NE BUSINESS BUREAU
MUMBAI, NOV 9
The Rs 18,300 crore initial public offering (IPO) of Paytm’s parent company One97 Communications Ltd, the biggest such share sale to hit the Indian stock markets till date, saw the retail portion of the offer getting oversubscribed on Tuesday, the second day of the offering.
The retail book, worth around Rs 1,830 crore, was subscribed 123 percent at the end of day on Tuesday.
The portion of the share sale reserved for institutional investors was subscribed 46 percent, while the high net-worth individual book subscription stood at just 5 percent.
The Canada Pension Plan Investment Board (CPPIB), which had invested in the anchor round of the IPO, has increased its subscription. As per sources, CPPIB has bid for 6 lakh shares worth Rs 1,280 crore on Day 2 of the IPO. At the end of Day 2, total shares that were bid by Foreign Institutional Investors stood at 1,20,03,522.
Day 3 will see QIBs, HNIs and domestic mutual funds come in
Paytm had closed India’s largest anchor round on November 3 as it raised Rs 8,235 crore, led by leading foreign institutional investors such as BlackRock, CPPIB and GIC, and which are also expected to bid in the main book, according to sources. As per sources, most of these investments would come in on the final day of the subscription and also domestic mutual funds invest on Day 3.
Proven Trend: Coal India’s subscription went up only in the final days of the IPO
Historical records show that for large IPOs, while retail investors bet on the first day, QIB and HNIs invest in the later days of the subscription. Some of the largest IPOs from before like Coal India had seen muted demand on the first day. Even Coal India was only 1.71 on Day 2, but closed at 15.28 on the last day. The same trend was seen even for recent, and significantly much smaller IPOs like Nykaa and PolicyBazaar, where more than 90% of the QIB bids, and also overall bids, came in on Day 3. Paytm’s QIB tranche, while being the highest in Indian capital markets, is already close to 50% subscribed on Day 2.
As per reports, QIBs participate mostly in the third day of the IPO, given the requirement to commit 100% payment upfront, and block INR funds till allotment. So, to invest in larger issues, these institutions end up taking loans from banks and to avoid interest addition, they wait until the later days of the subscription.
Paytm IPO is larger than Zomato/Nykaa, subscriptions cannot be compared
Paytm IPO cannot be compared to the likes of recent internet IPOs like Zomato or Nykaa, as their price bands, and relative sizes of the IPOs, were much lower. Paytm’s large size also meant that its retail subscription is much larger in absolute terms of value than that seen in recent internet IPOs like that of Zomato or Nykaa. Paytm saw the highest retail subscription percentage on Day 1 over the last decade, for IPOs with retail size greater than Rs 1,000 crores, and also when compared to overall IPO sizes in excess of Rs 10,000 crores, over the same period.
The company opened for bid/offer on November 8 and it will stay open till November 10. The price band for the Paytm IPO has been kept in the range of Rs 2,080-2,150, as Paytm targets a $20 billion valuation. The company is set to raise Rs 18,300 crore from the markets through a fresh issue of Rs 8,300 crore and an offer for sale of Rs 10,000 crore.
