The initial public offering of state-run aerospace and defence firm Hindustan Aeronautics Ltd approached the one-fourth mark on the first day on Friday led by institutional investors.
The public issue, which has no anchor allotment portion, received bids for 8.1 million shares against 34.10 million shares on offer. The book was subscribed nearly 24%, stock exchange data showed.
Institutional buyers bid for 7.23 million shares, or 43% the portion reserved for them. High net-worth individuals and corporate bodies bid for a handful of shares from their quota, the data showed.
The portion set aside for retail investors, who cannot individually bid for shares exceeding Rs 2 lakh in value, was covered 7%.
HAL’s IPO closes on 20 March, Tuesday. The firm is seeking a valuation of Rs 41,464 crore ($6.4 billion) through its Rs 4,229 crore maiden public offering.
The company eyes the valuation at the upper end of its per-share price band of Rs 1,215-1,240. Retail investors will get a discount of Rs 25 on the price at which shares are allotted.
Through the public issue, the promoter government will sell 34.10 million shares representing 10.2% stake.
At the time of filing for the IPO in October 2017, the government had decided to sell 36.15 million shares. However, the company bought back 27.11 million shares, or 7.5% stake, from the government two months later.
After this buyback, the number of shares for which money has been paid reduced from 361.5 million to 334.38 million, and, as a result, the size of the present offer has shrunk from 36.15 million to 34.10 million shares.
The government, which owns 100% in the company, will get three years from the date of listing to bring its stake down to 75% or below to meet norms on minimum public holding.
A plan to list HAL was originally approved in 2012 but the firm did not want to make key information public as part of the listing process. In 2013, it sought an exemption from the market regulator regarding the disclosure rule but did not get one.
In October 2017, HAL filed its draft prospectus. In the same month, it got regulatory clearance.
Merchant bankers SBI Capital Markets and Axis Capital will manage the IPO.
Other directly and indirectly listed firms in the defence space include Bharat Electronics Ltd, Reliance Naval (formerly Reliance Defence Engineering), Mahindra & Mahindra, Larsen & Toubro and Cyient.
HAL’s listed global peers include US firm The Boeing Co., European multination corporation Airbus SE, Lockheed Martin, United Technologies and General Electric.
Proceeds from the HAL IPO could go to meet the fiscal deficit target for the current financial year, which has been revised from 3.2% to 3.5% of gross domestic product due to increases government spending .
Bengaluru-based HAL was incorporated in 1963. It designs, develops, manufactures, repairs, overhauls and services a wide range of products including aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.
HAL is India's largest aerospace firm and ranks 39th on the global list of aerospace companies based on annual revenue in dollar terms, according to a 2016 report by Flight International, an aerospace and aviation sector data and analytics firm.
The company reported a consolidated net profit of Rs 2,624.7 crore for the financial year ended 31 March 2017. Its consolidated net profit stood at Rs 2,004.3 crore and Rs 994.1 crore for FY2015-16 and FY2014-15, respectively.
Its revenue (minus excise duty) has grown at a compound annual rate of 7.11% from FY2014-15 to FY2016-17.
As on 31 July 2017, the value of its order book stood at Rs 63,333 crore (nearly $10 billion).