The initial public offering of Hughes Software Systems Ltd (HSS) becomes the first Indian offering to adopt international allotment norms for its book-built portion. For the first time, the allotment decisions will be discretionary on the part of the lead manager to the issue, Kotak Mahindra Capital Company. The quality of investors and price leadership will determine the allotment pattern, sources said.
The company, which garnered a whopping Rs 6,000 crore in application money against a target of Rs 250 crore, has laid out a 10 point guideline sheet which will be shortly approved and allotment will be based on these guidelines. Allotment for book-built portion of 39.37 lakh shares will be completed in a week's time, officials said.
"This becomes the first issue where the allotment would be based on the international guidelines adopted across the US and European markets. The discretionary element would bring the status of the book-running lead manager closer to that of international counterparts, where they operate as self-regulatory bodies," Shanti Ekambaram, executive director, Kotak Mahindra Capital Company said.
As a part of further due diligence, the company has made a provision wherein the existing promoters will not be allowed to divest any equity in the company through the secondary markets for a period of about six months after the issue is listed on the National, Bombay and Delhi stock exchanges.
This is to prevent any oversupply in the market after the issue listing, considering the huge demand that the stock has generated.
One of the key elements which would determine the allotment would be price leadership. This would mean that the higher the price, the better the chances for allotment. Bids received from the individual investors who have bid for up to 10 tradable lots, 1000 equity shares at or above the offer price will be grouped together to determine the total demand in this category.
The other issue will be quality of investors, where the lead manager has decided to look at the seriousness and long-term commitment of the investor, compared to the normal practice of entry point of the party into the book-building process. In the institutional investor category, the issue has received bids from more than 65 large global institutions.
HSS had decided to move in for price discovery through the book- built route and suggested a price band of Rs 480 to Rs 630 per share. Most of the demand was pegged to the highest level of Rs 630.
The book-built portion of the IPO was open for subscription between September 22-28. The company is offering a total of 43,75,000 equity shares and the balance 10 per cent will be open for subscription between October 7 and 12.
