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.