MUMBAI, NOV 11: Big institutional investors have pocketed a bonanza of over Rs 496 crore in the Hughes Software book-building exercise. As the scrip touched Rs 1,900 on the first day of listing on Thursday, big investors who got most of the shares through the book-building route have benefited from the initial public offering much to the disappointment of retail investors.As much as 90 per cent of the public issue of Hughes Software's Rs 275 crore issue was offered through the book-building route (a bidding system where no initial price is fixed) to big institutional investors. With big investors cornering a major chunk of shares, retail investors were left high and dry without getting a chance to participate in the IPO of a software company.When the scrip was listed on Thursday, it was quoted at a whopping premium of 192 per cent - a share which cost only Rs 630 to big institutions was worth Rs 1,900 on Thursday. The scrip finally closed at Rs 1550 on the Bombay Stock Exchange (BSE). ``Big investors benefited from the book-building part of the Hughes issue.As the company offloaded 90 per cent of the shares through book-building, small retail investors were not given a chance. If you calculate the difference in the market price and the offer price, big investors who participated in the book building made a clean profit of Rs 470 crore at the current market price level of the share.This is because the company offered 39 lakh shares - out of a total 43 lakh shares - to big investors through the book-building route. Only four lakh shares were offered through the general public issue route under a fixed price.Several small investors complained that the book-building norms are heavily loaded in favour of big institutional investors. On top of this, as much as 90 per cent of the issue was set apart for book building, thereby virtually eliminating the chances of small investors to participate in the IPO. ``Why is the SEBI giving a favourable treatment to big institutional investors? The regulators talk about protecting the interest of small investors, but it is not happening,'' said an investor.Out of the book-building portion, bids were invited from two categories of investors - 85 per cent of the offer was met by wholesale investors (those seeking over 1,000 shares) while 15 per cent was done by retail investors (for 1,000 shares or less). In the book-building process, the price is fixed on the basis of demand and supply. However, the company can give an indicative range (say between Rs 500-600). The Hughes Software issue had drawn a demand worth Rs 7,400 crore. While the book-built portion was oversubscribed by 25 times, the fixed price offer drew an oversubscription of 51 times. This itself indicates that general retail investors were keen to participate in the issue. However, the SEBI allowed book-building in such a manner that retail investors were kept away from the process.Said a merchant banker, ``one should encourage the book building route as both the company and investors will benefit from it. But it's not fair to offload 90 per cent of the issue through the book-building route. Small investors should also get a chance. Ideally not more than 40 per cent of the issue amount should have been sold through book building.''Certainly, the capital market needs more issues through book-building. This should be through greater participation of retail investors.
