Mumbai: Integrated business services provider Quess Corp. Ltd (QCL) received a stellar response to its 400 crore initial public offering (IPO) hat closed on Friday.

The three-day issue drew subscriptions that were 144.31 times the issue size, registering the fifth highest overall subscription (in percentage terms) for any IPO since 2000.

The Sankya Infotech Ltd IPO saw demand at 283.5 times the 1.67 crore IPO in March 2000, data from Prime Database showed.

This was followed by FCS Software Solutions Ltd’s 17.5 crore initial share sale that received bids that were 175.88 times the issue size in August 2005.

Religare Enterprises Ltd’s 140.15 crore IPO in October 2007 was oversubscribed 158.63 times, data showed.

As of 6.45pm on Friday, Quess Corp.’s IPO saw more than 1.02 billion shares applied for, compared with an issue size—excluding the anchor book—of 7.09 million shares.

At the lower end of the 310-317 price band for the issue, the IPO drew bids worth roughly 31,750 crore.

The institutional investor category received bids for 230.38 million shares and the book was subscribed 59.02 times.

The non-institutional category comprising high net-worth individuals was subscribed 392.20 times, stock exchange data showed.

Demand from retail individual investors, whose investments cannot exceed 2 lakh in an IPO, stood at 33 times the 1.26 million shares on offer, exchange data showed.

Merchant bankers were enthused by the response to the IPO despite concerns that the IPO was announced a day prior to the UK’s EU referendum vote.

The positive mood in the secondary markets, hefty grey market premium and positive listing of Mahanagar Gas Ltd’s shares on Friday also encouraged investors to rush for Quess Corp.

“The success of Quess Corp’s IPO once again shows that if the issue is priced right, it will find buyers irrespective of the market conditions. The success also underscores the quality of management and its business growth," said Dharmesh Mehta, managing director and chief executive officer, Axis Capital Ltd.

Axis Capital Ltd, ICICI Securities Ltd, IIFL Holdings Ltd, and Yes Securities (India) Ltd were financial advisers to Quess Corp.’s IPO.

“We are very pleased with the response received by Quess’s IPO. The response reflects the faith investors have shown in the company and the management team led by Ajit Isaac. Indirect backing by Fairfax Group is also a big positive," said Pranjal Srivastava, head of capital markets, ICICI Securities Ltd.

In Mumbai’s grey market, Quess Corp.’s shares were being quoted at a premium of 175-185 per share on Friday, two dealers said on condition of anonymity.

“While the issue is good, the strong response kind of amazes us. It is bewildering to understand the huge response to a business services provider, which is primarily in the recruiting space," said one of the dealers cited above.

On Tuesday, the Bengaluru-headquartered company raised 180 crore by allotting shares to anchor investors.

The firm sold 5.67 million shares to 15 anchor investors at 317 apiece, the upper end of the price band for the issue.

Institutions that participated in the anchor book include Fidelity Investments, Kuwait Investment Authority, ICICI Prudential MF, HDFC MF, Nomura, Harvard Management Co., DSP BlackRock, Wasatch, Pictet and Grandeur Peak, according to stock exchange data.

The anchor book is that portion of an IPO which bankers allot to institutional investors on a discretionary basis.

Anchor book subscription opens a day before the IPO launch and is an indicator of institutional investor interest.

Isaac, chairman and managing director and chief executive officer of Quess Corp., said that the huge investor response validates the business model of the company.

“We are very happy to see investor support. It is a positive sign for the industry and sector. While Fairfax Holdings’ entry into the company two years ago is a positive, the fundamentals have been built for years which have helped the company deliver consistent growth. The IPO proceeds give us the resources to multiply our growth going forward," Isaac said.

The proceeds will be utilized towards repayment of debt, capital expenditure as well as working capital requirements, and funding acquisitions and other strategic initiatives.

Strategic acquisitions have helped contribute 20% of the company’s total revenue and it has a track record of successful inorganic growth through such acquisitions, Isaac told reporters last week at the launch of Quess Corp.’s IPO.

Isaac highlighted a four-point plan in a media presentation as the way forward for QCL.

The company aims at expanding its service portfolio and operations through strategic acquisitions that complement existing operations.

It also aims at capitalizing growth in e-commerce in India and pursuing other business-to-consumer (B2C) opportunities as well as improving operating margins, among other things.

“Quess Corp. is the leader in global technology staffing. High revenue growth comes from a judicious mix of both organic growth and acquisitions. Quess, in our view, is well positioned to maintain high revenue/Ebitda/EPS growth driven by a) expected industry growth across all business segments and b) scope for margin improvement. Valuations may appear expensive at ~41x FY16 EPS, but that is well supported by high revenue growth and scope for margin expansion," said Prabhudas Lilladher’s analyst Govind Agarwal in client note on 29 June. Ebitda is earnings before interest, taxes, depreciation and amortization, while EPS is earnings per share.

Quess Corp. is a business services provider in which 69.55% stake is owned by Thomas Cook (India) Ltd, which, in turn, is owned by Canadian billionaire Prem Watsa’s Fairfax Financial Holdings Ltd (FFHL).

FFHL owns a 67.82% stake in Thomas Cook.

Quess Corp. offers business services, including recruitment, temporary staffing, technology staffing, information technology products and solutions.

The company reported a revenue of 3,442.4 crore in fiscal year 2016 (12 months), compared with 2,572.8 crore in fiscal year 2015 (15 months).

Net profit grew to 88.5 crore in FY16, compared with 67.2 crore for FY15.

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