Parag Milk IPO pulls through after extended period

The initial public offering of Parag Milk Foods Ltd managed to sail through on the final day after the company extended the issue by three days due to tepid response from institutional investors.

The portion reserved for institutional investors was covered 1.15 times at the close on Wednesday, stock-exchange data showed. The portions earmarked for non-institutional investors and retail investors were subscribed 3.08 and 2.12 times, respectively. Overall, the issue was subscribed 1.83 times.

Parag Milk, which opened its IPO on May 4, was to close the issue on Friday, May 6. But it extended the issue and also cut the lower end of the price band from Rs 220 to Rs 215 a share. The upper end of the issue, at which the anchor investors had picked up shares earlier this week, has been retained at Rs 227 a share.

Parag Milk is the second dairy firm to struggle to cross the ropes after Prabhat Dairy Ltd. Prabhat Dairy also had to cut the price band and extend the IPO period after poor investor response last September.

Prabhat Dairy’s shares made a muted debut on the stock markets. Shares of Prabhat Dairy have barely changed since listing.

Ahead of the IPO, Parag Milk had raised Rs 342.86 crore ($52 million) from a clutch of anchor investors, including sovereign wealth funds of Norway and Abu Dhabi. Other investors include funds under Nomura, Morgan Stanley, Tata MF, Neuberger Berman and Quantum.

The IPO comprises a fresh issue of shares to raise Rs 300 crore and an offer for sale of about 20.05 million shares that could mobilise almost Rs 470 crore for the sellers.

The dairy firm had earlier trimmed the fresh issue and slightly increased the offer for sale. In the draft red herring prospectus filed in October, Parag Milk had proposed to raise Rs 325 crore through the fresh issue and pegged the number of shares to be sold by IDFC Alternatives and Motilal Oswal Private Equity and other shareholders at 19.85 million.

IDFC Alternatives retained the number of shares it is selling at the same level in the red herring prospectus, but Motilal Oswal PE increased the size.

IDFC Alternatives and Motilal Oswal PE hold 19.21% and 9.11% stake in the company, respectively, besides convertible debentures that will be converted into equity. Both are part-exiting.

 VCCircle was the first to report that Parag Milk might look at listing its shares even as other media reports suggested that it was in talks with various strategic players, including Dutch dairy cooperative FrieslandCampina to sell a majority stake.

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