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Mundra Port and Special Economic Zone Ltd, part of India's Adani group, on Monday said it plans to raise up to 17.71 billion rupees ($450 million) through an initial public offer. The company, which plans to sell 40.25 million equity shares or 10.05 percent of its share capital, will be the first private sector Indian port developer to raise capital from the market.
The offer opens on Nov. 1 and the company has set a price band of 400-440 rupees a share. Special economic zones are tax-free export-oriented zones the government hopes will boost industrial production in India. Some funds would also be used to invest in Adani Petronet (Dahej) Port Pvt Ltd, which is being jointly developed by Petronet LNG, unlisted Adani Logistics and Inland Conware Pvt Ltd. The global co-ordinators for the issue are DSP Merrill Lynch, JM Financial Consultants, SSKI Corp Finance Ltd. Lead managers to the issue are Enam Securities, Kotak Mahindra Capital, ICICI Securities and SBI Capital Markets Ltd.
Religare Enterprises, a financial services company, is open for subscription with its initial public offering (IPO) of 7,576102 equity shares of Rs 10 each for cash, at a price to be decided through a 100% book building process.
The issue will close on November 1, 2007. The price band is between Rs 160 to Rs 185 per equity share.
Religare Enterprises is a holding company of 11 subsidiaries, which are engaged in a wide range of financial products and services targeted at the retail, high net worth individuals and the corporate and institutional clients. Along with its various subsidiaries, it offers a wide range of services ranging from equities, commodities, insurance broking, to wealth advisory, portfolio management services, personal finance services, investment banking and institutional broking services.
REL’s consolidated total income increased from Rs 311.27 million in fiscal 2006 to Rs 3,201.18 million in fiscal 2007. Its net profit increased from Rs 106.20 million in fiscal 2006 to Rs 250.21 million in fiscal 2007. It posted a consolidated Total Income of Rs 3,079.64 million and a net profit of Rs 367.26 million during the first half of fiscal 2008.
Barak Valley Cements, a cement manufacturer in the north-east region, is open for subscription with an initial public offer (IPO) of 56,60,000 equity shares of Rs 10 each for cash at a price to be decided through a 100% book building process.
The issue comprises a reservation of 1,13,000 equity shares for permanent employees on a competitive basis and the net issue to the Public of 55, 47,000 equity shares. The net issue would constitute 25.03% of the post-issue paid up capital of the company.
The issue will close on November 1, 2007. The company has fixed the price band between Rs 37 and Rs 42 per equity share.
The equity shares are proposed to be listed on the NSE and BSE.
Of the total equity offer, up to 50% of the issue will be allocated on a proportionate basis to qualified institutional buyers (QIBs), out of which 5% shall be available for allocation on a proportionate basis to mutual funds only. Further, not less than 15% of the Net Issue will be available for allocation on a proportionate basis to non-institutional bidders and not less than 35% of the net issue will be available for allocation on a proportionate basis to retail individual bidders, subject to valid bids being received at or above the Issue Price.
The objects of the issue are to part finance expansion of clinkerisation capacity from present 420 TPD (tonnes per day) to 600 TPD, cement grinding capacity from 460 TPD to 750 TPD, investment in wholly owned subsidiary — Badarpur Energy (P) Ltd.; for setting up a 6 MW biomass based power project, to meet the working capital requirements and for general corporate purpose.
Consolidated income for fiscal 2006 and fiscal 2007 were Rs 536.7 million and Rs 745 million respectively. The profit after tax for fiscal 2006 and 2007 were Rs 116.0 million and Rs 142.7 million respectively. For the quarter ended June 2007, the income and profit after tax were Rs 209.9 million and Rs 36.2 million respectively.
The new rules to curb inflows through Participatory Notes (P-notes) is likely to act as a dampener for the initial public offering (IPO) market as most of the recently concluded big issues, including the $2 billion-plus DLF issue, saw huge subscriptions by overseas investors through P-notes.
Bankers, however, added that serious long-term money will continue to come through the FII route, and the new rules will discourage short-term leveraged funds from placing bids through the P-note route. “Quality issues will now get quality money,” said a banker.
CRACKING THE SHOTS
* Bankers said serious long-term money will continue to come through the FII route, and the new rules will discourage short-term leveraged funds from placing bids through the P-note route
* On an average, 20-30 per cent of the demand for the IPO subscription comes through P-notes
On an average, 20-30 per cent of the demand for the IPO subscription comes through P-notes. It is estimated that there are about 12-13 P-note investors who bid heavily in IPOs. The Sebi, at its board meeting on Thursday, approved all the proposals to curb P-notes in total.
Several big ticket IPOs are lined up in coming weeks, and this include the mega initial share offering by Anil Ambani-backed Reliance Power, real estate firm Emaar MGF, Mundra Port & SEZ, among others.
“In the initial period, the demand will fall short by 20 per cent assuming that it comes from P-notes. Several hedge funds in the US come through this route as they will have a problem in placing the bids directly. We feel that smaller issues are likely to be more impacted as a lot of small funds come through P-notes,” said a senior executive with a leading local investment bank.
Another banker said that the impact would vary from issue to issue. “Small issues will see a decline of at least 10 per cent as in the recent past many small issues were subscribed many times over due to big bids in FII category through P-notes. However, as long as the fundamental story of the company is good, there will be a good number of overseas investors who would like to place the bids through P-notes.”
P-notes accounted for as much as 25 per cent of the bids received under the foreign institutional investors’ (FIIs) category in the Delhi-based DLF’s IPO. Bids through P-notes were as high as 40 per cent for the ICICI Bank’s Rs 10,062 crore follow-on public offer.
Around 13 issues have received the Sebi approval (as on 19.10.07) including Mundra port & SEZ which plans to raise about Rs 1500 crore, the IPO is likely to hit the market on the first week of the next month.
MUMBAI: The Adanis-promoted Mundra Port & SEZ (MPSEZ) has raised $120 million from the Government of Singapore Investment Corporation (GIC), T Rowe Price Asia, ICICI Bank and IDFC. This pre-IPO deal will fetch money over and above the $100 million it raised a year ago using optionally convertible bonds from GIC and UK-based private equity firm 3i.
On Wednesday, market regulator Sebi cleared the firm's IPO. A price band of Rs 400-440 has been fixed for the issue, which is expected to open by November first week. MPSEZ would sell 10% of its equity in the market, said informed sources.
They added that 3i has also picked up equity in the unlisted Adani Power (APL), which is also eyeing the primary market. The subsidiary company is currently pursuing two projects — a 2,640-MW plant in Mundra and a 2,000-MW plant in Gundiya district in Maharashtra with total investment of Rs 20,000 crore.
At Rs 440 per share, MPSEZ's market cap will be around Rs 17,500 crore ($4.4 billion). The other equity holders — 3i, GIC, T Rowe, ICICI Bank and IDFC, who cumulatively invested $220 million — will hold around 4-5% in MPSEZ, post-IPO. The remaining stake is being held by the promoter — Gautam Adani and group companies.
On September 17, ET had reported that GIC and 3i had asked MPSEZ promoters to convert their $100 million-worth IPO convertibles into equity. Over the past one year, the company's valuations soared from the earlier $1 billion to over $4 billion now, bringing down their investments to a minuscule 2-3%.
According to equity analysts, the company's valuations shot up after it changed its profile of a pure port company into an umbrella organisation that owns three port projects and a port-based special economic zone (SEZ) that is already in operation.
The Ahmedabad-based Adani group made MPSEZ both operating and holding company for three port projects — Mundra, Dahej and Dholera, and the sprawling SEZ at Mundra. Total capital outlay for all the projects undertaken by MPSEZ had been pegged at around Rs 4,000 crore.
While Mundra and the proposed Dholera ports were wholly owned by Adani, Dahej port is being developed as a JV with Petronet LNG, with the Adani group holding 50% stake. The port at Dahej is a mandatory condition as part of the agreement between Petronet, India's largest LNG importer, and Gujarat government.
MUMBAI: The Anil Ambani group company Reliance Power has filed a complaint with market regulator SEBI for investigating a campaign against the company’s public offer. The company is awaiting SEBI’s nod for the initial public offering (IPO), which is expected to hit the market by the first week of November.
Fourteen people, including a few brokers, have been named in the complaint. A REL spokesperson said the company has filed a formal complaint with SEBI to investigate the campaign launched against Reliance Power’s IPO.
Reliance Energy and the investment vehicle of Anil Ambani group, AAA Projects Ventures, hold 50% each in Reliance Power. Post-issue, both the companies will hold 45% each. Reliance Power has proposed an IPO of 130-crore equity shares of Rs 2 each for cash at a premium to be decided through a 100% book-building process.
“There were rumours in the market that SEBI has quashed the DRHP of Reliance Power. Immediately after that, the grey market trading of Reliance Power shares had stopped. In addition to it, a few politicians have questioned the transferring of projects from REL to Reliance Power.
They complained that REL shareholders have not been consulted for the proposal to transfer all the projects from the company to Reliance Power. Now, they seem to have withdrawn their statements against the company,” said market sources.
SEBI has written to the company asking clarifications for two statements made in DRHP. “SEBI has asked two normal queries and the company responded to it immediately,” said a company source.
Reliance Power has also sought SEBI permission to price its proposed offer at less than Rs 500. SEBI norms stipulate that the price of company shares should be above Rs 500, if it has a face value of less than Rs 10 per share.
NEW DELHI: Reliance Communications is likely to list its tower arm — Reliance Telecom Infrastructure Ltd (RTIL) — by March. The company which has already offloaded 5% stake in RTIL to outside investors, plans to sell an additional 10% in the company through an IPO.
The valuation of the company as per its 5% equity placement in July to seven institutional investors from the US, Europe and Asia was about Rs 27,000 crore. It is also learnt that the promoters (Reliance Communications) will sell shares and therefore there would not be a fresh issue of equity.
Industry sources told ET that the RCOM was targeting a higher valuation in the range of 20-30% premium during its proposed listing when compared to $6.75 billion in July 2007. They also added that the RTIL would kick off the process for listing by December 2007 by filing the draft red herring prospects with the markets regulator. Being an infrastructure company RTIL needs to sell only 10% through the IPO compared to the 25% minimum listing requirement for other companies.
Reliance Communications (RCOM) chairman Anil Ambani, when announcing the 5% sale of the tower unit, had said that the company would sell additional stake through an IPO or via further placements, but declined to specify a time frame for it.
RCOM’s primary competitor Bharti Airtel, which is currently in the process of transferring its mobile telecom towers and related infrastructure to Bharti Infratel, has already prepared a road map which would allow the company to divest a majority stake in its tower arm in the future.
After the completion of the demerger, Infratel will enter into comprehensive sharing agreements with other service providers while Bharti in time would divest a majority stake and may also go for an IPO, thus making it a completely independent company, Bharti Airtel chairman Sunil Mittal recently told ET.
To sustain the current growth in telecom, India will need to add about 90,000 towers each in FY08 and FY09. At a cost of about Rs 40 lakh per tower, the total investment required annually is Rs 36,000 crore ($10 billion).
Telcos have realised that investments towards setting up towers individually, where the assets are completely owned and used exclusively by single players can no longer be sustained. They are, therefore, hiving off their infrastructure arms as this will make sharing of the active and passive components easier and also help them get return on investments within a reasonable time frame.
Equity dilution in the tower arms also offers a window to bring in both strategic and financial investors on board.
Religare Enterprises Limited (the "Company"), a financial services company in India offering a wide range of financial products and services targeted at retail investors, high net worth individuals, corporate and institutional clients, is entering the capital markets with its initial public offering ("IPO") of 7,576102 equity shares of Rs. 10 each ("Equity Shares") for cash, at a price to be decided through a 100% book building process ("Issue"). The Bid/ Issue will open on October 29, 2007 and will close on November 1, 2007. The Price Band has been fixed between Rs. 160 to Rs. 185 per Equity Share. The Company is promoted by the promoters of Ranbaxy Laboratories Limited and the Issue has been graded by ICRA Limited and assigned the IPO Grade 3 on a five point scale. The Equity Shares of the Company, offered through this IPO, are proposed to be listed on National Stock Exchange of India Limited ("NSE") and the Bombay Stock Exchange Limited ("BSE"). At least 60% of the Issue will be allocated to Qualified Institutional Bidders ("QIBs") on a proportionate basis, of which 5% will be available to Mutual Funds only. Further, upto 10% of the Issue will be available to Non-Institutional Investors and upto 30% of the Issue will be available for allocation on a proportionate basis to Retail Individual Investors. The Issue will constitute 10% of the fully diluted post issue capital of the Company. The objective of the Issue is to fuel the future growth plans of the Company including the expansion of the domestic operations as well as the network of branches of two of its subsidiaries, Religare Securities Limited and Religare Insurance Broking Limited. It plans to fund the retail finance business as well as expand its financing activity, through its subsidiaries, Religare Finvest Limited and Religare Finance Limited. Religare Enterprises Ltd. has entered into an investment agreement with Indopark Holdings Limited, an indirect wholly owned subsidiary of Merrill Lynch & Co. Inc., wherein it has agreed to issue and allot 3,788,050 Equity Shares representing a 5.56% ownership of the paid-up share capital of the Company worth Rs. 606.09 million. Religare Enterprises Ltd. is a holding company of 11 subsidiaries, which are engaged in a wide range of financial products and services targeted at the retail, high net worth individuals and the corporate and institutional clients. Along with its various subsidiaries, it offers a wide range of services ranging from equities, commodities, insurance broking, to wealth advisory, portfolio management services, personal finance services, investment banking and institutional broking services. It has divided its product and service offering under three broad client interface categories: "Retail Spectrum", "Wealth Spectrum" and "Institutional Spectrum". Religare Enterprises Ltd. ("REL") has a wide reach, diversified product portfolio with distinctive expertise and a focused servicing model. It has a growing client base built on a well-recognised brand. As on September 30, 2007, it had six regional offices and 40 sub-regional offices across 392 cities and towns controlling 1,217 business locations (managed by it along with its business associates) all over India as well as a representative office in London. It has a region-focused entrepreneurial management team leading 6,500 employees (as on September 30, 2007). It is geared to address the competitive challenges of discount brokerage through an online investment portal --- www.religareonline.com. REL's principal subsidiaries include: Religare Securities Ltd. ("RSL"), Religare Finvest Ltd., Religare Commodities Ltd. and Religare Insurance Broking Ltd. REL has a majority stake in the joint venture ("JV") special purpose vehicle ("SPV"), Religare Insurance Holding Company Limited ("RIHCL"), which has been formed to enter into a JV (called AEGON Religare Life Insurance) with a leading global life insurance and pension company, AEGON International N.V. REL's subsidiary RSL has a 50:50 asset management JV with AEGON called Religare AEGON Asset Management Company (AMC) for making a foray into the mutual fund and AMC business. REL has signed a JV with Macquarie Bank Limited to expand its wealth management business wherein Macquarie will become [subject to receipt of necessary approvals] a 50% shareholder of REL's subsidiary Religare Wealth Management Services Limited, which is expected to be renamed Religare Macquarie Wealth Limited. RSL has an agreement with IndusInd Bank to offer online trading services as well as with Vijay Co-Operative Bank Ltd. and Tamilnad Mercantile Bank Ltd. to offer offline trading services. REL's consolidated Total Income increased from Rs. 311.27 million in fiscal 2006 to Rs. 3,201.18 million in fiscal 2007. Its Net Profit increased from Rs. 106.20 million in fiscal 2006 to Rs. 250.21 million in fiscal 2007. It posted a consolidated Total Income of Rs. 3,079.64 million and a Net Profit of Rs. 367.26 million during the first half of fiscal 2008. The Book Running Lead Managers ("BRLMs") to the Issue are: Enam Securities Private Limited and Citigroup Global Markets India Private Limited
Note: Religare Enterprises Ltd. is proposing, subject to market conditions and other considerations, an initial public offering ("IPO") of its equity shares and has filed its Red Herring Prospectus ("RHP") with the Registrar of Companies, New Delhi. The RHP is available on the website of the SEBI at www.sebi.gov.in; and on the respective websites of the BRLMs at www.enam.com and www.citibank.co.in. Investors should note that investment in equity shares involves a high degree of risk and for details relating to the same should see the section titled "Risk Factors" in the RHP. This press release is not an offer for sale within the United States of any equity shares or any other security of the Company. Any equity shares of the Company may not be offered or sold in the United States absent registration under applicable U.S. securities laws or an exemption from the registration requirements under such laws. The proposed offering of securities described in this press release has not been and will not be registered under the United States Securities Act of 1933, as amended (the "Act"), and, accordingly, any offer or sales of these securities may be made only in reliance on an available exemption from or in a transaction not subject to the registration requirements of the Act.
For further details contact: Mr. Subhrangshu Neogi Religare Enterprises Ltd. Mob: +91- 9910993925, +91-9811793686 Mr. Himanshu Kapadia Adfactors PR Mob: + 91-9821358418
MUMBAI: Adani group promoted Mundra Port and Special Economic Zone Ltd (MPSEZL) is planning to raise Rs 1,500 crore through an initial public offer to part fund the development of the port.
The company plans to hit the capital market through a public issue of 40,250,000 equity shares of Rs 10 each.
MPSEZL the developer and operator of Mundra Port, located in Kutch district of Gujarat, is primarily engaged in providing bulk cargo services, container cargo, crude oil cargo and value-added port services, including railway services between Mundra Port and Adipur.
MPSEZL is the first company from SEZ and port sector to hit the capital market. The proceeds of the issue would be utilised for the further development of Mundra port and SEZ.
"The company will raise over Rs 1,500 crore to part fund construction and development of basic infrastructure and allied facilities in the proposed SEZ and construction and development of south basin terminal for coal and other cargo at Mundra Port among others," MPSEZL, Executive Director, Ameet Desai told reporters in Mundra.
He said the proceeds of the IPO would also be utilised in part funding Adani Petronet (Dahej) Port Private Ltd, Adani Logistic Ltd and investments in Inland Container Private Ltd,".
The Ministry of Corporate Affairs (MCA) is likely to refer the complaints received on the proposed initial public offering of the Anil Ambani Group company Reliance Power to the capital market regulator, Securities and Exchange Board of India.
Shareholder value
Official sources said that the Ministry has received representations from various quarters including some Members of Parliament alleging that the proposed IPO would destroy shareholder value of the parent company Reliance Energy (REL), which is a listed entity.
“Since the company has already filed its draft red herring prospectus with the capital market regulator, the Ministry is not directly involved. However, in order to ensure that the regulatory norms including those prescribed under the Companies Act are not flaunted, the Ministry is taking necessary precautions,” sources said.
Violation
Earlier this month, Reliance Power filed its draft red herring prospectus with the SEBI. According to the complaints, the proposal to transfer all projects from REL to Reliance Power has not been taken to the shareholders of Reliance Energy.
“The projects have been transferred under the agreement of September 14, 2007. This is highly irregular and is in clear violation of Section 293 (1) (a) of the Companies Act,” it has been alleged.
As per the Section, the board of directors of a public company cannot transfer any undertaking of the company without the consent of shareholders.
Credit Rating
Meanwhile, a spokesperson of REL refuted the charge that there is any irregularity in the company having transferred these power generation projects to its group company Reliance Power for execution by it. These projects have been conceived a long time ago and it was the decision of the independent members of the Board of Reliance Energy some time in 2004 that REL’s exposure to these projects be restricted to 50 per cent, he clarified.
Indeed, he added, the decision predates even that of the restructuring of Reliance Industries as part of a settlement among members of the Ambani family, the promoters of Reliance Industries and other group companies.
Execution of projects
The decision was also vindicated by the fact that credit rating agencies had rated the company’s debt instrument at the highest level as the risks of execution of these projects was not on the books of Reliance Energy, he added, reports The Hindu Business Line.
MUMBAI: Delhi-based alcohol beverage company, Globus Spirits Ltd proposes to enter the capital market with an initial offer of Rs 68 crore through the book building route. The company has filed papers with the Securities and Exchange Board of India.
The company has been assigned ‘CARE IPO Grade 3’ by Credit Analysis & Research.
Globus Spirits is engaged in manufacture, marketing and sale of Indian made foreign liquor, industrial alcohol (comprising rectified spirit and extra-neutral alcohol) and country liquor.
The company has already launched its own IMFL brands in Haryana, Chandigarh and Uttar Pradesh and proposes to launch the brands in three more states in North India. Globus is also planning to expand in the south, after its Kerala launch.
The company proposes to modernise and expand facilities at Behror, Rajasthan and Samalkha, Haryana; develop and acquire IMFL brands; and revamp its storage and bottling capacity.
Globus Spirits also plans to install multi-pressure distillation plants to produce 35,000 litres each of extra neutral alcohol from both molasses and grain at Behror in Rajasthan and from grain at Samalkha in Haryana.
Also planned is capacity expansion of total spirit-based starch liquefaction section of 75 klpd, installation of a high-pressure boiler and back-pressure turbine, which would use biogas and biomass as fuel and implementation of green house gas abatement project at both the facilities, which will entitle the company for carbon credit.
The company posted a gross turnover of Rs 116.67 crore in 2006-07 with a CAGR of over 30 per cent in the last three years, and registered a profit after tax of Rs 8.66 crore.
MUMBAI: Aban Singapore, a wholly-owned subsidiary of Aban Offshore, is to hit the Singapore stock exchange with India’s largest IPO abroad for a subsidiary company.
The $4-billion company, which acts as Aban’s hub for its international activities, is to offload around 13-15% for $500 million, and the IPO is slated for December 2007, say sources.
Aban has appointed UBS and Merrill Lynch as lead managers. They are currently undertaking a fresh valuation exercise. The offshore drilling giant and its arm have seen a major re-rating following the recent take-over proposals received by an industry peer — the UK-based Abbot Group, from various PE players.
On Wednesday, Aban’s share price fell 1.3% to Rs 3,971 on the Bombay Stock Exchange (BSE). The stock price has gone up four times from the 53-week low of Rs 1,010 recorded on October 30, 2006.
Efforts by ET to reach Aban’s top management were futile. An e-mail query did not elicit any response. “Aban’s market cap is currently hovering around Rs 15,000 crore.
With charter rates in the offshore sector reaching out for new peaks, Aban is enjoying excellent cash flows from operations,” say sources. The Singapore arm’s fleet size is almost double the size of the parent. It is 100% owned by Aban Offshore through another wholly-owned subsidiary Aban Holding.
The Singapore IPO is aimed at refinancing its existing debt, which is around $1 billion, thanks to last year’s acquisition of Norwegian offshore drilling company Sinvest in a $1.3 billion deal.
Aban had tried to raise PE for the Singapore subsidiary but later decided to go for the IPO. Aban Singapore and its wholly-owned subsidiary Aban International Norway owns 100% of Sinvest.
The Singapore subsidiary manages Aban’s international play, say sources. According to an equity report by Macquarie Research, the company operates across South Asia, which has witnessed tremendous growth in offshore drilling activity also expects operating rig day rates to rise in the region.
The subsidiary owns and operates 11 jack-up rigs and 2 drill ships, while the Chennai-based parent has 5 jack-up rigs, one drill ship and a floating platform unit (FPU). One rig, currently being built, is expected to be delivered in March 2008. The client list includes ONGC, Hardy Exploration and Production (India), Oriental Oil Co (Dubai), Hindustan Oil Corporation Company, Shell Brunei, Shell Malaysia, Cairn Energy, ROC Oil (China) Company and GSPC.
Aban has fixed most of its offshore assets on long-term charters, and managed to accrue benefits of the booming charter market.
Recently, the company chartered a rig to GSPC for a firm period of 2 years with 2 options of 6 months each thereafter at mutually agreeable rates. The contract is expected to result in revenues of around $141 million during the firm period.
Sources said the company delayed the IPO for a while, to fix all rigs under new contracts with fresh rates, in order “to get better valuations”.
The company recently informed stock exchanges that Venture Drilling, owned 50:50 by Sinvest, a wholly-owned subsidiary, and Petrolia Drilling, has commenced drilling operations on June 30, 2007, under the drilling contract with Exxon-Mobil for deployment of the drillship Valentine Shashin to be renamed Deep Venture — with an estimated contract revenues of $220 million during the contract period of 18 months.
Aban Offshore has also entered into deal with Bulford Dolphin to purchase a semi- submersible rig `Bulford Dolphin' for $211 million, and its delivery is expected by 2007-end.
UTI Mutual Fund's proposed initial public offer (IPO) is likely to be priced between Rs 850 and Rs 1,050, sources said.
The IPO is likely to come out in the second week of January.
The 11 investment banking firms, which are in the race to manage the first public offer by an India mutual fund, have valued the asset management company (AMC) between Rs 5,500 crore and Rs 9,000 crore.
At Rs 5,500 crore, the per share value would be Rs 850 and at Rs 9,000 crore, it would have a per share value of Rs 1,200.
The IPO would offer a 5 per cent discount to retail investors, sources said.
The valuation at Rs 1,200 per share reflects what in industry circles is called scarcity value, which derives from the fund house's status as the first mutual fund to be hitting the bourses.
But the thinking within the AMC is not to go for the highest valuation as far as retail investors are concerned, and hence, the upper band is likely to be fixed at Rs 1,050.
According to sources, of the 11 investment bankers in the fray to manage the offer, the dart may ultimately fall on one of the four - Lehman Brothers, Enam Securities, Citibank and JM Financial.
The AMC has already decided to go for a 20 per cent pre-IPO placement through the reverse auction route.
Under this route, the buyers will offer their price with conditions like the amount of unsubscribed portions they are willing to underwrite or board positions.
Though such proposals are made after the filing of the draft prospectus, players can sound out the AMC even before that, sources said.
Accordingly, UBS, which is likely to be a co-runner, may get a good chunk of the strategic stake up for sale as its underwriting conditions are the best, sources said. UBS is believed to have made an informal offer.
State Bank of India, Punjab National Bank, Life Insurance Corp and Bank of Baroda are the four sponsor companies of the AMC.
UTI MF has assets under management (AUM) worth Rs 45,000 crore.
In terms of AUM, it ranks third after Reliance MF and ICICI Prudential MF. The final details of the UTI MF offer would be announced on October 29.
UTI MF or UTI -II was set up in 2003 after the US -64 fiasco. While UTI MF has been given the responsibility to run all net asset value based schemes of UTI, the Specified Undertaking of the Unit Trust of India (SUUTI) or UTI -I has been housing all the assured return schemes and UTI's flagship scheme, US-64.
Of late, UTI MF has been going aggressive in overseas markets and it
It recently entered into an offshore fund distribution agreement with National Bank of Australia.
The AMC already has such alliances in Singapore, Japan, Mauritius and London.
It will take six more months for the government to decide on the timing, size and other modalities for the initial public offer (IPO) of National Aviation Company Ltd (Nacil), the merged entity of Air India and Indian.
There has been speculation on the timeframe within which the IPO may be announced, but civil aviation minister Praful Patel clarified on Tuesday, "We will review the merger (of Air India and Indian) after six months and then take a call (on the IPO)."
Patel said decisions on the IPO as well as granting stock options to Nacil employees would be taken keeping in view the prevailing market environment.
The minister's comments come even as officials in his ministry indicate that consultants have been asked to work out the valuations and the method by which equity dilution would happen.
Accenture, the consultant that advised the government on the merger of the two state carriers, has been roped in for conducting the valuation study as well, and its study could take 5-6 months to complete.
Nacil officials have earlier indicated that the company is looking at revenues of $4 billion this fiscal against $3.5 in 2006-07, but it is not clear whether the merged entity would be able to declare any profit as yet. Separately, both Indian and Air India were loss-making entities before the merger.
The performance of Nacil and its ability to report good numbers for 2006-07 would play a crucial role in the timing and the size of the proposed IPO, since a profitable entity would be able to command better valuations.
Nacil managing director V Thulasidas had earlier indicated that the government could look to offload up to 15 per cent stake through the IPO, but no such decision has been taken till date. In fact, senior ministry officials said there was no proposal for an IPO as on date with the Nacil board.
Meanwhile, Patel also said the government was examining a proposal to offer stock options to Nacil employees.
NEW DELHI: Unitech group’s proposal to raise money through an initial public offering (IPO) in Singapore is under taxman’s scrutiny. The company has proposed to sponsor and list a business trust in the Singapore capital market which would ultimately hold Unitech Hi-Tech Structures (UHTSL), a company involved in development of IT-related SEZ in Kolkata.
Unitech’s proposal, tabled before the Foreign Investment Promotion Board (FIPB) last week, has been deferred and it is being examined by the revenue department, a Dipp source said. It is understood from official sources that the board wanted to ascertain revenue implications of the “complicated share transactions” envisaged in the proposal.
When contacted, Unitech spokesperson said that the company was not aware of any such scrutiny by the revenue department. “The shareholding is being restructured to raise money in Singapore which will benefit Unitech shareholders as Singapore market offers better valuation,” he said.
According to the application pending with FIPB, the recently incorporated Unitech group entity — Jalore Properties — has proposed to acquire Unitech’s 36% equity stake in UHTSL. Other shareholders of UHTSL are Myna Holdings of Mauritius (a 100% subsidiary of LSE-listed Unitech Corporate Parks Plc) and Maxlon of Cyprus.
While Myna holds 60% equity capital of UHTSL, balance 4% is held by Maxlon. It is understood that all these companies are directly or indirectly held by the Unitech group. UHTSL is developing 19.58 hectare IT-ITeS SEZ in Rajarhat (Kolkata).
According to official sources, the Singapore IPO vehicle (business trust) which proposed to acquire shares of UHTSL from Unitech, would set up a two-tier holding company structure in Cyprus which would in turn hold 100% of shares capital of the Jalore Properties.
Jalore has applied to FIPB for its approval to acquire the 36% shareholding of UHTSL from Unitech. After the acquisition, the equity shareholding in UHTSL will be owned by the business trust (the Singapore IPO vehicle), through its wholly-owned subsidiaries in Cyprus and India.
It is understood from sources that the process would help the company in enjoying certain tax benefits. Capital gains tax exemption is available under the India-Singapore tax treaty as well as the India-Cyprus tax treaty.
MUMBAI: The Bombay High Court's order to Anil Ambani group's RNRL and Mukesh Ambani's Reliance Industries to rework a gas supply agreement may have a bearing on the upcoming IPO of Reliance Power, two of whose projects rely on gas supplies from RIL's KG basin fields.
Reliance Power, a subsidiary of Reliance Energy that is seeking to raise up to $3 billion (Rs 12,000 crore) through the public offering, said in its draft prospectus that it intended to get coal and gas for its two projects at a combined investment of over Rs 30,000 crore from RNRL.
But the court today asked Reliance Industries and RNRL to renegotiate within four months, a gas supply master agreement (GSMA) between them saying it has to be a "bankable" pact.
Reading out the order, Justice A V Mohta said the GSMA will have to be in-line with the family arrangement between Ambani brothers prior to demerger of Reliance group.
Meanwhile, the court's interim order barring RIL from selling gas from KG fields to any third party will continue.
Reliance Power in its draft prospectus to SEBI has said that it has not arranged for "any alternative sources of coal or gas for our Shahpur Coal, Shahpur Gas and Dadri projects."
The company proposes to issue 130 crore equity shares of face value Rs 2 in the public offer, expected to mop up Rs 12,000 crore. The company intends to use the proceeds from the issue to fund new projects, including the 4,000 MW Ultra Mega Power Project at Sasan and the 7,480 MW Dadri power project.
RNRL had taken Reliance Industries to court over implementation of GSMA, under which the Mukesh Ambani group firm is to supply gas from Krishna-Godavari fields to RNRL.
"Currently, RNRL does not have any right to coal resources of its own. In addition, RNRL is in litigation with respect to its gas reserves, which may impact the availability and pricing of the fuel for our two gas-fired thermal projects," Reliance Power said in its draft prospectus.
Reliance Power has identified 12 power projects including the 4,000 MW Shahpur project in Maharashtra. The project would be developed in two phases - 1,200 MW Shahpur Coal and 2,800 MW gas-fired Shahpur Gas.
While Shahpur Gas is expected to start operations in March 2011, Shahpur Coal is scheduled to be commissioned in December 2011. The first Dadri project is expected to be on-stream by September 2011.
"We intend to seek supplies for our super critical coal- fired project, Shahpur Coal through RNRL or third parties. In addition, we are planning to seek supplies of natural gas from RNRL for our gas-fired projects at Shahpur and Dadri primarily from its rights to KG Basin gas reserves," Reliance Power added.
RNRL approached the High Court seeking amendment to GSMA, saying that present agreement did not ensure certainty regarding quantity of supply and its tenure.
Either of the parties can come back to the court if they fail to rework the deal within four months.
Kolkata: Oil India Ltd (OIL) may submit the draft red herring prospectus, for its proposed IPO, for SEBI clearance in mid- November, according to sources. The company is expecting the issue to be opened in February.
Meanwhile, the Union Ministry of Petroleum and Natural Gas recently approved the proposed appointment of seven independent directors on board to help OIL to confirm to the clause 49 of the listing agreement.
Accordingly, the search committee under the Public Enterprises Selection Board (PESB) has started the process of selecting the suitable candidate. “Though normally the process takes three to four months, we are hopeful of appointment of independent directors as early as in November,” a company source said.
It may be mentioned that the Cabinet Committee of Economic Affairs had approved fresh issue of 10 per cent of OIL’s paid-up capital through IPO. This apart, the company will also issue an additional one per cent capital to the employees.
Also, the Government will disinvest 10 per cent of OIL’s paid-up capital in favour of IndianOil, Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL). While IOC will pick up five per cent stake in OIL, BPCL and HPCL will get 2.5 per cent stake each in the upstream company.
The price band to be discovered for the IPO will be applicable on the disinvestment. While the IPO is expected to generate resources to the tune of Rs 1,430 crore for OIL, the government may raise an identical sum through the disinvestment.
Following the Cabinet approval, OIL has appointed HSBC, Morgan Stanley and Citibank as lead managers to the proposed IPO.
“We are expecting to file the DRHP by mid-November,” the source said adding that once SEBI approves the proposal, OIL will go back to the Centre to decide the issue price.
The World Bank has estimated an annual investment of $60 billion in the Indian infrastructure sector. This has given steel majors, the biggest beneficiary of infrastructure development, a reason to scale up.
The latest to join the list is Rajasthan-based Rathi Bars Ltd, which plans to expand capacity from 80,000 tonnes per annum (tpa) to 1 lakh tpa.
To raise capital for the expansion and modernisation, Rathi Bars is tapping the capital market this month, hoping to raise Rs 25 crore.
The company's initial public offering (IPO) will comprise 71,42,857 equity shares with a face value of Rs 10 and a premium of Rs 25 each. The issue will open on October 18 and close on October 23.
Rathi Bars currently manufactures steel bars used in the construction of multi-storeyed buildings, dams, bridges, flyovers and power plants as a basic reinforcement material. Its cold twisted deformed (CTD) and thermo mechanically treated (TMT) steel bars are categorised under long products.
Anurag Rathi, director, Rathi Bars, said the company enjoys a leadership position in the construction markets of north India and has been associated with a number of major projects and organisations, such as the Delhi Metro, National Thermal Power Corporation, DLF and Omaxe.
According to Rathi, the construction industry has witnessed tremendous growth over the last few years. With more funds being pumped into the sector, the demand for steel bars is expected to surge in the coming years.
The Securities and Exchange Board of India (Sebi) will soon issue an order relating to the handing over of files that deal with a ban imposed on Indiabulls Securities in April 27, 2006 by the capital market regulator, and its immediate withdrawal within 24 hours.
This follows an application under the Right to Information (RTI) Act by YP Singh, a former IPS officer.
While over 200 entities were banned by the market regulator, in what has now come to be called as the IPO scam, only Indiabulls was let scot-free the next day.
The scam related to the connivance of broking entities and some others to corner large chunks of the retail portion of IPOs, using fictitious accounts.
While agreeing to furnish all documents from Sebi’s side within a week, an official with the market regulator said that an order would be issued only after Indiabulls files its written objections to parting with its clients’ personal information.
Singh and Indiabulls representatives were heard by VK Chopra from Sebi’s appellate authority, following an order from the Central Information Commission.
Singh said, “The disclosure of information is in the interest of lakhs of investors who have risked their life’s savings with Indiabulls. It will bring further accountability of public servants.”
RTI activist Kewal Semlani, who argued on behalf of Singh, said, “There is a need to know what happened within those 18 hours to revoke the suspension.
The need of overwhelming transparency and large public interest justifies parting with such information,” he added.
It all began in February this year when the Central Public Information Officer (CPIO) of Sebi, RK Nair, refused to grant information to Singh’s application, stating that investigations were still underway.
Singh filed an appeal with Chopra, who upheld the CPIO argument. Following this, Singh appealed before the Central Information Commission last month.
Indiabulls responded by objecting that disclosure of such information would seriously damage its functioning and reputation.
Singh argues that the entire episode of imposing the ban and lifting it in the same breath, smacked of favouritism, producing newspaper clippings which reported how “high level interventions made the public authority change its position within 24 hours,”
In its order, the Central Information Commission asked Sebi to examine the case by calling all parties involved and summoning all records.
MUMBAI: The Central Bureau of Investigation (CBI) has filed chargesheets against 22 persons involved in the 2006 IPO scam. Officials of Bharat Overseas Bank, Indian Overseas Bank, Karvy Shareholdings, Karvy Consultants and Karvy Computers figure in the chargesheet.
The CBI began its investigation after the market regulator filed two complaints with the agency in 2006, alleging that thousands of fictitious applications had been submitted to corner shares set aside for retail investors in IPOs of various companies.
SEBI had, in 2006, exposed the IPO scam after an investigation by its surveillance division indicated the involvement of several operators. According to CBI, the motive of the dubious exercise was to corner shares that would have been allocated to retail investors.
The modus operandi was to download photos from websites such as shaadi.com for preparing fake applications and corner the shares that would have been rightfully allocated to retail investors. The CBI believes about 1.2 crore shares have been cornered this way. Bank accounts and demat accounts have been opened using forged documents for facilitating the dubious operation.
The CBI states in the chargesheet that the depository participants took no tangible steps to verify the authenticity of these applications. In some cases, some 5,000 persons have been named as joint holders of one account.
Instead, the CBI alleges, they connived with middlemen to provide funds. In several instances, the bidding was done without subscription money. The registrar to the issue had allegedly accepted the share application forms, which were not accompanied by the local cheques/DD, a mandatory requirement.
Still, shares were allotted to these fictitious applicants. However, since the persons did not exist, delivery instructions slips (DIS) were forged to show transfer of shares to the demat accounts of the middlemen. This was made possible as the same market intermediary performed multiple functions of depository participant, syndicate members, financiers and registrar.
The officials of Bharat Overseas Bank and Indian Overseas Bank who had allegedly flouted the know your client (KYC) norms and those of the Karvy companies are among the 22 persons chargesheeted by CBI in this connection.
NEW DELHI: State-owned Air India will likely unload 15 per cent of its equity in an initial public offer (IPO) when its merger with domestic counterpart Indian Airlines is completed, a report said.
V Thulasidas, chairman of the National Aviation Company of India Ltd (NACIL), the airlines' new parent company, said the government would make the final decision on the size of the IPO.
But he told reporters his "personal view" was that NACIL would dispose of 15 per cent of its equity, media reported on Monday.
The government has said it is merging the two airlines in a bid to create a "world-class airline" that can compete globally and domestically. Singapore Airlines and Emirates have already expanded into India's booming travel market.
The IPO would be staged once the merger of Air India and Indian Airlines was finished and both airlines' operations were fully integrated.
Air India is the nation's biggest international carrier and Indian Airlines is the second-largest domestic airline after privately run Jet Airlines.
Thulasidas, speaking in Kolkata, gave no timeframe for the IPO, which he said would be aimed at making the new merged company "a more business-like entity." But he said before the IPO, employee stock options (ESOPs) would be offered to the staff and they would be announced shortly.
Air India was engaged in talks on forming an international alliance with Star Alliance as part of its global expansion, he said.
The merged airline will fly under the brand of Air India domestically and internationally with a combined fleet size of more than 112 aicraft - comparable to the best airlines in the Asian region.
Long derided for its old planes, the company is engaged in a massive fleet replacement programme. It has already placed orders for 111 aircraft at a cost of Rs 450 billion ($11.4 billion).
Forty-three are Airbuses and the rest are Boeings. Sixteen have been delivered and the rest are slated for delivery over the next three to three-and-half years.
Post merger, the two airlines will have 34,000 employees. The government cleared the airlines' merger in August.
BANGALORE: The newly-created holding company for national carriers Air India and Indian, National Aviation Company of India (Nacil), may offload 10-15% stake through an initial public offering (IPO) in 2008 to fund expansion and take on competition from private airlines, civil aviation minister Praful Patel told ET. The offer could involve issue of fresh shares and dilution in existing equity of Nacil.
"We are yet to take a view on the exact mode of equity dilution. Accenture and Ambit Finance, the consultants appointed to handle the merger, are now doing the valuation and we expect them to give a report by the year-end," Mr Patel said.
The IPO will be preceded by an offer of about 5% of equity to the 33,000 employees of the merged entity, Mr Patel said. Nacil, created in March, expects the integration process to be completed within two years. It has a paid-up capital of Rs 145 crore. It will fly under the Air India brand.
Air India and Indian have a combined fleet strength of 125 aircraft, about a third of the national total. They have ordered 111 more aircraft.
Mr Patel also said an empowered group of ministers examining the draft civil aviation policy will meet later this month and is expected to reach a conclusion on the rules governing qualifications to fly overseas. The criterion requiring five years of domestic service only allows Air India and Jet to fly abroad as of now. Newer private airlines want this rule to be relaxed so they too can commence overseas operations.
Furthermore, the limit on foreign direct investment (FDI) is also likely to be increased in select segments, but foreign airlines will not be allowed to take over Indian carriers just yet. "Why should they be gobbled up by international carriers?" Mr Patel asked.
Cabinet approval will be sought to allow 100% FDI in helicopter operations, seaplane companies, pilot training and maintenance, repair & overhaul (MRO) facilities. The foreign investment cap on cargo operations could be raised to 74%. India currently allows up to 49% FDI in most segments of civil aviation, barring airports, where the ceiling is 74% for existing ones and 100% for greenfield projects.
The stock market rally has left investors gasping for breath. When the market is in an uncertain territory like this, opinion always gets sharply divided on whether the new levels are sustainable or not. With the secondary market in a quandary, the primary market may just be the one to show the way.
The reason being some large, and significant public issues like Reliance Power, Emaar MGF, Edelweiss and Wockhardt Hospital are ready to enter the market. If they get lapped up by investors without denting the secondary market, then the market may just get the vote of confidence they are looking. Among the lot, Reliance Power and Emaar are the two most important issues.
In terms of size, they are the largest issues among the 60 or so draft red herring prospectus (DRHPs) filed with Sebi currently. Reliance Power aims to raise a little over Rs 6,000 crore and Emaar MGF is planning to raise Rs 5,000-6,000 crore.
These issues could see the sectors they represent — power and real estate — emerge as the drivers of the next phase of the market rally. Both these issues are looking at ambitious valuations. Reliance Power is reportedly looking at a valuation of around Rs 90,000 crore, while Emaar is looking at a Rs 50,000 crore to 60,000 crore market cap.
Reliance Power issue, in particular, is important. This issue, like the Reliance Petroleum issue in April 2006, once again asks investors to put their faith on the Reliance name. Reliance Petro IPO had raised Rs 2,700 crore from retail investors for a greenfield Rs 27,000-crore refinery project which is likely to go on stream in 2009. Such was the frenzy that the issue was oversubscribed around 68 times.
Investors haven’t been disappointed. The share price is now around Rs 160, up 160% from the IPO price. Reliance Petro’s market cap is over Rs 70,000 crore now.
Reliance Power is attempting something even more ambitious. It plans to raise over Rs 6,000 crore for 12 power projects, aggregating 24,000 MW. Considering Rs 4 crore as expense per mega watt as a thumb rule, Reliance Power is talking of implementing around Rs 100,000 crore worth of projects almost simultaneously. No company in the history of India Inc has perhaps attempted something of this magnitude.
How this issue performs on the primary market will no doubt be important. Media reported last week that the issue is already trading at almost 50% premium in the grey market. Successful closing of this issue can have tremendous spin-offs for the power sector, making it one of the most important sectors for the market.
Reliance Energy’s decision to raise equity finance for the upcoming ultra mega and other power projects through the public route is well-timed and may be a good business proposition. The ultra mega project, requiring a total investment of around Rs 18,000 crore, is one of the two large projects being undertaken, involving equity finance of Rs 3,600 crore at 80:20 debt-equity ratio.
The recent government decision to allow the developer to increase the capacity of these plants beyond 4,000 MW and sell excess power at market rate is an added incentive.
The company is expected to raise close to Rs 10,000 crore through the IPO. At the prevailing debt-equity ratio for power projects, the company can mobilise up to Rs 40,000 crore of debt on the basis of this equity, which would be enough for around 12,000 MW of power projects. Under the assumption of 80% capacity utilisation and Rs 2.5 per unit of power, this can generate revenue of around Rs 20,000 crore.
Another interesting feature of the proposed IPO is its striking similarity with the public issue of Reliance Petroleum last year, where money was raised on the strength of a new project. However, while the promoter had the experience of developing a similar project then, for Reliance Power, the proposed plant is going to be the first project of this size. On the positive side, the government may make the environment more supportive for power projects given the wide supply-demand gap.
Maytas Infra, a construction and infrastructure development company, will close today. The issue has subscribed 5.73 times on the back of good support from qualified institutional investors (QIBs), whose portion subscribed 9.35 times, according to data available on NSE.
The reserved portion of non institutional and retail investors remains unsubscribed. Bids for 5.06 crore shares have received, including bids for 8.86 lakh shares at cut off price.
The issue had opened for subscription on September 27, 2007 with an initial public offering of 88.5 lakh equity shares of Rs 10 each for cash at a price to be decided through a 100 per cent book building process.
The company has fixed the price band between Rs 320 and Rs 370 per equity share.
The company plans to use the funds to purchase construction equipment, invest in companies, building an elevated road in Bangalore, a coal based electricity generation plant in East Orissa and a coal washery in Chhattisgarh.
DSP Merrill Lynch Ltd, JM Financial Consultants Pvt Ltd and Kotak Mahindra Capital Co Ltd are the book running lead managers and Karvy Computershare Pvt Ltd is the registrar to the issue.
TCG Lifesciences, one of the leading life sciences research services and informatics organisations promoted by Dr Purnendu Chatterjee and TCG Lifesciences Mauritius Limited with operations in India, the UK and the US, has filed its draft red herring prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) to enter the capital market with its initial public offering of equity shares.
The company proposes to issue 9,500,000 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process. The issue comprises a fresh issue of 9,000,000 equity shares and a reservation of up to 500,000 equity shares for eligible employees. The issue will constitute 14.41% of the fully diluted post issue paid-up capital of the company. The net issue will constitute 13.65% of the fully diluted post Issue paid-up capital of the company.
The company is considering a pre-IPO placement of upto 15,00,000 equity shares with certain investors. The company will complete the issuance of such equity shares prior to the filing of the red herring prospectus with the Registrar of Companies. If the pre-IPO Placement is completed, then (i) the issue size offered to the public would be reduced to the extent of such Pre-IPO Placement, subject to a minimum issue size of 10% of the post-issue capital being offered to the public and (ii) the employee reservation portion shall (if required) be accordingly reduced.
The issue is being made through the 100% book building process wherein at least 60% of the Net Issue will be allocated on a proportionate basis to qualified institutional buyers, out of which 5% shall be available for allocation on a proportionate basis to mutual funds only. Further, not less than 10% of the net issue will be available for allocation on a proportionate basis to non-institutional bidders and not less than 30% of the net issue will be available for allocation on a proportionate basis to retail individual bidders, subject to valid bids being received at or above the Issue Price. The objects of the Issue are primarily to finance capital expenditure; finance capital investments in subsidiaries; repay debt and for general corporate purposes.
The company’s business is structured to enable a translational medicine approach delivering fully integrated end-to-end discovery and development solutions to the global life sciences industry, which includes many large and mid-market global pharmaceutical and biotechnology companies. It offers solutions in discovery research, translational research, clinical development and enterprise informatics.
The equity shares are proposed to be listed on the National Stock Exchange and the Bombay Stock Exchange.
The BRLMs to the issue are Kotak Mahindra Capital Company Limited and Enam Securities Private Limited.
An auction-based method for pricing of initial public offers may replace book-building, with the government aiming to bring in more transparency and efficiency in share sale.
Market regulator SEBI’s primary market advisory committee (PMAC), which has been asked to prepare a paper on various price discovery mechanisms, is examining the issue. While no final decision has been taken, it is possible that SEBI might opt for a method similar to the Dutch auction process used in the Google initial share offer.
The government had discussed the proposal with SEBI after which the panel was entrusted with the task. According to one model being considered by the committee, qualified institutional buyers will be told to bid for shares in an open auction. The lowest bid will then become the fixed price for retail investors.
Generally, in an open auction, investors are asked to indicate the price and number of shares they wish to buy. The issuer then allocates certain shares in a descending order of prices till the amount of shares to be issued is exhausted. The lowest bid price is accepted as the deemed price and all investors pay this price. In case of oversubscription, allocation is done on a pro-rata basis.
Consider a situation where a company wants to sell one million shares. The underwriters rank the demand for shares in descending order of prices till one million shares are reached. If the total demand is for two million shares, then the highest price bids adding up to one million shares is considered. The lowest price becomes the price at which shares will be allocated.
“In an auction method, the issuer gets the right value for shares, institutional investors get shares at a price they want and retail investors can then buy it at the lowest price offered by a qualified institutional buyer,” Prithvi Haldea of Prime Database said.
Open auction has become the preferred way to discover the price in Japan and France, among other countries. In the US, the concept was pioneered by venture capitalist Bill Hambrecht and was used in the Google IPO, although the concept is yet to gain popularity in that country.
The government’s move to look at alternatives to book-building method for price discovery comes against the backdrop of an increase in pre-IPO share placements. In last few years, most companies hitting the capital market have opted for a private placement just ahead of the IPO. In most such deals, while institutional investors managed to bag shares at a lower price, retail investors, who bought shares through the IPO, had to pay a higher price.
Anil Ambani group firm Reliance Energy today announced its subsidiary Reliance Power will soon go public, a move that is presumed to help it raise up to three billion dollars (about Rs 12,000 crore) through the IPO.
Reliance Power is expected to file next week its draft prospectus for the IPO, which is aimed at part-financing its about Rs 100,000 investment plan for setting up coal, gas and hydro power projects in the country. If successful, the public offer could value the company at over 20 billion dollars.
The decision for an IPO was taken at the Board meeting of Reliance Energy headed by Ambani, whose group as such has a market capitalisation of over Rs 200,000 crore.
"The Board approved a proposal by Reliance Power, a company promoted by Reliance Energy and Reliance ADAG, to undertake an IPO of equity shares. The DRHP for the IPO will be filed by RPL with SEBI shortly," REL said in a statement.
RPL is pursuing various gas, coal and hydro power generation projects in different parts of the country. The proposed IPO is being undertaken to fund the development of the said projects, the statement said.
