ICICI Securities IPO: Why Rs 4,017-crore issue was undersubscribed

Market volatility has claimed another victim within a week. This time, it is the initial public offer (IPO) of ICICI Securities. A week ago, the IPO of public sector undertaking (PSU) Hindustan Aeronautics Ltd (HAL) was subscribed around 50% on the third day of its offer till LIC came to the rescue of defence firm and took it close to the finishing line of 99% subscription during the final hours of the issue.

On Monday, the IPO of ICICI Securities was subscribed just 88% including the portion set apart for anchor investors on the last day of the issue.

The firm said it raised around Rs 3,500 crore from the IPO. The brokerage received bids for 3,46,75,396 shares against the total issue size of 4,42,25,343 shares (without anchor portion), according to the NSE data. On the contrary, anchor investors poured in Rs 1,717 crore a day before the IPO signalling strong enthusiasm for the issue. Around 3.30 crore shares were allotted at Rs 520 apiece to 58 anchor investors including Temasek, Nomura, Fidelity, Blackrock, Fairfax, IDFC Premier Equity Fund, L&T Mutual Fund Trustee, L&T Prudence Fund Pioneer Investment Fund, Reliance Strategic Investments Ltd and SBI Magnum Balanced Fund among others.

Anchor investors are institutional investors who are offered shares in an initial public offer (IPO) a day before the issue opens. The quantity of shares bought by anchor invesors signals the magitude of demand for the IPO. Each anchor investor has to put a minimum of Rs 10 crore in the issue.

The qualified Institutional Buyers (QIBs) quota was subscribed 1.04 times, non institutional investors 35 per cent and retail investors 88 per cent, according to the BSE data. While high net worth individuals subscribed to just 36% of the portion allotted for them, ICICI's shareholders put in bids for 1/3rd of the portion reserved for them.

Analysts said the IPO was undersubscribed on the backdrop of investor caution about rich valuations and a volatile stock market.

The valuation of ICICI Securities was expensive, some analysts said. According to reports, the IPO received sluggish response especially from high networth individuals.