Adlabs cuts price, extends closing after tepid response

Cuts offer price after tepid response

A lukewarm response has forced Adlabs Entertainment to cut its offer price and extend the closing date for its Initial Public Offer (IPO) of equity.

The amusement park operator was aiming to raise at least Rs 450 crore but got less than half. The company has slashed its price band around 20 per cent and has decided to keep the IPO open for another three trading days.

The weak response shows that despite a rally in the stock market, investors continue to remain sceptical of  IPOs. Adlabs’ is the third IPO this year to go through turbulence. Last week, cable and internet company Ortel Communications had to cut the issue size after its IPO remained under-subscribed. In January, edible oil firm NCML had to withdraw its issue after it failed to garner subscription despite slashing the price.

JUST WHEN THE PARTY WAS TO START…

• All IPOs this year have received tepid response
• Adlabs Entertainment got just 44% subscription
• Company slashed issue price by up to 20%
• Last week, Ortel had to cut offer size due to poor response
• In January, NCML withdrew its issue
• Development raises concerns over future issues
• Next week Inox Wind’s Rs  1,000-cr IPO is to hit the market

The reduced price band for the Adlabs’ IPO is between Rs 180 and Rs 215 a share, compared to the earlier band of Rs 221 and Rs 230 a share. The issue will now close on Tuesday, instead of Thursday.

Due to the downward revision in price, Adlabs will now be able raise between Rs 365 crore and Rs 437 crore. The company has already raised around Rs 60 crore from anchor investors, which include Daiwa India, HDFC Infrastructure Fund and Axis Mutual Fund.  The capital raised through the IPO is to be utilised to retire some of its debt. About a tenth of the issue is an offer for sale by two existing promoters of Adlabs.

The company is offering an additional discount of Rs 12 a share to retail investors. However, only 10 per cent, and not 35 per cent as in other IPOs, of shares are reserved for the retail category, as the company fails to comply with the profitability criteria.

From provisional data, the Adlabs offering in the retail segment was over-subscribed. The qualified institutional buyer (QIB) and high net worth individual (HNI) segments were subscribed only 40 per cent and 13 per cent, respectively. Around three-fourths of the shares are reserved for QIBs.

Adlabs operates the Adlabs Imagica and AquaMagica theme parks, spread across over 130 acres on the outskirts of this city. The company also has a surplus 170 acres and is in the process of starting a hotel, in association with Novotel.

Experts say the Adlabs issue is likely to succeed after the price cut. “The revised price leaves gains on the table for investors. The issue should now see full subscription,” said an investment banker, asking not to be named.

The IPO is being managed by Kotak Mahindra Bank, Deutsche Equities and Centrum Capital.