.

The share prices have fallen to Rs 225 on a day that the market is up. At the time of writing this article the BSESENSEX is trading at 16126 points, a gain of 204 points and REC is down 2.21% and trading at Rs 225.30. 

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