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Adlabs Entertainment IPO fully covered on day 6

17 March, 2015

Theme parks operator Adlabs Entertainment Ltd finally cleared the ropes to see through its initial public offer (IPO) in the dying hours of an extended public issue. The PE-backed firm’s issue was covered 1.1x or saw applications for shares which was just marginally more than the total that the firm had offered to sell in the issue.

The push to the issue came from institutional investors who also fully subscribed to their share of the issue. Earlier retail investors had covered their portion.

At the end of the IPO, institutional investors portion was covered 1.17x while retail investors bid for 1.37x the number of shares reserved for them. HNIs and corporate investors, did not find the issue attractive and they bid for just under half of the shares allocated for them, exchange data shows.

At the end of day 5, the issue had not even reached the two thirds mark and as late as three hours to the issue closure it was faring poorly.

Earlier, the firm cut the price band of the IPO and extended the time period of the issue, which was to close last Thursday, by another three trading days hoping to attract investors. This was after it failed to see through its issue as originally planned.

The price band had been revised to Rs 180-215 a share from Rs 221-230 a share.

The firm had offered 17.6 million shares to the public after the anchor allotment portion where it raised Rs 60 crore (just under $10 million) from a hedge fund under Edelweiss, besides a string of mutual funds under Axis, L&T Fin, HDFC AMC and a fund under Daiwa. The anchor investors had picked the shares at the lower end of the Rs 221-230 a share price band of the IPO.

The overall issue, including the anchor allotment portion, comprises 20.03 million shares of which around a tenth is through an offer for sale by the promoters.

At the new price band, the firm would be able to raise a maximum of Rs 436 crore including anchor investors commitment as against up to Rs 464 crore with the previous pricing. The company is yet to fix the issue price.

The IPO had got off to a slow start with subscription of just 3 per cent on the first day which only managed to reach 18 per cent at the end of day 2 and thereafter to 44 per cent as of day 3.

Adlabs is backed by ICICI Venture, which invested in the company in mid-2013 and Jacob Ballas, which came in as a pre-IPO investor a few months ago. ICICI Venture holds 16.95 per cent stake while NYLIM-JB owns 4.13 per cent and Jacob Ballas separately owns 0.22 per cent.

With the new IPO price band, ICICI Venture is now sitting on a potential upside of 30-56 per cent while Jacob Ballas is sitting on 15 per cent paper gains at the upper end of the price band. If the issue price is fixed at the lower end, its investment would be underwater.

Adlabs’ issue is being managed by Deutsche Equities, Centrum Capital and Kotak Mahindra Capital.

This was the second public issue which failed to attract investors in droves as in the past. Early this month, another PE-backed firm Ortel Communications had to cut the overall issue size as it was covered only three-fourth of the target size. It managed to sail through after its investor New Silk Route decided to cut the size of the offer-for-sale portion of the IPO.

With these two issue faring poorly, there is a question mark over how conducive is the primary market to fresh issues. Several firms including PE-backed companies are in the queue to float their IPOs and were hoping to capitalise on the positive sentiments in the secondary market to generate profitable exits or part-exits.

Secondary market has been buoyed up over the last one year with the benchmark indices recently hitting new milestones. They have retreated from their highs in the past few days.


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Adlabs Entertainment IPO fully covered on day 6

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