Regional cable TV and broadband distribution firm Ortel Communications Ltd barely managed to see through its initial public offer (IPO) after its private equity backer decided to cut the offer-for-sale portion of the issue.
As per data collated by the stock exchanges, the issue saw just 75 per cent subscription of the issue available to the public after the anchor allotment portion.
The public issue size was 9.45 million shares excluding the 2.55 million shares picked by anchor investors. This included a fresh issue of shares besides an offer for sale by New Silk Route (NSR). The PE firm was looking to part exit in the IPO.
Of the total 12 million shares on offer, NSR had offered to sell 6 million shares while Ortel offered 6 million fresh shares. Of this 9.67 million shares were subscribed in total including anchor allotment portion.
Kotak Mahindra Capital was managing the issue. A spokesperson for the investment bank said the portion of offer-for-sale by NSR has been reduced and the issue has sailed through.
This means NSR cut the number of shares it sold from targeted 6 million to around 3.67 million.
Although the issue sailed through after cutting the overall size, this comes as a big blow to the bevy of firms waiting to go public in India and sends a weak signal of investor appetite for the primary market.
Early this year a small edible oil firm NCML Industries Ltd was forced to withdraw its IPO after a poor response. The firm had previously extended the time period for the issue and also cut the price band to attract investors.
But, the firm, which had reserved bulk of the issue for retail investors, failed to woo them even as institutional and HNI & corporate investors almost subscribed to their full portion as of the penultimate day.
Ortel, in contrast, saw HNIs largely ignoring the issue and retail investors also passing it on with only 39 per cent subscription and only institutional investors’ portion seeing full subscription.
Earlier, Ortel roped in Axis Mutual Fund and ICICI Prudential Insurance as anchor investors in the IPO. The two investors had committed to pick 2.55 million shares for Rs 46.2 crore ($7.5 million). While Axis Mutual Fund agreed to buy 0.9 million shares for Rs 16.3 crore, ICICI Prudential Insurance had committed the remaining amount. Notably, they had agreed to buy the shares at the lower end of the price band of Rs 181-200 a share. This itself set a weak tone to the public issue.
Ortel was eyeing to raise up to Rs 120 crore through fresh issue of shares besides an offer for sale worth around Rs 108.6-120 crore by NSR.
NSR, which was initially looking to part exit but had offered to sell its entire holding when Ortel filed its draft red herring prospectus (DRHP) last September, again changed its plan and offered to sell around three-fourth of its holding as part of the offer for sale. With this IPO, it now gets to offload just over half of its holdings.
Ortel had previously looked at a public float around five years ago, when NSR was looking to exit completely. However, it did not go ahead with the IPO due to poor market conditions. In 2013 it had re-filed its documents but later withdrew it.
Monte Carlo Fashions was the last IPO to clear the rope three months ago.
Earlier, Shemaroo Entertainment, another non PE-backed firm, had managed to see through its issue comfortably.
The two previous issues of PE-backed firms Sharda CropChem and Snowman Logistics saw bumper IPOs and both were oversubscribed 59x at the end of their issues. Comparatively, the last successful IPO of Monte Carlo, another PE-backed firm, had seen tepid response even though it finally closed with almost 7x oversubscription.
Buoyant primary market is crucial for both PE firms looking at liquidity from their past investments as also for firms looking at new source of capital as lending rates remain high.
Several PE-backed firms are in the queue to float their shares in the public market.
(Edited by Joby Puthuparampil Johnson)