The initial public offer of public sector oil company OIL Ltd has defied concerns over investor interest with almost 30 times oversubscription. As against the issue aiming to raise upto Rs 2,777 crore ($566 million) it got bids worth around Rs 85,000 crore ($17.7 billion).
Although in terms of fund commitment, NHPC issue (issue size of Rs 6,000 crore) recorded better interest with investors applying for shares worth a staggering Rs 1.43 lakh crore ($29.5 billion), oversubscription for OIL Ltd was higher than that of the government owned hydro power generator.
Final data is still being compiled but as of the penultimate day, the issue appeared to get overwhelming response from institutional investors even as others such as HNIs and retail investors were lukewarm to it.
For instance, qualified institutional buyers (QIB) which includes both foreign institutional investors and domestic institutions had bid for shares, seven times what is reserved for them. In contrast retail investors had applied for just about one third of their pie while others such as corporates and high net worth investors (HNIs) had not even bid for one tenth of what is reserved for them as a category.
The HNIs had in particular faced heavy losses in the previous two large IPOs– Adani Power and NHPC. Many investors had struck off market deals through the grey market even before the stock listed to buy them at high grey market rates. But the poor show of the scrips post listing led to losses for them and raised concerns on their participation in future issues.
In the meantime strong demand from FIIs and other domestic institutions clearly led the way for OIL Ltd, as also the rising stock market which is now slowing moving towards the previous highs before market tanked in January 2008.
One aspect which could have played on the minds of investors is that OIL was perceived to be fairly valued in the price band of Rs 950-1,050/share. Some analysts were speculating that the merchant bankers could look to hardsell the issue with the upper end of the price around Rs 1,400 but the final issue price band could have given some comfort to investors that there is something left on the table for post listing gains.