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Tejas Networks’ IPO covered less than twice on final day

16 June, 2017

Bangalore-based telecom equipment maker Tejas Networks Ltd’s initial public offering was covered a tad less than twice the issue size on the final day on Friday, weighed down by a lack of enthusiasm among non-institutional investors.

The offering of 17.11 million shares–excluding the anchor investors’ portion–received bids for nearly 32.12 million shares, or 1.88 times, stock-exchange data showed.

The IPO was covered about 40% on Thursday and 11% on the opening day on Wednesday.

On Friday, retail investors’ portion was subscribed a little more than three times the shares reserved for them.

The quota of shares reserved for institutional buyers was subscribed a tad more than two times. The portion set aside for non-institutional investors, such as corporate houses and wealthy individuals, however, was covered just 50%.

The firm is seeking a valuation of around Rs 2,301 crore ($360 million) through the IPO. The IPO size is pegged at Rs 776.68 crore at the upper end of the price band for a 33.75% stake dilution on a post-issue basis.

The IPO comprises a fresh issue of shares worth Rs 450 crore and an offer for sale of 12.71 million shares by founders and other shareholders including Frontline PE and Intel Capital. Frontline is fully exiting while Intel Capital is selling part of its stake.

On Tuesday, Tejas Networks raised Rs 350 crore ($55 million) by selling shares to a bunch of anchor investors. The company allotted 13.59 million shares at Rs 257 apiece, the upper end of the Rs 250-257 price band.

Abu Dhabi Investment Authority (ADIA), US-based private equity firm East Bridge Capital and PremjiInvest, the family investment arm of Wipro Ltd chairman Azim Premji, were among the anchor investors that bet on Tejas Networks.

The company had filed a draft red herring prospectus with the Securities and Exchange Board of India for an IPO on 10 February. It received SEBI’s final observations on 24 April.

Tejas Networks plans to use Rs 45.28 crore from the IPO proceeds toward capital expenditure needs such as payment of salaries and wages. It intends to use Rs 303 crore toward working capital requirement and an undisclosed amount for general corporate purposes.

The shareholders who plan to sell their holdings in the IPO include Cascade Capital Management Mauritius, Intel Capital and Frontline Strategy. A number of individuals are also selling their shares. These include CEO Sanjay Nayak and CTO Kumar N Sivarajan.

Cascade Capital is believed to be controlled by co-founder Gururaj ‘Desh’ Deshpande, who had become a billionaire during the dotcom boom at the turn of the century. Deshpande is also the brother-in-law of Infosys co-founder NR Narayana Murthy. Cascade Capital owns 31.38% of Tejas Networks.

Intel Capital, through two entities, holds about a 7.66% stake in Tejas Networks while Frontline, through its India Industrial Growth Fund, owns 3.61%.

Other main shareholders of Tejas Networks include Samena Spectrum Co (20.09%) and Mayfield (10.21%).

Axis Capital Ltd, Citigroup Global Markets India Pvt. Ltd, Edelweiss Financial Services Ltd, and Nomura Financial Advisory and Securities (India) Pvt. Ltd are managing the IPO.

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Tejas Networks’ IPO covered less than twice on final day

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