Retail investors "NO" to Indigo IPO: MoneyControl

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

The initial public offer (IPO) of Interglobe Aviation, the parent company of country's largest carrier IndiGo, closed today, with the total issue book being subscribed more than seven times. Data released show the qualified institutional buyers (QIB) portion of the IPO was subscribed 1957 percent, while the high-net-worth-individuals (HNI), retail and employee portions were subscribed, 372 percent, 74 percent and 11 percent, respectively. (Though, the closing for the retail book was still a few hours away at the time of writing.) CNBC-TV18 spoke with a host of experts, such as Kapil Kaul of Centre for Asia-Pacific Aviation, Deven Choksey of KR Choksey and market expert Ambareesh Baliga, who outlined their views on the issue. Below is the verbatim transcript of the interview.. Q: Along expected lines or has it bettered your expectations? Of course the enthusiasm has really come in from the qualified institutional buyer (QIB) portion? Kaul: The QIB and the anchor investors were supposed to be participating and so that is on expected lines. In fact the QIB as well as the anchor investors have shown more confidence than what we expected but it is nevertheless on expected lines. So, there is no surprises there. Q: Are you surprised by the retail participation or would you have expected more? Kaul: I was not expecting the retail participation to be similar to QIB or the anchor investors but I thought that it will get subscribed. Though I don't know the numbers it was around 20 percent, so, honestly wait and watch what will happen. Q: At this point in time what we are getting is it is being subscribed 0.8 times? Kaul: My assessment at the end of the day should by the time the final numbers come it should get subscribed but it reflects frankly the fact that retail investors primarily, not a reflection on IndiGo, largely still not having confidence in making investments in the listings. Overall a muted response from the retail IPOs, so far. Not limited to Indigo but to be honest with you if it doesn't get subscribed I will be surprised. Q: What is your first reaction to the kind of numbers that IndiGo has managed to get, almost 7 times for the book? Choksey: I think the company should be complemented for bringing this particular company to the public markets. Definitely I think the institutional investors have better appetite for this kind of a product into the market vis-a-vis the retail investors. Retail investors normally they would like to have the flipping gains on listing. In this case I think that is not a possibility because of the higher valuation at which the company has priced their IPO. It is very clear that retail has not participated but those who go for the long term investment and buy the story of two years and above for this company they certainly would have put in money into this company at IPO price and others would wait for the listing and then probably take a call accordingly. Q: There were several brokerage views that seem to suggest that one should stay away from the IPO given the fact that valuations were on the higher side and the price had already factored in all the appreciation that we could see as far as IndiGo's profitability etc is concerned. What do you now expect as far as listing day goes? Choksey: I would not know whether on listing day the price would be materially different. Of course the floating stock is less in the market and if there is institutional demand which is more than what they have seen in the IPO then certainly one could well argue that the prices will not come down. However suppose if the institutions do not pay further premium to the price at which they are marketing the IPO then in that case I think you are not likely to see too much of a material difference into the price at this point of time. Considering the fact that the floating stock is less, the market price would be determined largely by the demand supply scenario vis-a-vis the fundamental scenario at this point of time. Fundamentals I still believe, they are a strong company, they have strong visibility as far as the earnings growth is concerned over next 2-3 years time. So, from that perspective I think nobody is doubting the company. However from the listing point of view people will have their own calculations on the demand and supply situation which I just now stated. Q: Enthusiastic response to IndiGo, how would you see the issue having closed and your first reactions? Baliga: I was a bit surprised because I found the issue slightly expensive. The sort of response which they have got from QIB is stupendous. The response they have got from retail and HNI is on expected lines. My feeling is that this IPO from IndiGo's point of view was at the right time, oil prices are down, load factors are decently high, their margins are the highest till date. The question is they don't  have control over oil prices and that is the biggest input as far as airlines is concerned. If you look at history airlines really haven’t  made money in the longer run. So, possibly this is the right time for IndiGo but may not be for  investors in the longer run because I really don't know as to whether they can hold on to this sort of premium over the other airlines. They haven’t really shown too much of profits till date except for the last two quarters. Q: What would the advise be on listing day, hold or try and make the pop on listing day? Baliga: In case it lists at a premium, possibly going by the grey market premium it could be about Rs 25-30, may be even Rs 40 higher, I think one should take that and exit. Like I said earlier I am not too bullish. I would possibly look at buying back in case it comes down to levels of about Rs 550-575.