Varroc Engineering IPO hits one-third mark; CDPQ among anchor investors
Photo Credit: Mukul Mudgal

The initial public offering of auto components maker Varroc Engineering Ltd reached the one-third mark on the first day on Tuesday, thanks to strong interest from institutional investors.

The Tata Opportunities Fund-backed company received bids for 4.61 million shares at the end of the first day. That’s 32.6% of the total 14.18 million shares on offer, stock-exchange data show.

The portion of 4.02 million shares reserved for institutional buyers was fully subscribed, while that for retail investors was covered 5.5%. Non-institutional investors remained largely on the sidelines.

A day ahead of the IPO, the company raised Rs 583.7 crore ($86 million) from anchor investors including Canadian pension fund CDPQ.

Varroc allocated a tad more than 6 million shares to 18 anchor investors at Rs 967 apiece, it said in a stock-exchange filing late Monday.

Eight mutual funds accounted for about two-fifths of the total allocation while SBI Life Insurance Company Ltd and Bajaj Allianz Life Insurance Company Ltd also bought some shares.

CDPQ, short for Caisse de depot et placement du Quebec, bought shares worth almost Rs 11 crore while a private equity arm of Edelweiss purchased shares worth about Rs 10 crore.

Smallcap World Fund Inc. bought the biggest chunk of the shares, totaling about Rs 100 crore.

The IPO opened on Tuesday and will close on Thursday. Varroc Engineering is eyeing a valuation of as much as Rs 13,036 crore ($1.9 billion) through the share sale.

The auto components maker has set a price range of Rs 965-967 a share for the issue. At the upper end of the range, the IPO will raise about Rs 1,955 crore.

The public issue comprises a sale of 20.22 million shares, according to the red herring prospectus. This marks an increase from the 18.53 million shares proposed in the draft red herring prospectus. The revised offer will result in a 15% stake dilution on the post-issue basis compared with 13.75% earlier.

Singapore-based Omega TC Holdings Pte Ltd, a fund managed by Tata Opportunities, and Tata Capital Finance Services will sell their entire holding in the IPO.

Omega will sell all the 16.91 million shares it holds. Tata Capital Finance will sell all the 1.55 million shares it owns. Promoter Tarang Jain is selling a small chunk of shares.

The company will not receive any proceeds from the offer, and the money will go to the promoter and existing private equity shareholders.

Varroc had filed its draft red herring prospectus with the capital markets regulator on 28 March. The Securities and Exchange Board of India had approved the IPO on 6 June.

Kotak Mahindra Capital Co, Citigroup Global Markets India, Credit Suisse Securities (India) and IIFL Holdings are the merchant bankers managing Varroc Engineering’s IPO.

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