Alkali Metals soars 75% on listing day

Shares of Hyderabad-based Alkali Metals surged 75 per cent on debut on Thursday, even as the Bombay Stock Exchange’s (BSE’s) Sensex and the BSE Metal index fell 3.81 per cent and 8.41 per cent respectively.

The stock was listed on BSE at Rs 90 – a discount of 12.62 per cent against the initial public offer (IPO) price of Rs 103 per share.

However, the counter saw a sudden spurt of activity after a few minutes of listing, and the shares rose to touch a high of Rs 179. Over 20 million shares of Alkali were traded on BSE and NSE.

 

The company had come out with a public issue of 25,50,000 equity shares of Rs 10 each, which was subscribed 1.03 times. It was not a smooth sailing for the IPO as the company had to extend the closing date by five days and lower the price band from Rs 90-105 to Rs 86-103. Also, credit rating agency ICRA had given Grade 2 to the IPO, suggesting below average fundamentals.

Analysts expressed surprise over the sudden spurt on the listing day.The IPO was oversubscribed 2.59 times in the retail category and 1.06 times in the non-retail category. Overall, the public issue was oversubscribed by 1.70 times. The issue received only 1,315 applications and the company was able to raise Rs 26.26 crore.

Interestingly, a closer look at the allotment details reveals that only one Qualified Institutional Buyer (QIB), Mavi Investment Fund, has been allotted 35 per cent, or 912,000 shares out of the total issue of 2.5 million shares. And, there is no lock-in period for the fund.

Mavi Investment Fund is a sub-account of M M Warburg Bank (SCHWEIZ) AG and has been active in small-cap IPOs. MM Warburg & CO KGaA is the second largest independent private bank in Germany, entirely owned by private individuals.

Apart from this, 10 corporate bodies hold 680,000 shares and eight individuals have shares totaling 280,000. Public offers that had similar allotment patterns in the past have not been able to sustain their first-day rally. For instance, the IPO of Niraj Cement this year has led to the highest wealth erosion for investors.