State-run warship maker Mazagon Dock Shipbuilders Ltd received a bumper response to its initial public offering (IPO) on the final day on Thursday with strong investor interest across all categories, while the public offering of UTI AMC managed to sail through at the eleventh hour.
Mazagon Dock’s public offering of nearly 30.6 million shares received bids for over 4.81 billion shares at the end of the third and final day of bidding, stock exchange data showed. The book was subscribed 157.4 times.
The quota of shares reserved for retail investors was covered 35.63 times. Institutional investors bid for 89.71 times the shares reserved for them, the data showed.
Non-institutional investors -- corporate houses and affluent individuals -- placed orders for nearly 679 times the shares reserved for them.
High net-worth individuals (HNIs) typically invest in very large quantities on the final day of the issue to save on the cost of interest. They borrow short-term capital from various avenues, barring banks, to fund their IPO applications in what is known as IPO financing.
These investors deploy a small fraction of their own capital—which is called margin money—upfront. Additional capital raised through short-tenure loans help HNIs or wealthy investors to place large bids in an IPO.
On the grey market, shares of Mazagon Dock were quoting at a premium of Rs 140-150 apiece over the price band of Rs 135-145, and that perhaps explains the investor interest in the IPO, a grey market dealer told VCCircle.
The IPO started on a strong note on the first day on Tuesday, with the book covered 2.1 times. Bids continued to pour on the second day on Wednesday with the issue subscribed 7.5 times.
Mazagon Dock’s IPO is part of the government’s disinvestment programme. The company is seeking a valuation of as much as Rs 2,924.5 crore ($396 million).
The government is selling 15.17% stake in the Mumbai-based company which isn’t issuing any new shares. At the upper end, the government will mop up Rs 444 crore.
Mazagon Dock, which is fully owned by the government of India, is the first state-run company to go public in the financial year that began in April.
As part of the disinvestment programme, the government has sold a part of its stake in two other listed companies this fiscal year so far—Hindustan Aeronautics Ltd and Bharat Dynamics Ltd—raising a total of almost Rs 5,696 crore.
In February, the government had set an ambitious target to raise Rs 2.1 trillion ($28.4 billion) from asset sales in 2019-20. It has so far met less than 3% of the goal.
A successful IPO and listing will see Mazagon Dock join listed peers such as state-run Cochin Shipyard Ltd, which went public in August 2017, and Garden Reach Shipbuilders & Engineers Ltd.
Mazagon Dock had received regulatory nod for its IPO in December last year.
This was the second time Mazagon Dock had filed its IPO proposal.
It had previously planned a share sale in 2018, when the government wanted to sell a 10% stake in the company.
Yes Securities (India) Ltd, Axis Capital Ltd, Edelweiss Financial Services Ltd, JM Financial Ltd and DAM Capital Advisors Ltd (earlier known as IDFC Securities Ltd) are the merchant bankers managing the IPO.
Mazagon Dock has a long history. It operated as a small dry dock in Mazagaon village in Mumbai to service the ships of the British East India Company in 1774. The dock was then developed into a ship repair yard and later a ship-building yard over the course of two centuries.
The company was incorporated as a private firm in 1934, and was acquired by the government in 1960 to expand its warship development programme. Since 1960, it has built 795 vessels.
Mazagon Dock constructs and repairs warships and submarines for use by the Indian Navy and commercial clients. It is India’s only shipyard to have built destroyers and conventional submarines for the Indian Navy, besides being one of the initial shipyards to manufacture corvettes (or small warships).
The company operates two verticals: One builds and repairs naval ships, and the second builds and repairs diesel electric submarines, among others.
UTI AMC’s IPO of 27.35 million shares, excluding the anchor allotment, received bids for 63.102 million shares on the third and final day, stock exchange data showed. The book was subscribed nearly 2.31 times.
The quota of shares reserved for retail investors was covered nearly 2.32 times, while institutional investors’ portion was covered 3.34 times of the shares reserved for them, data showed.
But, wealthy individual investors gave it a miss. Non-institutional investors -- corporate houses and high net-worth individuals (HNIs) -- placed bids for nearly 93% of the shares reserved for them.
The IPO crossed the one-fourth mark on day one on Tuesday and received 75% demand at the end of day two.
A day prior to the IPO, the company raised Rs 644.64 crore ($87.3 million) from a bunch of anchor investors by allotting 11.636 million shares at Rs 554 apiece.
UTI AMC had set the price band for its IPO in the range of Rs 552-554 per share. The IPO comprised share sales by Life Insurance Corp., state-run lenders State Bank of India, Bank of Baroda and Punjab National Bank, and US-based asset management firm T Rowe Price.
UTI AMC will be the third fund house to be listed on the bourses, after HDFC Asset Management Co. and Nippon Life India Asset Management Ltd. HDFC AMC went public in 2018 and Nippon India Mutual Fund the year before.
The company is India’s second-largest asset manager, behind SBI Mutual Fund, after taking into account the money it manages under mutual funds, pension funds, alternative investment funds, the national pension scheme and assets of the Employees’ Provident Fund Organisation.
However, in terms of quarterly average mutual fund assets under management, it is the eighth-largest asset management company (AMC).