By
Garden Reach IPO sails through; retail investors, HNIs stay away
Photo Credit: Thinkstock

The initial public offering of state-run warship maker Garden Reach Shipbuilders & Engineers Ltd crossed the ropes on the fifth day of the issue on Friday thanks to support from institutional investors.

The offering of 29.21 million shares received bids for 29.59 million shares, stock-exchange data showed.

The full subscription comes after Garden Reach became the first state-run company to fail to get enough bids for its maiden share sale and extended the IPO on Wednesday by three days till 1 October.

The issue was covered only 1.3% on the first day on Monday and just 3.5% on Tuesday. The sale was 68% covered at the end of Wednesday and made little progress on Thursday.

State-run banks and insurers as well as mutual funds bid for a huge chunk of shares, resulting in the institutional book being subscribed 1.8 times. Institutions such as SBI Mutual Fund, General Insurance Corporation, UTI Mutual Fund, Indian Bank and Punjab National Bank bid for Garden Reach’s shares to bail out the IPO, people in the know had told VCCircle previously on the condition of anonymity.

However, retail investors and non-institutional buyers such as corporate house and wealthy individuals remained lukewarm to the offering. Foreign institutional investors did not bid for a single share.

The portion set aside for retail investors was covered 23% while non-institutional investors used up about a third of their quota.

The IPO is entirely a sale of 29.21 million shares by the government. The government’s stake in Garden Reach will fall to 74.5% after the share sale from 100% currently.

Garden Reach had initially set a price band of Rs 115-118 for the IPO and cut the lower end to Rs 114 on Wednesday. At the upper end, it will have a valuation of about Rs 1,352 crore.

The company had filed its draft red herring prospectus with the Securities and Exchange Board of India in March. It received SEBI’s approval on 22 May.

IDBI Capital Markets & Securities and Yes Securities are managing the IPO.

Garden Reach’s IPO is part of the government’s disinvestment plan for the current financial year as it aims to boost rural and infrastructure spending as well as contain the fiscal deficit ahead of the 2019 general elections.

In 2018, the government has so far floated the IPO of railway consulting firm RITES Ltd. The IPO of state-run railway infrastructure engineering and construction company Ircon International Ltd received demand for nearly 10 times the shares on offer. However, shares of Ircon fell 12% on debut on Friday.

Other government-owned companies preparing for maiden share sales include Rail Vikas Nigam Ltd and Mazagon Dock Shipbuilders Ltd.

Leave Your Comment(s)