IPO season is here, but are retail investors warming up?
COFFEE DAY SAW A PARTIAL RESPONSE TO ITS `1,150-CRORE IPO, WITH RETAIL AND HIGHNET-WORTH INDIVIDUAL SEGMENTS WITNESSING UNDER-SUBSCRIPTION.
MUMBAI: If Coffee Day Enterprises’ recent initial public offer (IPO) is any indication, then retail investors have been very careful in parting with their money in public issues, especially in conglomerates that operate as holding companies for diverse businesses.
The sentiment, however, looks bullish for forthcoming public issues — Indigo kick-starts its road-show on Monday — as the festive season is typically seen as a good time to lure retail investors.
Coffee Day Enterprises, which owns the Café Coffee Day (CCD) popular chain, saw a partial response to its `1,150-crore IPO, with retail and high-net-worth individual segments witnessing undersubscription. While the qualified institutional buyer segment – a highly informed and funds-backed investor — subscribed to the issue 4.4 times, individual investor segment subscribed 0.9 times.
“It has been some time since retail investors saw an issue size that is `1,000-crore plus and a retail bucket also that is `400crore large. Till now, whole public issues were `400-crore big,” said V Jayasankar, executive director at Kotak Investment Bank, one of the merchant bankers to the issue.
Conglomerates, or entities with the subsidiary firms having diverse businesses, have a typical discount in their valuation determined by adding the estimated value of each company and subtracting the conglomerate’s market capitalisation. This is done to value the holding company, which has no operating business of its own.
Some large holding companies such as Tata Investment Corp (of the Tata Group) and Pilani Investments (of the Aditya Birla Group) are trading at 40-45% discount of their net asset value. Coffee Day Enterprises has diversified businesses such as logistics, financial services, resorts, technology parks, apart from the coffee business.
“It is the lead managers who should communicate the holding company discount concept,” said Arun Kejriwal, director, Kris Securities. “The CCD issue was also aimed at raising funds to retire the conglomerate’s debt. ”
InterGlobe Aviation, which owns the highly-profitable airline