India primary equity markets continued with strong momentum entering into 2018, with Apollo Micro Systems seeing record demand for its three-day public issue that closed on Friday.
The initial public offering (IPO) of 4.14 million shares, excluding the anchor allotment, received bids for 1.02 billion shares, stock exchange data showed. The book was covered nearly 248 times.
Mumbai-based construction firm Capacit’e Infraprojects Ltd had previously attracted record demand for its IPO in September 2017. Its maiden offering to the public was subscribed 183 times with strong demand across investor categories.
Securities depository firm CDSL and hypermarket chain Avenue Supermarts had seen very strong demand for their respective IPOs last year. To be sure, CDSL IPO is the most successful offering in India since Gurgaon-based FCS Software’s Rs 17.5 crore IPO in August 2005.
Hyderabad-based Apollo Micro Systems, which caters to the defence sector, saw a little over 101 times demand for shares reserved for qualified institutional buyers (QIB), stock exchange data showed.
The retail portion, in which bids cannot exceed Rs 2 lakh, was covered nearly 38 times the 2.11 million shares reserved for them. The portion set aside for non-institutional investors comprising corporate bodies and high net-worth individuals was covered 958 times, data showed.
The company raised Rs 46.64 crore by selling shares to a handful of anchor investors a day ahead of its IPO. Institutional investors subscribing to Apollo shares in the anchor allotment include Jupiter South Asia Investment Co and Sundaram Mutual Fund.
Anchor investors are institutional investors who accept a one-month lock-in period for a sizeable allocation of shares and support a public offering. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.
Apollo Micro Systems is seeking a valuation of Rs 573.12 crore ($90.1 million) through the IPO that will result in roughly 28% stake dilution on a post-issue basis.
The IPO size is pegged at Rs 160.62 crore at the upper end of the Rs 270-275 apiece price band.
The offering is entirely a fresh issue of shares. The company will use Rs 118.92 crore of the net IPO proceeds towards working capital requirement and the remaining part for general corporate purposes.
On the grey market, shares of Apollo Micro Systems were quoting a premium of Rs 285-290, up 105% its IPO price, said two dealers requesting not to be identified.
The grey market is a pseudo, over-the-counter market where IPO shares are traded before the official listing on a stock exchange.
Incorporated in 1997, Apollo provides electronic, electro-mechanical, engineering designs, manufacturing and supply as well as develop and sell mission- and time-critical solutions for defence, space and homeland security to India’s Defence Ministry.
The company offers custom-built COTS (commercially off-the-shelf) solutions based on specific requirements to defence and space customers.