October 30, 2015

indigo faced turbulence in its ipo flight path


Here are two stories I did in last two days on the Indigo (Interglobe Aviation) IPO for the newspaper I currently write for:

Bumpy landing for Indigo in Interglobe IPO

Interglobe Aviation, the company that operates the largest passenger airline in the country, Indigo, faced rough weather in getting its large-sized initial public offer (IPO) of Rs 3,018 crore fully subscribed on time on Thursday, the last day of its IPO.
Retail investors, for whom 35 per cent of the IPO was reserved, took a long time in checking in to subscribe to the IPO. At 5 pm, the usual closing time for bids for IPOs, the retail investor portion was subscribed by only 0.53 times on the BSE, it was by 0.28 times only at the National Stock Exchange. Together, on the two exchanges, the retail investor subscription at that point, was just 0.81 times of its reserved portion.
Even the employees of Interglobe, for whom around five per cent of the IPO was kept reserved, and with a price discount, did not check in fully, as at 5 pm, their aggregate subscription on the two exchanges was just 0.11 times of their reserved portion.
The quota for the other two categories, qualified institutional buyers and non-retail non-institutional investors, were fully subscribed. At 5 pm, on the two exchanges, taken together, QIBs had subscribed 17.80 times their reserved portion of about 50 per cent of the issue, and non-retail non-institutional investors had subscribed 3.57 times of their reserved portion of about 15 per cent of the issue.
A senior official at one of the exchanges, who did not wish to be quoted, told Financial Chronicle that the two exchanges extended the bidding for the retail and employee categories to 7 pm. “This is usually done on members' requests based on volume of bids applications,” he said.
But the landing for Indigo, as far as the closing out of Interglobe IPO was concerned, was further delayed as, even at 7 pm, the retail and employee portions were still not fully subscribed. At 7 pm, the retail investors had subscribed 0.90 times of their reserved portion, while employees had checked in with just 0.12 times their reserved portion.
According to Prithvi Haldea, founder of Prime Database, retail investors who lost money in the spate of IPOs during 2007-08, were cagey of investing in the spate of IPOs happening in the current financial year. “The IPO market, currently, has not reached the retail investor frenzy stage yet,” said Haldea.
The stock exchanges extended the Interglobe IPO bid time for retail and employee categories beyond 7 pm as well. It finally closed at 8.30 pm. At that time, the retail portion, at 0.93 times subscription, was still not fully subscribed. The employee category portion also stood at 0.12 times subscription at that time. But the overall issue, across all investor categories, was subscribed by 5.16 times, as of 8.30 pm, and that was expected to sail through the IPO issue for Interglobe.
Of the total number of 3.94 crore shares in the Interglobe IPO issue, amounting to Rs 3,018 crore at the upper end of the price band of Rs 700-Rs 765, around 58 per cent was through an offer of sale by selling shareholders who were the earliest investors in the company. This part of the IPO proceeds will go directly to these shareholders with the company not receiving anything out of it except for the proportionate issue expenses. The balance 42 per cent of the IPO issue involved fresh issue of equity shares, the proceeds of which will go to the company.


QIBs check in, but not the retail investor

On Wednesday, the second day of the high profile Rs 3,018 crore initial public offer (IPO) of Interglobe Aviation saw total bids across all investors crossing the issue size, but retail investors, non-institutional investors and employees did not bid fully for the shares reserved for them. The company operates the largest passenger airline in the country, IndiGo.
As per book-building bidding data from Bombay Stock Exchange’s website, at the end of Wednesday’s bidding process, the Interglobe IPO attracted bids for 4.67 crore shares in the price range of Rs 700 to Rs 765. The IPO size is for a total of 3.01 crore shares, excluding about 0.93 crore shares issued to anchor investors. The bidding data pertained to the cumulative demand from both exchanges, BSE and National Stock Exchange.
But the IPO was still, technically, not over-subscribed since only the qualified institutional buyer (QIB) category, for which 0.85 crore shares (excluding the anchor investor portion) is reserved, attracted a 5.2 times over-subscription.
The other three investor categories were partially subscribed. Retail investors, for whom 1.36 crore shares is reserved, collectively bid for only 0.19 times of their reserved portion. The non-institutional investor category, for which 0.58 crore shares is reserved, saw a marginal 0.04 times subscription, while the employee category portion of 0.22 crore shares saw a 0.04 times subscription.
Clearly, therefore, Thursday, the final day of the IPO, will be a crucial day so far as receiving the requisite subscriptions from retail investors, non-institutional and employees are concerned.
Around 58 per cent of the Interglobe IPO is an offer of sale by selling shareholders who were the earliest investors in the company. This part of the IPO proceeds will go directly to these shareholders with the company not receiving anything out of it except for the proportionate issue expenses. The balance 42 per cent of the IPO issue involves fresh issue of equity shares, the proceeds of which will go to the company.