Fairfax-controlled Quess Corp’s IPO records highest investor interest in over 8 years

By TEAM VCC

  • 01 Jul 2016

The initial public offering of business services provider Quess Corp Ltd received bids for a whopping 144 times the number of shares on sale, making it the most attractive IPO in more than eight years.

High net-worth investors and companies, which largely ignored the IPO on the first two days, fell over each other to bid 392 times the shares reserved for them, probably the highest ever. Institutional investors bid for 59 times their portion while retail investors put in applications for 31 times their quota, stock-exchange data show.

The massive oversubscription for the Quess Corp IPO, which closed on Friday, comes after market volatility in the first half of this year had forced several firms to skip their planned share sales. However, a rebound in the secondary markets over the past few weeks has offered hope to companies looking to float IPOs.

The Quess Corp IPO also adds to the positive sentiment about the primary market where around three-fourths of the two-dozen-odd firms in the queue to launch initial share sales are backed by private equity firms, many of whom are looking at some liquidity to show returns to their limited partners, or investors.

The overall subscription number easily beats the IPO of Future Capital (now renamed Capital First) in early 2008 that was oversubscribed some 132 times. This was at the peak of the last bull market.

Quess Corp’s IPO almost matched Everonn Education's IPO, which saw bids worth 145 times the issue size. But it was a tad behind Religare Enterprises’ IPO, which was subscribed a record 160 times. Both these firms went public in 2007.

Quess Corp's investors would, however, hope its performance after listing does not emulate that of Everonn or Religare. Everonn now trades at a fraction of the price at which it sold its shares in the public issue while Religare trades at half its issue price and is quoting close to its historical lows.

Quess Corp’s IPO had received strong interest from retail investors on the first day itself and saw institutional investors join the party on the second day. The overall issue was covered 41% at the end of the first day and was subscribed 3.4 times on the second day.

As indicated by VCCircle, HNIs and institutional investors typically come in hoards on the last day, which set the issue on course for a bumper oversubscription.  

Earlier, Quess Corp raised Rs 180 crore ($26.5 million) from a group of 15 anchor investors including entities under Fidelity, Blackrock, Goldman Sachs, Wasatch and Grandeur Peak. The company finalised the anchor allotment at the upper end of the Rs 310-317 price band that it fixed for its IPO.

The IPO comprised a fresh issue of shares to raise Rs 400 crore to fund the company’s expansion plans and repay debt (Rs 50 crore). Quess will also use the proceeds to fund capital expenditure requirements of the holding company as well as its subsidiary MFXchange US (Rs 70.68 crore), incremental working capital requirement (Rs 157.9 crore), acquisitions and other strategic initiatives (Rs 80 crore).

The IPO was managed by Axis Capital, ICICI Securities, IIFL Holdings and YES Securities.

Quess Corp, which was set up in 2007, had filed its draft red herring prospectus for the IPO with the capital markets regulator Securities and Exchange Board of India in February. It received SEBI approval last month. It is eyeing a valuation of as much as Rs 4,000 crore (about $590 million).

Quess, earlier known as IKYA Human Capital Solutions Ltd, will be the second listed firm for Canada's Fairfax Financial Holdings Ltd in India. Its parent Thomas Cook is already a listed firm.

IKYA was founded by serial entrepreneur Ajit Isaac, who sold PeopleOne Consulting to Swiss staffing giant Adecco in 2004. It was acquired by travel and tour company Thomas Cook in early 2013 for Rs 256 crore. The deal marked an exit for India Equity Partners, which invested in IKYA back in 2008. It was rebranded as Quess earlier last year.

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