Mumbai: Retail investors continue to cold shoulder the government’s divestment programme. They picked up just 15% of the shares kept for them in the initial public offer (IPO) of SJVN Ltd on its second day while high networth individuals (HNIs) bid for 20% of their allocation.
The institutional bidders applied for 330 million shares or 1.33 times the number reserved for them but foreign institutional investors (FIIs) drew a blank on the second day. The entire institutional subscription has came from domestic institutions.
Graphic: Yogesh Kumar / Mint
Overall, the issue received bids for 180 million shares on Friday, taking the total subscription to 358.2 million or 86% of the offer.
Friday’s subscription was little more than bids received on the first day and most of these came from institutions.
The issue closes on Monday.
According to the National Stock Exchange website, out of the 123.5 million shares reserved for retail investors, subscriptions were received for only 18.8 million shares, or 15%, at the end of the second day. Response from HNIs was slightly better—8.2 million shares of the 41.1 million shares available for them.
The lukewarm response from retail investors is not limited to just the government issue. Even Jaypee Infratech Ltd saw poor pick-up from the segment.
On the second day, retail investors subscribed for just 5% of their allocation in Jaypee Infratech and the HNIs’ portion saw 31% subscription.
Bankers said retail interest continued to be lukewarm due to the uncertainties in the market in the backdrop of the crisis in Greece.
Also, after the dramatic drop in the Sensex, India’s bellwether equity index, in the wake of the global credit crunch in 2008-09, retail investors have not regained their confidence as many of them lost money in the market.
Investment bankers handling the sale are hopeful that retail investors will be drawn to the issue before it closes. “Retail subscriptions have picked up on the second day. Between retail and HNIs, they would have subscribed up to 10% of their allocation. The interest is there; the bids would come on the last day,” one investment banker, who did not want to be named, said.
“Why should they put in money in advance and lose the float for three days?” another investment banker, who also did not want to be named, asked, echoing that sentiment.
Institutions need to put in 10% of their application money as upfront margins. For bulk applications, this money could run into hundreds of crores, leading to a significant loss in interest.
Typically, the last day of an IPO sees maximum bids as investors wait to see the demand before submitting their applications. For example, the follow-on offer of Rural Electrification Corp. Ltd saw only 56% subscription at the end of the second day but on the last day, many institutions pitched in with their bids subscribing three times the number of shares on offer.