Hindustan Aeronautics Ltd’s initial public offering (IPO) was fully covered on its final day Tuesday, thanks to support from Life Insurance Corporation (LIC) of India, while the public issue of Sandhar Technologies Ltd picked up pace after a slow start on Monday, reaching 40% subscription.
State-run aerospace and defence firm Hindustan Aeronautics’ IPO, which hit the Street after a five-year struggle, managed to sail through on the tail end of its final day.
The IPO, which has no anchor investors, received bids for 33.7 million shares out of 34.10 million shares on offer. The public issue was subscribed 99%, with a large portion of the bids flowing in the last few hours of the IPO, stock-exchange data showed.
Institutional buyers bid for 28.89 million shares, or 1.72 times the portion reserved for them.
Insurance behemoth LIC bid for shares worth Rs 2,500 crore, said three people aware of the development.
That accounts for roughly 60% of the total Rs 4,229 crore that the government aimed to raise through the public issue. LIC’s participation in the IPO could not be independently ascertained.
Foreign portfolio investors did not bid for a single share in the issue, data showed.
High net-worth individuals (HNIs) and corporate bodies bid for just 3.4% of the shares from their quota as IPO financing looked risky considering the weak undertone in the secondary markets.
In IPO financing, short-term capital is borrowed from various avenues, barring the banking one.
The portion set aside for retail investors, who cannot individually bid for shares exceeding Rs 2 lakh in value, was covered about 38%. The employee category, offering discounts, was subscribed 21%.
The public issue was subscribed 24% on the first day on Friday. It picked pace on the second day on Monday, with the IPO getting subscribed 45%.
Hindustan Aeronautics Ltd was seeking a valuation of Rs 41,464 crore ($6.4 billion) through its IPO, as calculated at the top end of the public issue’s share price band, Rs 1,215-1,240.
Retail investors were offered a discount of Rs 25 on the price at which the shares were allotted.
The promoter, the Union government, aimed to sell 34.10 million shares representing 10.2% stake in the firm through the public issue.
At the time of filing for the IPO last October, the government had decided to sell 36.15 million shares. However, the company bought back 27.11 million shares, or 7.5% stake, from the government two months later.
After this buyback, the number of shares for which money has been paid reduced from 361.5 million to 334.38 million, and, as a result, the size of the offer shrunk from 36.15 million to 34.10 million shares.
The government will get three years from the date of listing to bring its stake down to 75% or below to meet norms on minimum public holding.
Proceeds from the IPO could go towards meeting the fiscal deficit target for the current financial year, which has been revised from 3.2% to 3.5% of gross domestic product due to increased government spending.
A plan to list the firm was originally approved in 2012 but the company did not want to make key information public as part of the listing process. In 2013, it sought an exemption from the market regulator regarding the disclosure rule but did not get one.
In October last year, HAL filed its draft prospectus. In the same month, it got regulatory clearance.
Merchant bankers SBI Capital Markets and Axis Capital managed the IPO.
The Bengaluru-based firm was incorporated in 1963. It designs, develops, manufactures, repairs, overhauls and services a wide range of products including aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.
Its listed global peers include The Boeing Co., Airbus SE, Lockheed Martin, United Technologies and General Electric.
Other directly and indirectly listed firms in India’s defence space include Bharat Electronics Ltd, Reliance Naval (formerly Reliance Defence Engineering), Mahindra & Mahindra, Larsen & Toubro, and Cyient.
Automobile parts maker Sandhar Technologies Ltd’s public issue picked up pace on Tuesday after a slow start the previous day, thanks to institutional demand.
Sandhar’s public offering of 10.87 million shares, excluding anchor allotment, received bids for 4.38 million shares, stock-exchange data showed. The IPO, which closes on Wednesday, was subscribed 40.2% at the end of day two, that is, Tuesday.
The portion reserved for institutional buyers was subscribed 88%. High net-worth individuals and corporate bodies’ quota was covered 7.5%.
The category for retail investors, who cannot individually bid for shares exceeding Rs 2 lakh in value, was subscribed 27%.
The IPO was covered 5% at the end of day one, that is, Monday.
Gurugram-based Sandhar had raised Rs 153.74 crore ($23.6 million) from anchor investors, including venture capital firm Volrado Venture Partners, last Friday.
Sandhar sold 4.6 million shares to 15 anchor investors at the upper end of the IPO price band of Rs 327-332 apiece, it said in a stock-exchange filing.
Volrado Venture Partners Fund II bought 331,290 shares. Other anchor investors mostly included mutual funds.
Sandhar is seeking Rs 1,998 crore in valuation through the IPO. The company aims to issue fresh shares worth Rs 300 crore while private equity investor GTI Capital eyes selling its stake via the IPO.
VCCircle had previously reported that GTI Capital is likely to score neat returns from its bet on the auto parts maker.
Sandhar will join 50 auto parts makers on the stock exchanges. These include Minda Industries Ltd, JBM Auto Ltd, Motherson Sumi Systems, Bharat Gears and GNA Axles Ltd.
ICICI Securities and Axis Capital are the merchant bankers managing the IPO.
Sandhar was incorporated in 1987 by first-generation entrepreneur Jayant Davar. He is the co-chairman and managing director of the company.
The company builds safety and security systems for vehicles. It has 29 factories across eight states in India, besides two facilities in Spain and one in Mexico. It has one assembly and packaging centre in Poland. The company is setting up eight more units in India.
Sandhar had started operations as a supplier of sheet metal components to Hero MotoCorp, formerly Hero Honda Motors Ltd. Its existing clients include Eicher Motors, Honda Cars, Tata Motors, Ashok Leyland, Caterpillar and Bosch.
It caters to 79 Indian and global vehicle manufacturers across various segments. Sandhar makes 21 categories of products catering to different segments, including two-wheelers, passenger vehicles, commercial vehicles, off-highway vehicles and tractors.