Despite choppy markets, share sales worth Rs 70 billion get lapped up

The new fund offer of Bharat-22 ETF, in which the govt offloaded its stake in 22 companies, was subscribed more than two times, sources said

New share sales worth over Rs 70 billion were registered on Friday, signaling strong investor appetite for quality primary stocks despite volatility in the market. 

The new fund offer (NFO) of Bharat-22 ETF, in which the government offloaded its stake in 22 companies, was subscribed more than two times, sources said. 

Meanwhile, the Rs 4.6-billion initial public offering (IPO) of state-owned engineering company RITES saw 66 times oversubscription, generating demand worth Rs 306 billion.

Also, the Rs 6-billion IPO of specialty Fine Organics Industries was subscribed nearly nine times. Put together, the three share sales mopped up nearly Rs 71 billion. Good demand was seen from all categories of investors, which included qualified institutional buyers (QIBs), high networth individuals (HNIs) and retail investors.

“The IPO momentum will stay buoyant for the next few months. Several companies are planning to launch their issuances ahead of the general elections. There is also enough appetite in the markets for a fresh paper. IPOs with good businesses and reasonable valuations will continue to find favour,” said Ajay Saraf, executive director, ICICI Securities.

Earlier this week, the Centre launched the second tranche of Bharat-22 ETF, whose top holdings include ITC, Axis Bank, State Bank of India and Larsen & Toubro (L&T). The Centre offered a discount of 2.5 per cent on the weighted average market price of the 22 underlying shares during the NFO period, which was between June 20 and June 22. Experts said investors used the NFO as an opportunity to gain exposure to quality shares in the ETF. In November 2017, the Centre had mobilised Rs 145 billion through the first tranche and garnered four times the subscription. 

Through the RITES   IPO, the Centre divested 25.2 million shares (13 per cent stake). Both RITES and Bharat-22 ETF were part of the Rs 800-billion disinvestment programme for 2018-19. 

Many analysts had recommend investors to subscribe to the RITES IPO citing attractive valuations. At the IPO price of Rs 185 per share, the company was valued at just 12 times its annualised earnings per share of Rs 17 for 2017-18. 

The Fine Organics IPO, too, was entirely an offer for sales by promoters, who offloaded 25 per cent stake. At the top end of the IPO price band of Rs 783 per share, Fine Organics was valued at three times its market cap-to-sales ratio and 30 times its 2017-18 earnings.