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Offer fully subscribed within hours of opening; all you need to know

Harsha Engineers IPO Price, GMP, Review, Details: The initial public offering (IPO) of Harsha Engineers International, a manufacturer of precision bearing cages, opened for subscription on Wednesday, September 14, 2022, and was oversubscribed within a few hours on the first day of bidding.

The issue opened for public subscription at 10 am and was subscribed 1.64 times as of 2:36 pm. It received total bids for 2,76,14,745 shares across both the stock exchanges against 1,68,63,795 shares on offer, data from National Stock Exchange (NSE) showed.

The Rs 755 crore Harsha Engineers IPO will be available for subscription till Friday, September 16, 2022, and the price band of the company has been fixed at Rs 314-330 per share.

Harsha Engineers IPO consists of a fresh issue of equity shares aggregating to Rs 455 crore, and an offer-for-sale (OFS) of up to Rs 300 crore by existing shareholders. As a part of the OFS, Harish Rangwala (up to Rs 75 crore), Rajendra Shah (up to Rs 66.75 crore), Pilak Shah (up to Rs 16.5 crore), Charusheela Rangwala (up to Rs 75 crore) and Nirmala Shah (up to Rs 66.75 crore) will offload shares, according to the information provided in the red herring prospectus (RHP).

The net proceeds from the fresh issue will be utilised for pre-payment or scheduled repayment of a portion of the existing borrowing availed by our company, funding capital expenditure requirements towards purchase of machinery, infrastructure repairs and renovation of our existing production facilities including office premises in India and general corporate purposes.

Harsha Engineers International is the largest manufacturer of precision bearing cages in India (brass/steel/polyamide) with 50-60 per cent market share in the organized market. It is also one of the leading players globally with market share of 6.5 per cent for brass, steel and polyamide cages in CY21 (forming 75 per cent of global bearing cage requirement). It caters to each of the top six global bearing companies and derives 75 per cent revenue from this segment.

The company has five manufacturing facilities with two of its principal manufacturing facilities at Changodar and one at Moraiya, near Ahmedabad in Gujarat in India, and one manufacturing unit each at Changshu, China and Ghimbav Brasov in Romania, which allow access to its customers in over 25 countries.

Half of the issue size of Harsha Engineers IPO has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 35 per cent for retail investors.

Investors who wish to subscribe to Harsha Engineers IPO can bid in a lot of 45 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,850 to get a single lot of Harsha Engineers International. The shares will be listed on both BSE and NSE.

The applicants also must note that the cut-off time for UPI mandate acceptance is Friday, September 16, 2022, upto 5:00 pm, the last day of IPO bidding. If they fail to do so then their application may not be considered.

Axis Capital, Equirus Capital and JM Financial are the book-running lead managers to the offer while Link Intime India is the registrar of the issue.

Before heading into the IPO, the Ahmedabad-based company on Tuesday raised over Rs 225.74 crore (Rs 2,25,74,82,150) from 23 anchor investors in lieu of 68,40,855 equity shares at Rs 330 each, data from the stock exchanges showed.

The anchor investors include Whiteoak Capital Funds, Goldman Sachs Funds, HDFC MF, SBI MF, UTI MF, SBI Life Insurance Company, Abu Dhabi Investment Authority, Nippon Life India MF, ICICI Prudential MF, L&T MF and ICICI Prudential Life Insurance Company among others.

The research teams at IIFL Securities, Motilal Oswal Financial Services, Geojit Financial Services and LKP Securities in their respective IPO notes have given a “Subscribe” rating to the offer.

IIFL Research in its IPO note said, “At the upper price band of ₹330, Harsha Engineers International Limited is demanding a P/E multiple of ~20.5X based on FY22 earnings while the company’s price to sales ratiois at 2.27X of FY22 revenue. The industry average PE multiple is of 50.98X of FY22 revenue. Considering ~60% market share in the organized segment of the Indian bearing cages market, long standing relationship with clientele, expertise in tooling, design development and automation, plans to strengthen its technological leadership, and focus on increasing operational efficiencies, we recommend ‘SUBSCRIBE’ to the issue with a long term perspective.”

Motilal Oswal Financial Services in its reserch report noted, “HEIL with its dominant position is well placed to capture the growing bearing cage demand across industries. We like its increasing focus on other specialized precision components and on the growing EV segment which could boost its EBITDA margins. It is valued at 32.7x FY22 P/E which is at par with itslisted peers. Given growth recovery in auto/auto ancillary and strong momentum in the midcaps, we expect the IPO to do well. We suggest investors to Subscribe for listing gains.”

The share allotment is likely to take place on Wednesday, September 21, 2022, and the shares are expected to be listed on Monday, September 26, 2022, according to the timeline given in the RHP.

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Delhi News

Syrma SGS Technology’s Rs 840-crore IPO to open on Friday

Electronic manufacturing services firm Syrma SGS Technology on Monday said it will come out with its Rs 840-crore initial share sale on August 12, which will end two-and-a-half months of the gap in the initial public offering (IPO) market.

The company has fixed a price band of Rs 209-220 per equity share for its IPO, according to a statement.

This would be the first company to tap the primary market in two-and-a-half months. Prior to that, the IPO of Aether Industries was opened for public subscription during May 24-26.

Companies were not taking the IPO route for fundraising due to the volatility in the markets. In fact, many firms that received Sebi’s go-ahead are waiting for the right time to float their issues as current market conditions are challenging.

So far in the current fiscal, 11 debutants have gone public to garner Rs 33,254 crore. Of these, a lion’s share (Rs 20,557 crore) was raised by a public issue of Life Insurance Corporation of India (LIC).

The public issue of Syrma SGS Technology comprises a fresh issue of shares worth Rs 766 crore, and an offer for sale (OFS) of up to 33.69 lakh equity shares by Veena Kumari Tandon.

At the upper end of the price band, the company is expected to raise Rs 840 crore. The public issue will close on August 18.

The net proceeds from the fresh issue will be utilised for funding capital expenditure requirements to expand manufacturing, R&D facilities, long-term working capital requirements and general corporate purposes.

Half of the issue size has been reserved for qualified institutional buyers, 35 per cent for retail investors and the remaining 10 per cent for non-institutional investors.

Syrma SGS is a technology-focused engineering and design company engaged in turnkey electronics manufacturing services (EMS) that specialises in precision manufacturing. Its customers include TVS Motor Company, AO Smith India Water Products, Robert Bosch Engineering and Business Solution, Eureka Forbes and Total Power Europe BV.

The company currently operates through 11 strategically located manufacturing facilities in north India — Himachal Pradesh, Haryana and Uttar Pradesh — and south India — Tamil Nadu and Karnataka — and three R&D facilities, two of which are located in Chennai, Tamil Nadu and Gurgaon, Haryana, and one is located in Stuttgart, Germany.

In September 2021, Syrma acquired Gurugram-based SGS Tekniks in a cash and stock deal. Additionally, it acquired Perfect ID in October 2021.

Dam Capital Advisors, ICICI Securities and IIFL Securities are the book-running lead managers to the issue.

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LIC IPO: Day 1, 67% booked, employees and policyholders oversubscribe quota

The mega initial public offering (IPO) of Life Insurance Corporation (LIC) received a strong response from investors with 67 per cent of the shares getting sold out on Wednesday, the first day of bidding, despite the stock market plunging 2.29 per cent after the Reserve Bank of India hiked interest rates.

LIC policyholders led the subscription list, with their quota subscribed 1.99 times (199 per cent). The portion for employees was subscribed 117 per cent. The retail investors portion, meanwhile, was subscribed 60 per cent, according to stock exchange data.

While 2.21 crore shares were allotted for policyholders, there were bids for 4.40 crore shares. Employees bid for 18.53 lakh shares against their quota of 15.81 lakh shares.

The first day’s response from investors for the IPO has been strong despite the RBI’s rate hike which came after the market opened. The 1,307-point Sensex fall did not affect the IPO much, analysts said.

Non-institutional investors subscribed 27 per cent of their portion while qualified institutional buyers (QIBs) bought 33 per cent of their allotted quota of 3.95 crore shares. QIBs normally put in their bids on the last day of the IPO, investment bankers said.

Overall, there were bids for 10.86 crore shares as against the total IPO size of 16.20 crore shares on the first day, exchanges said. The issue will close on May 9.

The corporation has priced the IPO in the range of Rs 902-949 per share. It has offered a discount of Rs 60 for policyholders and Rs 45 for retail investors and employees. The size of the IPO was cut from Rs 65,000 crore to Rs 21,000 crore as the Russian invasion of Ukraine and sustained selling by foreign investors sent the stock markets into a tailspin.

Domestic mutual funds invested Rs 4,002.27 crore, accounting for 71.12 per cent of the total anchor book portion of the IPO. SBI Mutual Fund invested Rs 1,006.89 crore, becoming the largest investor in the anchor book quota.

LIC mobilised Rs 5,627 crore from anchor investors on Monday. Four equity schemes of SBI MF invested the amount, with SBI Equity Hybrid Fund alone putting in Rs 518.99 crore, according to data available with exchanges.

Seven schemes of ICICI Prudential Mutual Fund invested Rs 725 crore in the LIC IPO. HDFC Mutual Fund was allocated shares worth Rs 525 crore. Aditya Birla Sun Life MF, Axis Mutual Fund, Kotak MF, L&T MF and Nippon India MF, among others, also invested in the anchor portion.

Among foreign funds, BNP Investments LLC was allocated shares worth Rs 449.99 crore. Govt Pension Fund Global of Norway invested Rs 224.99 crore. The government of Singapore invested Rs 151.67 crore and the Monetary Authority of Singapore put in Rs 38.32 crore.

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Explained: After revised pricing, should you invest in LIC’s IPO?

How is the IPO priced?

LIC on Wednesday priced its IPO, the largest in the history of the capital market despite a reduction in size, at Rs 902-949 per share. LIC has offered a discount of Rs 60 for policyholders and Rs 45 for retail investors and employees. The IPO will open on May 4 and close on May 9.

The government will sell 22.13 crore shares through the offering. The anchor book will open on May 2, and the issue will open for retail investors two days later. Investors can bid in multiples of 15 shares. The size of the IPO was cut from Rs 65,000 crore to Rs 21,000 crore as the Russian invasion of Ukraine and sustained selling by foreign portfolio investors (a net of Rs 1,48,078 crore since the beginning of December 2021) affected the stock markets.

How should investors view the issue?

A couple of leading mutual fund managers said the reduction in valuation has made the issue attractive. “While there is a lot of inherent strength in the company and there are growth prospects, the valuations too seem fine now after the revisions. As the market is not witnessing a mad bull run that was being seen over the last year, there is a possibility that investors may not get immediate listing gains. But it will generate decent returns over the next three to four years,” a leading fund manager said.

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“There is a lot of strength in the company. There are many categories where LIC is not present on the business front, and so there is a lot of scope for it to explore these and grow. As LIC had a monopoly, one can only lose market share from such a position. It is, however, important to note that the company still maintains around a 60% market share and it could be a good company to invest with a medium- to long-term view,” said another fund manager.

Some see the listing as part of a strategic vision of the government aimed at long-term value creation for shareholders. “Our take is that we won’t be able to determine the true value in the case of LIC as it is a very big entity in itself. There are two ways to look at it: one in the present case where everyone is buying policies to safeguard themselves from uncertainties… second, due to huge buying power in the hands of consumers, the margins might reduce. One can subscribe with a long-term perspective,” said Manoj Dalmia, founder and director, Proficient Equities Limited.

How does the valuation compare with that of other insurers?

Yash Gupta, analyst at Angel One Ltd, said that at the offer band, the IPO is valued at a Price/Embedded Value (P/EV) of 1.06-1.1 on its September 2021 EV of Rs 539,686 crore, which is at a significant discount compared to the P/EV for listed private life insurance companies. HDFC Life Insurance is trading at a P/EV of 3.9, SBI Life at 3.2, and ICICI Pru Life at 2.5 on their respective December 21 EVs.

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“Although LIC valuations appear to be cheap compared to listed private players, investors need to keep in mind that LIC has a lower VNB margin (value of new business) of 9.9% in FY2021 compared to private players that have VNB margins of 22-27% due to higher share of participation and group products. Despite lower margins and inferior business mix, we believe that the IPO is being priced reasonably and offers value to investors with a long-term view,” Gupta said.

There is, however, a section of the market that is not fully convinced about the valuation. “The ongoing volatility in stock markets due to the Russia-Ukraine war has forced the government to cut the issue size to 3.5%. However, the price band is kept on the higher side, which is not an attractive price for adequate return growth. We recommend that investors may subscribe for listing day gains and wait for lower levels for long-term investment,” said Ravi Singh, Vice-President and Head of Research, ShareIndia.

Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management, said, “This is a fair and attractive valuation… We want to champion LIC as a long-term value creator in the equity markets.” He said the issue is right-sized considering the capital market environment and will not crowd out capital and monetary supply even under the current constraints.

How big is LIC?

LIC, formed by merging and nationalising 245 private life insurance companies on September 1, 1956, with an initial capital of Rs 5 crore, now manages around Rs 40 lakh crore assets. It is the fifth largest life insurer globally and the largest asset manager in the country. As on December 31, 2021, it covered 91% of all districts and had 1.33 million individual agents, and had a market share of 61.6% in terms of premiums or GWP, 61.4% in terms of New Business Premium, 71.8% in terms of number of individual policies issued, and 88.8% in terms of number of group policies.

What are the advantages of listing?

LIC’s profile will get a boost. Investors can trade in its shares or keep them long-term. LIC will become more transparent and answerable to shareholders for any mismanagement. It will have to follow the listing guidelines of stock exchanges and SEBI regulations.

While Pandey has ruled out a follow-on issue in the current financial year, markets are expecting more offers in the next financial year. Moreover, the insurtech industry will benefit. “Most of the public insurers in the country were still evaluating digitisation of customer journeys, which will get a boost post the LIC IPO,” said Surjendu Kuila, co-founder and CEO, Zopper.

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IPO mania gets reality check in India after a series of flops

A boom in technology initial public offerings in India risks grinding to a halt after several of the country’s highest-profile startups tanked soon after listing.

A raft of prominent tech startups, including Oyo Hotels and logistics provider Delhivery, are pushing back their public debuts and preparing to reappraise target valuations, according to people familiar with the situation. The duo, both backed by SoftBank Group Corp., had been among the country’s highly anticipated offerings.

India’s burgeoning startup ecosystem faces a reckoning just weeks after it closed out a record year for IPOs. Investors have soured on new tech offerings after the calamitous public debut of fintech firm Paytm, as well as the battering received by newly listed e-commerce operators Zomato Ltd. and Nykaa. Regulators have stepped up scrutiny of IPO candidates after investors got burned, contributing to the delays.

“Investors are no longer enamored of the household name startups; they want a path to profitability and returns, not hype and hoopla,” said Anup Jain, a managing partner at early-stage investor Orios Venture Partners.

An Oyo spokesman said by e-mail that it is standard procedure for the regulator to ask for clarifications of a preliminary IPO filing, adding “our bankers are actively engaged with them. We can’t comment on specifics.” Delhivery declined to respond.

Source: Bloomberg

The owners of Delhivery have pushed back its approximately $1 billion IPO to the fiscal year starting in April, said some of the people, asking not to be named because the details are private. Delhivery is also reviewing its listing plan after the stock market regulator frowned on a planned sale of a substantial amount of shares by investors in the IPO, the people said. The logistics startup, backed by Carlyle Group Inc. as well as SoftBank, had previously planned to list by March.

Oyo, which came under scrutiny for its ownership structure and heavy losses after filing preliminary IPO documents last year, is now facing regulatory questions too. India’s watchdog has made queries about Oyo’s ongoing litigation with hostel operator Zostel Hospitality Pvt., which is claiming a stake in the company after a failed merger in 2016.

The approval for the draft prospectus of Oyo’s planned $1.2 billion IPO has been pending for almost five months. Its investors include Sequoia Capital and Lightspeed Venture Partners, as well as SoftBank.

The management and bankers of Oyo, formally called Oravel Stays Ltd., are not in a rush, however, said one of the people. They are taking their time to respond to the regulator’s queries to slow down the listing process on purpose, the person said.

Also up in the air are the IPO timings of Pharmeasy, which goes by API Holdings Ltd., and automobile marketplace Droom Technology Ltd., which filed initial IPO documents in November. Pharmeasy’s investors include Prosus Ventures and TPG, while Droom is backed by Beenext and Lightbox Ventures.

Spokespeople for Pharmeasy and Droom declined to comment.

Workers prepare the stage during the listing ceremony for the IPO of One97 Communications Ltd., operator of PayTM, at the Bombay Stock Exchange in Mumbai, India, on Thursday, Nov. 18, 2021. (Bloomberg)

India’s first-ever tech IPO rush marked a monumental year of exits for global investors in 2021. Paytm’s parent company, One 97 Communications Ltd., raised a record $2.5 billion when it went public in November. But its shares have plummeted 60% from their IPO price, infuriating investors and fueling concerns among regulators. A broader decline in tech stocks in India and beyond has only added to the gloom.

Even the U.S. IPOs of startups Druva Inc., InMobi Pte. and Pine Labs Pvt. have been put off or deferred to the second half of 2022 or later, some of the people said. Sunnyvale, California-based software-as-a-service provider Druva, Singapore-based mobile solutions startup InMobi and fintech Pine Labs were all founded in India, where they still have the bulk of their operations.

A Druva spokesperson said by email that “the company will continue to monitor market and industry conditions and will do what best positions Druva for future growth and success.”

InMobi and Pine Labs did not respond to requests for comment.

Hanging over the Indian listings is a big unknown: the fate of the massive public share sale of state-owned Life Insurance Corp. of India, which filed its draft prospectus over the weekend. The final valuation and investor interest in what’s being called the “mother of all Indian IPOs” could dictate the course of technology companies’ listing plans, multiple people said.

Sandeep Murthy, a Mumbai-based partner at Lightbox, said concerns among public market investors are intensifying after two years of “rocketing” growth.

“Last year was all about greed and, short of an alien invasion, the market was ready to accept anything,” Murthy said. “Right now, fear is creeping up but give it some time, greed will be right back.”

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CMS Info Systems Garners Rs 330 Crore From Anchor Investors Ahead of IPO

CMS Info Systems IPO will open tomorrow for subscription

CMS Info Systems, one of the major cash management companies in the country, has garnered Rs 330 crore from 12 anchor investors ahead of its initial public offer (IPO), which is opening for subscription tomorrow on December 21. The offer will close on December 23.

The company in a filing with Bombay stock exchange (BSE), said that it has finalised allocation of 1,52,77,777 equity shares to anchor investors, at a price of Rs 216 per equity share.

The investors who have invested in the company through anchor book are ICICI Prudential, Nomura India, SBI Mutual Fund, WF Asian Reconnaissance Fund, Aditya Birla Sun Life, Goldmans Sachs, SBI Life Insurance, Abakkus Emerging Opportunities Fund, Theleme India Master Fund and BNP Paribas Arbitrage.

CMS aims to raise Rs 1,100 crore from its public issue. The IPO is entirely an offer-for-sale by promoter Sion Investment Holdings Pte Limited, therefore all the money will go to the selling shareholder and the company will not get any funds from the offer.

The price band for the offer has been fixed at Rs 205-216 per equity share.

The company has reserved half of its offer size for qualified institutional buyers (including anchor investors), 35 percent for retail investors and the remaining for non-institutional investors.

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Government likely to block Chinese investment in insurance giant LIC’s IPO: Report

New Delhi wants to block Chinese investors from buying shares in Indian insurance giant Life Insurance Corp (LIC) which is due to go public, four senior government officials and a banker told Reuters, underscoring tensions between the two nations.

State-owned LIC is considered a strategic asset, commanding more than 60% of India’s life insurance market with assets of more than $500 billion. While the government is planning to allow foreign investors to participate in what is likely to be the country’s biggest-ever IPO worth a potential $12.2 billion, it is leery of Chinese ownership, the sources said.

Political tensions between the countries rocketed last year after their soldiers clashed on the disputed Himalayan border and since then, India has sought to limit Chinese investment in sensitive companies and sectors, banned a raft of Chinese mobile apps and subjected imports of Chinese goods to extra scrutiny.

“With China after the border clashes it cannot be business as usual. The trust deficit has significantly widen(ed),” said one of the government officials, adding that Chinese investment in companies like LIC could pose risks.

The sources declined to be identified as discussions on how Chinese investment might be blocked are ongoing and as no final decisions have been made.India’s finance ministry and LIC did not respond to Reuters emailed requests for comment. China’s foreign ministry and commerce ministry did not immediately respond to requests for comment.

Aiming to solve budget constraints, Prime Minister Narendra Modi’s administration is hoping to raise 900 billion rupees through selling 5% to 10% of LIC this financial year which ends in March. The government has yet to decide on whether it will sell one tranche of shares seeking to raise the full amount or choose to seek the funds in two tranches, sources have said.

Under current law, no overseas investors can invest in LIC but the government is considering allowing foreign institutional investors to buy up to 20% of LIC’s offering.

Options to prevent Chinese investment in LIC include amending the current law on foreign direct investment with a clause that relates to LIC or creating a new law specific to LIC, two of the government officials said.

They added that the government was conscious of the difficulty in checking on Chinese investments that could come indirectly and would attempt to craft a policy that would protect India’s security but not deter overseas investors.

A third option being explored is barring Chinese investors from becoming cornerstone investors in the IPO, said one government official and the banker, although that would not prevent Chinese investors from buying shares in the secondary market.

Ten investment banks including Goldman Sachs, Citigroup and SBI Capital Market have been chosen to handle the offering.

($1 = 73.8200 Indian rupees)

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