Ortel share price skids on stock market debut

By TEAM VCC

  • 19 Mar 2015

Regional cable TV and broadband distribution firm Ortel Communications Ltd had a poor debut with its share price declining after listing on Thursday. Within the first trading hour itself it hit Rs 171.95 a share, down 5 per cent compared to the issue price of Rs 181 a share, and the lower circuit limit for the day.

This comes after the company barely managed to see through its initial public offer (IPO) but only after its private equity backer decided to cut the offer-for-sale portion of the issue.

The overall issue saw just 75 per cent subscription available to the public excluding the anchor allotment portion.

The public issue size was 9.45 million shares, excluding the 2.55 million shares picked by anchor investors. This included a fresh issue of shares besides an offer for sale by New Silk Route (NSR). The PE firm was looking to part exit in the IPO.

Of the total 12 million shares on offer, NSR had offered to sell 6 million shares while Ortel offered 6 million fresh shares. Of this, 9.67 million shares were subscribed in total including the anchor allotment portion. NSR cut the number of shares it sold from targeted 6 million to around 3.67 million.

Kotak Mahindra Capital was managing the issue.

Ortel had seen HNIs largely ignoring the issue and retail investors also passing it on with only 39 per cent subscription and only institutional investors’ portion seeing full subscription.

Earlier, Ortel roped in Axis Mutual Fund and ICICI Prudential Insurance as anchor investors in the IPO. The two investors had committed to pick 2.55 million shares for Rs 46.2 crore ($7.5 million). While Axis Mutual Fund agreed to buy 0.9 million shares for Rs 16.3 crore, ICICI Prudential Insurance had committed the remaining amount. Notably, they had agreed to buy the shares at the lower end of the price band of Rs 181-200 a share. This itself set a weak tone to the public issue.

Ortel had previously looked at a public float around five years ago, when NSR was looking to exit completely. However, it did not go ahead with the IPO due to poor market conditions. In 2013, it had re-filed its documents but later withdrew it.

Although the issue sailed through after cutting the overall size, it raised a red flag to the bevy of firms waiting to go public in India and sent a weak signal of investor appetite for the primary market.

Indeed, another public issue of Adlabs Entertainment, which closed early this week after it was extended and price band was cut, eventually just managed to move past the finishing line in dying hours of the IPO period.

Early this year a small edible oil firm NCML Industries Ltd was forced to withdraw its IPO after a poor response. The firm had previously extended the time period for the issue and also cut the price band to attract investors.

(Edited by Joby Puthuparampil Johnson)