Investors lap up shares on offer as Sebi deadline nears

Companies price sales at premium to the market price

All the offers-for-sale (OFSs) that hit the market on Friday received full subscription, with average bids coming in at a premium to the market price. ELCID Investments, Fomento Resorts, Modern India and Sharda Motor Industries, in a bid to comply with the minimum public shareholding (MPS) norms, offloaded shares through the OFS route, raising about Rs 75 crore.

The highest premium was seen in ELCID Investments, where the indicative price was fixed at a whopping Rs 5,108. 04 a share, as against its market price of Rs 2.73 per share. The issue was subscribed 1.2 times and raised Rs 4.8 crore.

"Many of the OFSs that have taken place are perhaps being pre-arranged. It is difficult to believe that retail investors, who have stayed away from the market, are now suddenly convinced and willing to buy into these shares," said the head of a leading Indian brokerage.

Experts said these companies were too small and hardly backed by the market. Except Sharda Motor Industries, all the other stocks fall in the illiquid stocks category.

Fomento Resorts was subscribed the most at 1.4 times and raised close to Rs 35 crore. The indicative price of the issue, at Rs 108 a share, was at a 21 per cent premium to its market price of Rs 89 a share.

Similarly, Modern India, subscribed 1.07 times and raised Rs 21 crore, saw its indicative price of Rs 50.84 per share, at an 18 per cent premium to the market price. Sharda Industries, whose scrip ended the day at Rs 499 a share, had set the indicative price at Rs 505 a share. The company raised about Rs 14 crore through the issue.

On Monday, five companies, including Tata Communica-tions, will launch their share sales via the OFS route and are looking to raise close to Rs 64 crore. About twenty more companies are yet to comply with the MPS norms, which requires companies to maintain the MPS at 25 per cent. For private companies, the deadline for compliance with the norm is June 3.

Through a circular passed yesterday, Sebi tweaked the OFS norm, allowing companies to announce their share-sale plans just a day before the launch of the issue.

Earlier, companies were required to announce it on the last trading day before the launch of the issue. This is beneficial for companies looking to launch their issues on the last day of the deadline.