In what sends poor signals about the state of primary market in India despite the secondary market, as captured by headline stock indices, showing a surge, the second successive initial public offer (IPO) in the country failed to attract enough investors to see through its targeted issue in time. Theme parks operator Adlabs Entertainment Ltd failed to see through its issue on Thursday and has now cut the price band of the IPO and extended the time period of the issue hoping to attract investors.
Manmohan Shetty-promoted Adlabs did not even reach half-way mark at the time of original closure period. It saw subscription worth under 44 per cent with only the retail investors, who were offered a price discount, portion fully subscribed.
The institutional investors’ portion was covered only 40 per cent and HNIs and corporates applied for shares worth around 13 per cent reserved for them.
The issue, which was to close on March 12, will now close on March 17. Moreover, the price band has been revised to Rs180-215 a share from Rs 221-230.
The firm had offered 17.6 million shares to the public after the anchor allotment portion where it raised Rs 60 crore (just under $10 million) from a hedge fund under Edelweiss, besides a string of mutual funds under Axis, L&T Fin, HDFC AMC and a fund under Daiwa. The anchor investors had picked the shares at the lower end of the Rs 221-230 a share price band of the IPO.
The overall issue, including the anchor allotment portion, comprises 20.03 million shares of which around a tenth is through an offer for sale by the promoters.
At the new price band, the firm would be able to raise a maximum of Rs 376 crore (excluding anchor investors commitment) as against up to Rs 404 crore with the previous pricing.
The IPO had got off to a slow start with subscription of just 3 per cent on the first day which only managed to reach 18 per cent at the end of day 2.
Adlabs is backed by ICICI Venture, which invested in the company in mid-2013 and Jacob Ballas, which came in as a pre-IPO investor a few months ago. ICICI Venture holds 16.95 per cent stake while NYLIM-JB owns 4.13 per cent and Jacob Ballas separately owns 0.22 per cent.
With the new IPO price band, ICICI Venture is now sitting on a potential upside of 30-56 per cent while Jacob Ballas is sitting on 15 per cent paper gains at the upper end of the price band. If the issue price is fixed at the lower end, its investment would be underwater.
Adlabs’ issue is being managed by Deutsche Equities, Centrum Capital and Kotak Mahindra Capital.
The poor response to the issue comes after near casualty of a previous IPO. Last week, Ortel Communications had just managed to scrape through to the finishing line after its PE backer New Silk Route decided to cut the size of its own offer-for-sale as part of a larger issue.
At the fag-end of last year a small edible oil firm NCML had to withdraw its offer as it failed to get investors despite cutting issue price and extending the time period.
This sets a bad precedent for a bevy of firms in queue to float their IPOs in the market. Majority of these firms are PE-backed.
(Edited by Joby Puthuparampil Johnson)