The initial public offering of state-run Indian Railway Catering and Tourism Corp. (IRCTC) crossed most of the distance on the first day of the issue on Monday, thanks mainly to retail investors.
The offering of 20.16 million shares was covered 81% after receiving bids for nearly 16.34 million shares, stock-exchange data showed.
While the portion set aside for qualified institutional buyers (QIBs) received only a handful of bids, the quota of shares reserved for retail investors was covered 2.22 times.
Non-institutional investors, such as corporate houses and affluent individuals, bid for a little over 21% of the shares reserved for them.
High net-worth individuals (HNIs) typically invest in large quantities on the final day of the issue to save on the interest cost on the short-term capital they borrow to fund their IPO applications.
On the grey market, shares of IRCTC shares were quoting at a premium of Rs 140-160 apiece over the price band of 315-320 per share. This indicates high demand for the company’s shares and means that HNIs might place more bids on the third and final day on Thursday, two grey market dealers told VCCircle.
Banks, offices and financial markets are closed on Wednesday for Gandhi Jayanti public holiday.
Retail investors and IRCTC employees will get a discount of Rs 10 on the price at which the shares are allotted.
IRCTC, which provides online ticketing service for the world’s fourth-biggest rail network, is seeking Rs 5,120 crore ($721 million) in valuation through the IPO that is entirely a share sale by the government. At the upper end of the price band, IRCTC’s public offering will fetch the government Rs 645 crore ($91 million). The sale is part of the government’s disinvestment programme.
The IPO will bring down the government’s stake to 87.4% from 100% earlier. It will get three years from the listing date to bring its stake down to 75% or below as per the minimum public shareholding norms for listed companies.
The company had filed its draft prospectus last month and received approval from the capital markets regulator on September 17. VCCircle had first reported about IRCTC’s IPO plans and merchant banker appointment in May 2017.
IDBI Capital Markets & Seucities, SBI Capital Markets and Yes Securities (India) are arranging the share sale.
Incorporated in September 1999, IRCTC is the sole catering services provider and online ticketing platform to the Indian Railways. It also sells packaged drinking water at railway stations and on trains, and offers travel packages.
IRCTC is Asia’s busiest and world’s second most active website, with an average 15-18 million people transacting per month for the quarter ended June 2019.