With aggressive bidding from domestic institutional investors (DIIs), the R7,000-crore follow-on public offer (FPO) of Power Grid Corporation (PGCIL) was subscribed 0.69 times on its opening day on Tuesday. DIIs ? comprising domestic banks, financial institutions, and insurance companies ? bid for more than 46.84 crore shares on day one, as per the data provided by the stock exchanges.
Foreign institutional investors (FIIs) bid for 6.63 crore shares.
PGCIL has fixed the price band of its FPO at R85-90 per share and is offering a 5% (R4.5) discount from the top end of the price to retail investors and eligible employees.
Overall, the qualified institutional buyers? (QIBs) book was subscribed 1.36 times, with nearly 53.49 crore shares being bid for by institutional investors as against 39.20 crore shares offered.
On the other hand, the retail portion was subscribed just 0.03 times, with the investors bidding for 82.67 lakh shares. However, bids from individual investors could pick up in the coming days as the issue is open for retail investors till December 6, a day after it is closed for QIBs.
About 27.442 crore shares (34.87%) of the total issue size is reserved for the retail category.
?Retail investors take a call on the last day of the issue or usually wait for the response given by institutional investors,? said a head of a big domestic brokerage house.
On Tuesday, shares of PowerGrid closed at R93.75 per share, up R0.35 or 0.37% from the previous close. The stock has touched a high of R121.05 and low of R86.7 in the last 52 weeks.
Many brokerage firms have recommended that their clients participate in the issue, citing the attractive price and likely improvement in the fundamentals of the company.
Japanese financial services firm Nomura expects PGCIL shares to rally once the FPO concludes in the first week of December. ?PowerGrid remains a solid defensive growth story and our top pick in the sector,? Nomura stated in a report.
Motilal Oswal also has a ?buy? rating on the firm, citing valuations and earnings growth. ?We reiterate our
positive view on the stock and recommend the current offering as an opportunity to add. Offer price range of R85-90 per share appears very attractive given comfortable valuation, dividend yield of 3.3% and RoE of 15%.?
PGCIL aims to sell 78.70 crore shares via the FPO. The issue comprises a fresh issue of nearly 60.186 crore shares (13% of the existing paid-up equity) and simultaneous disinvestment of 18.52 crore shares (4% of existing paid-up equity) by the government. Post the issue, the government’s shareholding in the company will drop to 57.89% from 69.42%. Citigroup, ICICI Securities, Kotak Investment Banking, SBI Capital Markets, and UBS Securities are the lead managers to the issue.
