Ortel IPO fails to liquidate PE's holding

The Rs 240-crore IPO of the cable and internet services provider, which ended on Thursday, failed to garner full subscription

Private equity firm New Silk Route’s (NSR) wait to liquidate its holding in Odissa-based Ortel Communications has got longer.

This is after the Rs 240-crore Initial Public Offer (IPO) of the cable and internet services provider, which ended on Thursday, failed to garner full subscription. The 12-million share issue received demand for 9.68 million, around 81 per cent of what was on offer. Ortel had priced its IPO in a band of Rs 181-200 a share. The company would have raised around Rs 240 crore at the top end.

Half the issue comprised a secondary sale by NSR and the remaining half was fresh equity issuance to help Ortel fund its expansion.

A banker handling the issue said the fresh component for the IPO was fully covered, while the shares put on block by NSR have remained undersubscribed. According to provisional data provided by the exchange, only 61 per cent of NSR’s offering was sold. NSR, which owns around 33.6 per cent in Ortel, was looking at exiting part of its holding. If the IPO would have got full subscription, the private equity firm’s holding would have come down to seven per cent.

Interestingly, when Ortel had filed an offer document in September last year, NSR was looking to liquidate its entire holdings. From rough estimates, NSR, which had invested in Ortel in 2009, was making an internal rate of return (IRR) of only 10-12 per cent on its investment.

From exchange data, the qualified institutional buyer (QIB) quota for the IPO was fully subscribed. The retail and wealthy investor segment remained undersubscribed. The issue had 75 per cent reservation for QIBs, 15 per cent for the wealthy and 10 per cent for retail investors.

The company had raised around Rs 46 crore from anchor investors ahead of its IPO. It had sold around 2.5 million shares at Rs 181 apiece to Axis Mutual Fund and ICICI Prudential Life Insurance in the anchor portion.