Prabhat Dairy IPO barely sailed through on the final day of the extended subscription period after existing investors Rabobank and Proparco decided to reduce their offer for sale (OFS) by half. Following the poor response during the regular three days reserved for IPOs, Prabhat Dairy lowered price band of the issue from INR140-147 per share to INR115-126 per share and extended the public offer by another three days.
Despite the extension, the issue received lukewarm response and was subscribed only 77% on the final day of bidding. Subscription was highest in the Non Institutional Investor (NII) category at 142.3%. Subscription in the Qualified Institutional Buyer (QIB) category was 87.7%. Despite a discount of INR5 per share, retail investors largely stayed away and presented bids for only 33.7% shares reserved for the category.
The Ahmednagar-based dairy products company will collect anywhere between INR357 crore and INR396 crore through the IPO, a PR agency hired by the company told IPO Central. While this is higher than the INR300 crore the company was originally looking to raise through issue of fresh shares, the plans of existing shareholders offloading substantial chunk of their shareholding have gone for a toss. The total fund mobilization also marks a sharp contrast from at least INR505.8 crore Prabhat Dairy was planning to raise earlier. The IPO was managed by Edelweiss Financial Services, SBI Capital Markets, and Macquarie India Advisory Services.
Prabhat Dairy’s IPO Bidding (as on 4 September 2015)
|Sr.No.||Category||No. of shares offered||No. of shares bid for||% subscription|
|1||Qualified Institutional Buyers (QIBs)||20603987||18072258||87.71|
|2||Non Institutional Investors||6181197||8797500||142.33|
|3||Retail Individual Investors (RIIs)||14422792||4869888||33.77|
While several brokerage houses including Way2Wealth advised investors to SUBSCRIBE, our review found that a price by earnings (P/E) ratio in excess of 45 times was simply too much for a company which earned a margin of 2.1% in the latest financial year.
We like the steady growth of Prabhat Dairy but valuations of are evidently high as they have been in IPOs this year. This is another example of steep IPO pricing that can leave investors high and dry in volatile market conditions.
Unlike most other IPOs, Prabhat Dairy did not rope in anchor investors which made the going difficult for the IPO. Prabhat Dairy has become second IPO this year to extend the subscription dates and reduce price band. Earlier in March, Adlabs Entertainment met with the same fate. Adlabs Entertainment is still trading below its IPO allotment price which was reduced after the poor demand.