Retail, HNI investors take fancy to MCX

Experts say the success of the IPO marks the resurgence of investor sentiment in the primary issuance segment

The initial public offer (IPO) of the Multi Commodity Exchange (MCX) has brought the buzz back into the country’s primary equity issuance market. The MCX issue has clearly caught the fancy of retail and high net-worth individual (HNI) investors — the IPO was over bid 54.10 times till 6pm on Friday, the last subscription day of the issue.

MCX, which was offering a little over 5.5 million shares through the book building route, received bids for nearly 300 million shares in three days. Till 6pm, category-wise retail investor portion was subscribed 23.8 times, while the non-institutional or HNI category was subscribed 150.35 times and the qualified institutional investor portion was over bid 49.12 times.

 

“The IPO market seems to have come out of ICU,” said S P Tulsian, independent equity analyst and primary market expert. “The subscription figures indicate that the worst is over for the primary market and there is appetite among retail investors for quality IPOs,” he said.

“The feel-good factor created by the MCX IPO cannot be underestimated. What the Maruti IP did in 2003 to help the historic revival of the Indian capital markets, may be expected to be repeated by the MCX IPO in 2012,” said Jagannadham Thunuguntala, head of research at SMC Global.

Usually, subscriptions by retail investors come on the last day of bidding. But, in case of MCX, retail investors were seen lapping up the issue. The retail category was oversubscribed on the first day of bidding itself even while the QIB category got fully subscribed on the second day.

MCX will raise Rs 633 crore through this IPO, which is likely to be priced at the upper end of the band due to huge demand for the shares. The price band was Rs 860-1,032, valuing the exchange at a little over Rs 5,200 crore at the upper band.

MCX would now be in the list of top 10 highest subscribed IPOs in the past couple of years. The IPO of government promoted MOIL, which was launched soon after the success of the Coal India public issue, was subscribed 56 times. The retail category of MOIL was subscribed 32 times. However, Coal India was the most successful mega-issue since January 2008, when the Reliance Power issue disappointed investors with its listing, leaving the primary markets in the doldrums.

MCX is the biggest IPO since L&T Finance Holdings raised over Rs 1,200 crore in its maiden public float last July.

Market experts feel the MCX IPO, which lists just ahead of the announcement of Union Budget 2012, may revive investor sentiments. MCX is the country’s largest commodity trading platform and the exchange derives a major share of its income from transaction fees.

Anchor investors include Kuwait’s sovereign wealth fund and investment management firm Wellington Management, besides a string of mutual funds and other financial investors, such as Blackrock Global, Deutsche Securities, Tata AIG Life, ICICI Prudential and Acacia, among others. The anchor investors are subscribing to shares priced at Rs 1,032. The MCX public issue entirely comprises sale offer by existing shareholders, including main promoter Financial Technologies (India) Ltd, offering 6.4 million shares for sale, accounting for 12.6 per cent stake. Thus, money raised through the IPO will not go to the company as it is an offer for sale by the promoters.