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PE-backed Prince Pipes’ IPO subscribed nearly 75% on second day
Photo Credit: VCCircle

The initial public offering (IPO) of PVC pipe manufacturer Prince Pipes and Fittings Ltd almost reached three-fourths of the distance on the second day on Thursday thanks to bids from individuals as well as institutional investors.

The offering of 19.77 million shares, excluding the anchor allotment, received bids for nearly 14.56 million shares, stock-exchange data showed. The book was subscribed 73.6%. The IPO was subscribed 28% on Wednesday.

At the end of the second day, retail investors had bid for 1.05 times the shares reserved for them while the institutional buyers’ portion received bids for a little over 68% of the quota set aside for them.

Non-institutional, non-retail investors comprising corporate bodies and high net-worth individuals (HNIs) bid for nearly 6% of shares reserved for them.

HNIs typically invest in large quantities on the final day of the issue to save on the cost of interest. HNIs 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 place large bids.

On the grey market, shares of Prince Pipes were quoting at a premium of Rs 8-10 apiece over its price band of Rs 177-178 apiece, two grey market dealers told VCCircle.

A day ahead of the IPO, Prince Pipes raised 150 crore ($21.1 million at current exchange rates) from a bunch of anchor investors including mid-market private equity firm Oman India Joint Investment Fund (OIJIF).

A fortnight before the IPO, the company had roped in mid-market growth-equity firm and clean-tech investor Global Environment Fund (GEF) as an investor. GEF’s South Asia Growth Fund II, focused on energy and water efficiency in India and Bangladesh, infused Rs 106 crore ($15 million) for a roughly 5.5% stake on a post-IPO basis.

Prince Pipes, which makes PVC pipes for plumbing, irrigation and sewage works, is seeking Rs 1,958.45 crore ($277 million at current exchange rates) in valuation through the IPO. The public offering closes on Friday.

The Rs 500-crore IPO comprises a fresh sale of shares worth Rs 250 crore and a secondary sale worth Rs 250 crore by the promoter and members of the Chedda family.

Prince Pipes had originally filed for an IPO in September 2017. It had received regulatory approval in November the same year. At that point, it was looking to raise Rs 700 crore. However, macro-economic factors and global events resulted in a sharp decline in the stock market, including its listed peers, prompting the firm to put the IPO on ice.

In October 2018, the company had filed a revised draft red herring prospectus and cut its offer size to Rs 600 crore.

Now, the company will use the fresh net proceeds to repay loans. It will also use the money to finance a new manufacturing facility, upgrade equipment at existing factories and for general corporate purposes.

JM Financial Institutional Securities Ltd and Edelweiss Financial Services Ltd are the merchant bankers managing the share sale.

A successful listing will see Prince Pipes join listed peers such as Astral Poly Technik Ltd, Finolex Industries Ltd and Supreme Industries Ltd.

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