The initial public offering of Avenue Supermarts Ltd sailed through on the first day of the issue on Wednesday thanks to record demand from investors looking to bet on the company that runs hypermarkets under the D-Mart brand.
The public offering received bids for 1.38 times the 44.37 million shares on offer, stock-exchange data showed. This is the best first-day performance for an Indian IPO since Microsec Financial Services Ltd’s IPO six-and-a-half years ago.
Kolkata-based Microsec’s Rs 150-crore IPO in September 2010 received 1.57 times subscription on day one. Overall, its IPO was covered 12.2 times at the end of bidding.
In 2016, IPOs of two companies—L&T Infotech Ltd and Mahanagar Gas Ltd—were fully covered on the first day.
The IPO of the IT services arm of engineering giant Larsen & Toubro Ltd was covered 1.23 times on the first day of the issue in July 2016. Overall, the Rs 1,243-crore offering was subscribed 11.69 times.
Compressed natural gas supplier Mahanagar Gas had seen 1.1 times demand for its shares on the first day of its IPO. Overall, the Rs 1,040-crore offering in June 2016 was subscribed 64.54 times.
Avenue Supermarts joins FM radio operator Music Broadcast Ltd and stock-exchange operator BSE Ltd in floating successful public offerings this year. The three IPOs extend the good run after a blockbuster 2016 when fundraising by companies via initial share sales jumped to a six-year high to almost Rs 26,500 crore.
The IPO market in India picked up pace after four years of slow activity in mid-2014 when the BJP-led government took over. In 2015, 21 companies had raised about Rs 14,000 crore, as per stock-exchange data.
The IPO of BSE, in January this year, was oversubscribed 50 times while Music Broadcast’s issue closed on Wednesday with 39 times subscription.
Stock-exchange data showed that the retail investors’ book was subscribed 1.43 times the shares reserved for them.
The quota of shares reserved for institutional buyers was subscribed almost twice. The portion set aside for non-institutional investors such as corporate houses and wealthy individuals was covered 52%.
On Tuesday, Avenue Supermarts had raised Rs 561 crore ($84 million) by selling 18.76 million shares at Rs 299 apiece to anchor investors including private equity firm General Atlantic and Singapore’s sovereign wealth fund GIC Pte Ltd.
PremjiInvest, the investment arm of Wipro Ltd chairman Azim Premji, as well as Norway’s Government Pension Fund Global, venture capital firm Volrado Venture Partners and a dozen mutual funds were among the other anchor investors.
The IPO closes on Friday. The company has set a price band of Rs 295-299 a share for the offering.
The company is seeking a valuation of as much as Rs 18,660 crore ($2.8 billion). At that valuation, the company would surpass the combined $2.5 billion market capitalisation of four of its well-known peers—Shoppers Stop Ltd, V-Mart Retail Ltd, V2 Retail Ltd and Future Retail Ltd.
Including the anchor portion, the IPO comprises a fresh issue of shares worth Rs 1,870 crore ($280 million).
Avenue Supermarts will use almost 20% of the net proceeds to repay debt and a part of it to open new stores.
Two grey market dealers told VCCircle that the premium on Avenue’s shares on Wednesday increased to Rs 235-240 apiece over its price band, compared with Rs 230-235 apiece on Tuesday. The grey market is an over-the-counter market where shares are traded before they are listed on a stock exchange.
For more details of the IPO, click here.
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