When the shares of ICICI Securities make their debut on the bourses on Wednesday, it will be the first time in almost three years that a company whose public issue remained largely undersubscribed will list on the stock exchanges.
The last time such an undersubscribed offering made it to the bourses was in September 2015 when Prabhat Dairy listed after its initial public offer (IPO) was subscribed only 0.76 times, according to data from Prime Database.
Prabhat Dairy
Further, a total of only 10 issues were undersubscribed between February 2007 and February 2018 before getting listed on the bourses and only one — Prabhat Dairy — saw less than 80% subscription. The rest of the issues in that period, though undersubscribed, still managed more than 90% subscription. Meanwhile, investment bankers of ICICI Securities have fixed the issue price at ₹520 — the upper end of the price band — after the issue was subscribed 0.78 times as institutional investors bailed out the offering at a time when retail and high net worth individuals did not show much interest.
As per NSE data, the institutional portion of the IPO was subscribed 1.04 times while the segments reserved for retail and high net worth individuals were subscribed 0.88 times and 0.36 times, respectively. Further, the portion reserved for ICICI Bank shareholders was subscribed 0.34 times.
‘HAL too stumbles’
Incidentally, government-owned Hindustan Aeronautics Ltd (HAL), which listed on March 28, was also undersubscribed but still managed subscription of 0.99 times before the firm decided to fix the issue price at ₹1,215, the lower end of the band.
“The two broad reasons why the issue does not get satisfactory response is primarily valuation and business model,” said Arun Kejriwal of Kejriwal Research & Investment Services. “It also shows that the general public has not understood the offering.
In the case of ICICI Securities, valuation was certainly expensive and its inability to [engage in] NBFC activity since it is promoted by a bank was a deficiency in the business model,” said Mr. Kejriwal.
The merchant bankers managing the IPO of ICICI Securities are Bank of America Merrill Lynch, Citi, CLSA, Edelweiss, IIFL and SBI Capital Markets.
