Wipro share auction gets tepid response

Two weeks after Life Insurance Corporation (LIC) of India bailed out state-run ONGC’s share sale through the auction route, the Azim Premji Foundation received a lukewarm response for its offer-to-sale (OFS) shares of Wipro through the same route.

On Wednesday, the Azim Premji Foundation received bids for only 24.75 million shares as against 35 million on offer.

That was just about 71 per cent of the total shares the foundation had offered, underlying weak demand from investors.

However, the company accepted only 17.8 million bids or 50.8 per cent of the total shares on offer, thereby generating around Rs 750 crore, according to a statement issued late in the evening.

If the shares were fully subscribed, the foundation was expected to raise almost Rs 1,530 crore.

“Azim Premji Trust undertook the sale of shares to fund the charitable needs of the foundation and the fund’s asset allocation strategy through the OFS route. As per the Sebi guidelines on OFS, the size of the offer should be at least one per cent of the paid-up capital of the company. The sale of 17.8 million shares generated around Rs 750 crore of cash for the APT at prices around Wednesday’s daily trading range, which fulfilled our dual objectives," the statement said.

The company had chosen not to disclose the floor price -- the minimum price at which the seller intends to sell the shares -- for auction upfront. According to the rules, the seller has the option to announce the floor price to the market or submit the floor price to the stock exchange in a sealed envelope in the auction method. The company had chosen the latter.

The foundation decided Rs 418 a share as the floor price for the auction, according to stock exchange data announced after the offer closure. “The promoter is trying to sell shares at the current market price, but people are not willing,” said Rohit Anand, an analyst at Mumbai-based brokerage firm PINC Research.

Wipro shares closed down 1.41 per cent, or Rs 6.10, at Rs 425.40 on the Bombay Stock Exchange on Wednesday, close to the floor price. This means there is hardly any discount to auction bidders from the price quoted in the secondary market. The auction route can be used by the promoters of companies like Wipro to bring down their stake to 75 per cent before 2013 to comply with the minimum shareholding requirement. Wipro promoters had 79.15 per cent stake in the company as of December 31, 2011.

A lack of clarity among investors about the price at which others were bidding for the shares could also be a reason behind the tepid response, experts said. “Both ONGC and Wipro have used the closed auction method wherein investors don’t have clarity about what price other people are bidding at. So, they feel they are shooting in the dark,” said Jagannadham Thunuguntla, Strategist & Head of Research at SMC Global Securities.