Gas distributor Mahanagar Gas Ltd made a strong debut on the stock markets on Friday with its shares listing 28% higher than its initial public offering (IPO) price.
The shares opened trading at Rs 540 apiece on the BSE compared with the IPO price of Rs 421. The shares climbed to Rs 549.15 before ending 23.5% higher at Rs 519.90.
The sole gas distribution firm in Mumbai is now valued around Rs 5,100 crore ($755 million). In comparison, Indraprastha Gas Ltd (IGL), which supplies natural gas in New Delhi and adjoining areas, is valued around Rs 8,620 crore. IGL was listed on the bourses in late 2003. Its shares touched a one-year high on Friday, before paring some gains on profit-taking by investors.
The spectacular debut of Mahanagar Gas comes after it attracted a deluge of investors for its IPO that was oversubscribed 63 times. Institutional investors bid for 72 times the number of shares reserved for them while high net-worth individuals and companies bid for as much as 191 times their portion. Retail investors bid for six times their quota, stock-exchange data show.
The company is a joint venture of state-run GAIL India Ltd and BG Group, now part of Royal Dutch Shell Plc. The IPO, which was fully covered on the first day itself, was entirely an offer for sale of 12.3 million shares each by GAIL and BG. The issue was worth about Rs 1,040 crore, including Rs 309 crore it mobilised from anchor investors.
Mahanagar Gas is the 12th firm to see through its IPO amid volatility in the stock market early this year due to concerns of bad loans of state-run banks and the slow pace of economic reform. Although the banking sector’s problem continues to rile investors and many analysts take India's claim of being the fastest-growing major economy with a pinch of salt, the government has been trying to rekindle its reform push and recently eased foreign investment norms in several sectors.
While a number of firms have decided to put their IPO plans on the back burner, some are still on track to go public. The positive response to the Mahanagar Gas IPO strikes the right chords for the primary market. This also comes at a time when the secondary market has once again risen from the recent lows and is now just 10% short of its all-time highs.
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