Maruti public issue sold out in 3 hrs

Automobile major Maruti Udyog Ltd’s maiden public issue lived up to great expectations, receiving an overwhelming response from investo...

Automobile major Maruti Udyog Ltd’s maiden public issue lived up to great expectations, receiving an overwhelming response from investors with its initial public offer (IPO) being sold out in three hours. The issue was oversubscribed nearly 1.46 times by the end of the opening day.

This is a record of sorts for a company in which government has a sizeable stake. The government, which owns 45.8 per cent of Maruti, is selling a 25 per cent stake in the firm to institutions and the public as part of its disinvestment drive. Suzuki of Japan owns 54.2 per cent stake in MUL.

A day before the opening of the issue, Disinvestment Minister Arun Shourie had exuded confidence that the MUL issue would perk up the primary market and set the trend for public offerings in National Aluminium Company (Nalco) and Bharat Petroleum (BPCL) as part of the government’s divestment programme during the current fiscal.

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Against the offer of 7.2 crore shares with a face value of Rs 5 each, MUL received a thumping response with bids of 7.9 crore at the Bombay Stock Exchange (BSE) and 2.65 crore at the National Stock Exchange (NSE). In value terms, the bidding touched the amount of Rs 1,212 crore.

Industry sources said, ‘‘the Maruti issue has created a record in itself when an issue of this scale has been oversubscribed so heavily.’’ At floor price of Rs 115 per equity share of Rs 5 each, the offer is being made through a 100 per cent book building route, where up to 60 per cent would be offered to qualified institutional buyers.

In addition, at least 15 per cent of the offer would be given to wholesale bidders and 25 per cent to retail bidders. Officials close to disinvestment process said that retail investors could be considered for larger quantum of equity in case there was demand keeping in view the objective of making MUL as broad based a company as possible.

Buoyed by the strong interest generated in the market for the IPO of Maruti for disinvestment of 25 per cent government equity, Ministry officials said oversubscription could be even ten times the original size by the time issue closes on June 19.

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Maximum bids for 5.83 crore shares of Maruti came at Rs 120 per share compared to the floor price of Rs 115, according to the data available on BSE at 3 pm.

The second highest quantity of bids: 1.05 crore shares were at Rs 122 per share. To make the IPO a huge success, many banks including Indian Bank, IDBI, HDFC, Citibank, Kotak Mahindra and State Bank of India are also giving loans to retail investors so that they can subscribe Maruti’s shares.

Suzuki Motor Corporation (SMC), the majority shareholder in the joint venture has already agreed to underwrite the IPO at Rs 2,300 a share of Rs 100 but the company had gone for a share split to break each share into 20 of Rs 5 each to enable wider participation which established a floor price of Rs 115 a share.