The initial public offering (IPO) of Hyderabad-based micro lender Spandana Sphoorty Financial Ltd made some progress on the second day on Tuesday, while solar power infrastructure company Sterling & Wilson Solar Ltd’s issue got off to a slow start on its first day owing to stock market volatility.
Spandana’s public offering of 9.82 million shares, excluding the anchor allotment, received bids for 2.7 million shares. That amounts to a subscription of 27% at the end of day two, stock-exchange data showed.
The portion set aside for qualified institutional buyers saw nearly 75% subscription while the quota reserved for non-institutional investors, such as corporate houses and affluent individuals, saw 20% bids.
The portion of shares reserved for retail individual investors, whose bid application cannot exceed Rs 2 lakh in value, was subscribed about 3%.
High net-worth individuals (HNIs) typically invest in very large quantities on the final day of the issue to save on interest cost. 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 or wealthy investors place large bids in an IPO.
Spandana's IPO made a slow start on its first day on Monday after nearly 6% demand for its shares.
Indian shares partially recovered Monday's losses as traders squared off short positions on hopes of a possible rate cut by the Reserve Bank of India (RBI).
On the grey market, Spandana was quoting at a premium of Rs 8-10 over its price band of Rs 853-856 apiece. Last week, Spandana quoted at a premium of Rs 10-15 over its price band. The grey market is an over-the-counter market where IPO shares are traded before the official listing on a stock exchange.
Spandana attracted prominent domestic and foreign investors, including a private equity firm and a hedge fund, as anchor investors last Friday. It raised Rs 360.28 crore ($51.7 million) by allotting nearly 4.21 million shares to 18 anchor investors at the upper end of its price band.
Spandana is seeking a valuation of Rs 5,504.64 crore ($791 million) from the IPO.
The IPO is a combination of a fresh shares worth Rs 400 crore and an offer for sale worth Rs 800 crore by the microlender’s institutional backers. The IPO will see a stake dilution of 21% on a post-issue basis. That's lower than the 27.71% stake dilution expected at the time the company filed for its IPO.
Spandana counts homegrown private equity firm Kedaara Capital, venture capital firm Helion Venture Partners and strategic investor Valiant Mauritius Partners FDI Ltd as its backers.
Kedaara and other investors were previously hoping to raise an estimated Rs 1,125 crore by selling 13.15 million shares. Instead, they are now selling a total of 9.35 million shares.
Sterling & Wilson
Sterling & Wilson's public offering of nearly 22.17 million shares, excluding the anchor allotment, received bids for nearly 2.11 million shares. That amounts to a subscription of nearly 10% at the end of day two, stock-exchange data showed.
The portion set aside for qualified institutional buyers saw 6% subscription while the quota for non-institutional investors, such as corporate houses and affluent individuals, saw 19% bids.
The portion of shares reserved for retail individual investors, whose bid application cannot exceed Rs 2 lakh in value, was subscribed about 6%.