Aha! Finally, an IPO offering equity shares priced at near face value – sounds strange, isn’t it? Well, nothing surprising about it, there was an era when such sound pricing model to raise money from public was very much prevalent in the capital markets.
But, with ushering of the wily bull phase and market being slosh with hot money for last many years, the concept of corporate India offering shares at-par price bands has ceased to exist. However, for a change, we’ve a major business group interested in setting a precedent by offering its shares at near par levels.
Kishor Biyani’s Future Ventures, a unit of the Future Group, is all set to tap the primary market with Rs.750 crore offering at a price band of Rs.10-11 for its public issue. This venture capital firm has invested in 14 companies operating in food, fashion and FMCG segment, the ones whose businesses are strategically crucial to the group’s retail business.
Last major public offering from the Future Group stable was that of Future Capital Holding which was over-subscribed by 133 times at the peak of the bull phase in 2008, on account of positive market sentiment then. However, investors have lost a great deal of money as the stock has now corrected to below Rs.200 levels, driven by steep IPO pricing.
In order to make amends for the steep pricing policy which resulted into heavy losses for the group’s investors and regain their confidence, Biyani has underlined the importance of IPO valuations and has announced the pricing of its latest Future Venture offering near to its Rs.10 FV.
In my opinion, even Indian government should take cognizance of this IPO pricing phenomenon for all its PSU offerings; looking at the fact that disinvestment ‘process’ is going to be the mantra for all the future governments at least for a next decade.
Further to my earlier comment, I tried to find what they want to do with the IPO proceeds.
Here is the link to the plans of Future Ventures :
http://www.business-standard.com/india/news/future-ventures-plans-to-invest-ipo-proceeds-in-existing-investee-firms/431949/
Hi Viral
In your opinion, should we apply to this IPO as an LT investment?
Thanks & Regards
Vikas
I am really excited about this IPO. I feel after a long time an IPO has come which can give returns to retail investors of the likes of Coal India Ltd.
“We realised that we had to part with lot of stake (if priced at Rs 10 per share). But KB (Kishore Biyani) was absolutely clear he wanted investors to make money this time. He did not agree to raising the offer price,” said Pankaj Jaju, executive director, investment banking, Enam Securities Ltd.
We should acknowledge the honesty of Mr. Kishore for insisting on this IPO at par. However I do not understand how valueing this IPO at par will compensate the public which made a loss in 2008.
Future Ventures is from the Kishore Biyani stable and they are the No. 1 in retail in India.
When I read the purpose of the IPO, it did not say much other than “For general corporate purposes”. What ever is the purpose, an IPO from the Future Group which is retail king stable is a good opportunity to apply.
As is the case with MOIL, those who apply for less than full quantity in retail catagory will be left to lick saliva. I feel those with means should go for 2 lakh max limit.
Actually they should have announced this in the last week of March so that salaried people could have kept funds aside for this issue. Most probably most of them will be left out.
I already started calling friends and telling them to be prepared with funds :)
Just my two paisa :)