Tag: offer for sale (OFS)

SJVN Offer For Sale opens for retail investors today: Here’s how you can apply for shares

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government announced on September 20 it would be selling up to 4.92 percent stake in state-run hydroelectric power generator SJVN Ltd. through an Offer For Sale.

SJVN’s OFS for non-retail investors on Thursday received bids for 240 percent the total number of shares on offer. The stock had ended 13 percent lower on Thursday.

The offer for retail investors opens today. Here’s how you can apply for shares:

[faq][ques]What is an Offer for Sale?[/ques][ans]An Offer For Sale is a process by which listed companies in India can sell shares to comply with the Securities and Exchange Board of India’s (SEBI’s) minimum public shareholding norms, which mandate that promoter holdings in companies should not exceed 75 percent. The OFS mechanism was introduced in 2012 for private as well as state-run companies. The government uses the OFS route to pare stake in their entities to achieve their disinvestment targets.[/ans][/faq]

[faq][ques]How is an OFS different from an IPO?[/ques][ans]An Offer For Sale is a more cost-effective process for a company to sell their shares. The IPO is a long, elaborate process that requires regulatory approvals, appointing lead managers, preparing RHP and more. None of these requirements are applicable to an OFS. Also, unlike an IPO, the OFS is only open for one trading day each – one for non-retail and the other for retail shareholders.[/ans][/faq]

[faq][ques]How does an OFS work?[/ques][ans]It’s a simple mechanism. Promoters of the company have decided to sell some stake. In SJVN’s case, the government, which is the company’s promoter, has decided to sell a stake in the company. The information is then sent to the exchanges at least a day or two before the OFS opens. The information is mandatory. The company fixes a floor price, which is the minimum price at which the promoters will sell their shares. For SJVN, the floor price of the OFS has been set at Rs 69.6, which is a 15 percent discount on Wednesday’s (September 20) closing price. A floor price is usually lower than the company’s current market price.[/ans][/faq]

[faq][ques]How are OFS allocations made?[/ques][ans]A minimum 25 percent of the shares on offer will be reserved for mutual funds and insurance companies, subject to the allocation methodology. No single bidder other than mutual funds and insurance companies will be allocated more than 25 percent of the OFS size. A minimum of 10 percent of the shares offered are reserved for retail investors.[/ans][/faq]

[faq][ques]How to apply for an OFS?[/ques][ans]For a retail investor, it is mandatory to have a demat account in case one wishes to apply for shares in the OFS. The retail investor has to bid for shares above the floor price. Once all the bids are received, the company will decide on the cut-off price for the OFS. The cut-off price is generally on par or higher than the floor price in case of a healthy subscription to the offer. In case the retail investor’s bid is below the cut-off price, their bid will be rejected and allocation will not be made to them. Only those who bid higher than the cut-off price will be allocated shares. For example, if SJVN sets its cut-off price at Rs 72, only those investors whose bids are higher than Rs 72 will be allotted shares.[/ans][/faq]

[faq][ques]Who gets the OFS proceeds?[/ques][ans]Whether an IPO or a non-IPO OFS, the company does not receive any proceeds from the OFS. In both instances, the selling shareholders get the funds for parting with their stake. Even in SJVN’s case, the company will not receive any proceeds from the OFS. Those will go to the government, which will help boost its disinvestment target for the current financial year.[/ans][/faq]

[faq][ques]Can you place multiple bids in the OFS?[/ques][ans]Yes, you can. However, the total bid amount, regardless of the number of bids you place, should be available in your demat account to get the allocation. In case that does not happen, the bid is rejected. The final allotment is declared only at the end of the day. There are chances that you may not receive all the shares you have bid for in case of oversubscription. For those who get a partial allocation, the rest of the amount is refunded back into the demat account in T+2 days. The mechanism is the same even for those who do not get the allocation.[/ans][/faq]

[faq][ques]What are the timings to place bids in an OFS?[/ques][ans]One can place bids in an Offer For Sale only between 9:15 AM and 3 PM. Although the market is open until 3:30 PM, the bids can only be placed until 30 minutes before closing.OFS orders cannot be modified after 3 PM.[/ans][/faq]

[faq][ques]Other points to remember[/ques][ans]In an Offer For Sale, an investor applying can only apply through a limit order and not a market order.In case a bid is placed through a market order, that would be rejected. A market order is often executed at that very instance at whatever price the market is charging. However, a limit order will not trigger until the market price meets the investors’ price. This is also essential because OFS allocations are only made at the end of the session and not instantly.[/ans][/faq]

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Coal India OFS opens for retail investors today — Should you subscribe?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Central government’s two-day offer for sale (OFS) to sell over 18.48 crore shares, or 3 per cent stake, in state-run Coal India (CIL) was fully subscribed on the Day 1. The OFS opened for retail investors today (June 2), with an offer size of 9,244,093 shares. The sale includes a green-shoe option of 1.5 percent in case of over subscription.

The issue received an overwhelming response from non-retail investors on the first day of bidding, receiving bids for 287,624,993 shares or 28.76 crore, up 3.46 times against an offer size of 83,196,831 shares.

While the base price for the offer is Rs 225 per equity share, the indicative price of the offer was Rs 226.12 per share, with institutional buyers bidding Rs 6,500 crore for the equity stake worth about Rs 2,100 crore on Thursday. At yesterday’s closing price of Rs 230 on the stock exchange, the indicative price is at a 1.7 percent discount.

Analyst remain largely positive on the PSU coal producer’s prospects, though they remained a bit concerned over falling e-auction premiums. Their target prices for the PSU stock implies an upside potential of up to 58 percent over the OFS floor price of Rs 225 apiece.

What should investors do?

The outlook for Coal India in financial year (FY) 2023-24 appears bullish, primarily driven by robust power demand in India, supported by the growth of the manufacturing sector and rural electrification initiatives.

“Given our positive sentiment towards the entire Public Sector Undertaking (PSU) space, we view any potential technical dips resulting from news about Offer for Sale (OFS) as attractive buying opportunities. We recommend investors to consider participating in this OFS, as we believe the downside risk is limited around the 225 level,” said Santosh Meena, Head of Research at Swastika Investmart.

“On the upside, we see a potential target level of 275. By taking advantage of this offering and carefully assessing the risk-reward dynamics, investors can potentially benefit from the expected positive momentum in Coal India’s performance,” Meena added.

Antique Stock Broking’s price target on the counter suggests a potential upside of 24 percent on Coal India over the OFS floor price.

Sharing a note today morning, the brokerage said that Coal India estimates a capex of Rs 60,000 crore over the next four years as it plans to achieve 1 btpa target. “Even then, on a conservative volume/pricing estimate, we expect the company to clock 9 per cent and 16 per cent CAGR in revenue and Ebitda by FY22–25E. Using DCF, we value Coal India at Rs 280 per share, and retain Buy recommendation,” the note stated.

Nuvama projects a dividend per share of Rs 20 each for FY24 and FY25, with a dividend yield of 8 per cent. It said the Coal India stock trades at a cheap valuation, as it revised its target price to Rs 365 from Rs 362.

Kotak, meanwhile, suggested a target of Rs 240 on the stock.

The stock has been falling ever since the government announced to offload its 3 percent stake in Coal India. Shares of the state-run miner were trading flat in Friday’s morning deals. At 11:02 am, the scrip was trading 0.22 percent higher at Rs 230.85 apiece on the NSE. The stock was down 4 percent in the last five trading sessions, while it rose 2 percent on a year-to-date basis.

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Coal India shares slide 5% as two-day OFS kicks off — here’s how to trade the stock now

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Coal India Ltd (CIL), a state-owned Maharatna firm, plunged as much as 5 percent in Thursday’s trade as the government’s offer for sale (OFS) for non-retail investors opened for subscription. The retail investors can subscribe to the share sale on Friday (June 2). The government will sell up to 3 percent of its stake in the state-run miner to raise Rs 4,200 crore via a two-day OFS.

The floor price for the offer has been fixed as Rs 225 per share, a 6.7 percent discount to Wednesday’s closing price of Rs 241.20. Coal India said about 10 percent of the offer shares will be reserved for retail investors.

The OFS has received an overwhelming response from institutional investors as the issue was fully subscribed in less than four hours of trading. At around 1 pm, the government received bids for 8,56,00,454 shares as against 8,31,96,831 shares on offer for institutional investors, according to data from BSE.

The government has proposed to sell up to 9.24 crore shares, representing 1.50 percent of the total paid-up equity as a base offer with an option to additionally sell 9.24 shares or 1.5 percent% of the company equity in the event of oversubscription.

“The seller proposes to sell up to 9,24,40,924 equity shares of a face value of Rs 10 each of the company (representing 1.50 percent of the total paid-up equity share capital) (base offer size), on June 1st and 2nd for retail investors and non-retail investors. There will be an option to additionally sell 9,24,40,924 (1.50 per cent) equity shares of the company,” the company said in a filing.

“5 percent of the offer size may be offered to eligible and willing employees of the company, subsequent to the completion of the offer and subject to approval from the competent authorities in accordance with applicable laws. The employees will be eligible to apply for equity shares up to 5,00,000. The allotment to an employee will be up to 2,00,000 and in the event of undersubscription in the employee portion, the total allotment to an employee shall not exceed 5,00,000,” it further stated.

Investors, while placing their bids, can flag their willingness to carry forward their unallotted bids to T+1 day for allocation to them in case the retail category stays unsubscribed. On Friday, the OFS would be open for both retail and non-retail investors.

The Coal India OFS would be a part of the Central government’s plan to divest its stake in public sector undertakings. Currently, the government owns a 66.20 per centstake in the coal producer.

How to trade the stock?

At 11 am, the scrip was trading 4.46 percent lower at Rs 230.45 apiece on the BSE. The stock tumbled 5.03 percent to hit an intra-day low of Rs 229.65 over its previous close of Rs 241.20 on Wednesday.

Coal India shares gained 2.51 percent on a year-to-date basis and 17.40 percent in the last one year. The stock has outperformed Nifty50 which has given close to 12 percent returns during this period.

Today’s correction is third in a row for the largecap stock, which has lost over 6 percent during this period.

The stock has an average target price of Rs 254, according to data from Trendlyne, implying an upside potential of 10 percent from current market levels. The stock has a one-year beta of 0.71, indicating low volatility on the counter.

Tech view

In terms of technicals, CIL shares were last seen trading higher than the 50-day, 100- and 200-day moving averages but lower than the 5-day and 20-day moving averages. The stock’s 14-day relative strength index (RSI) was at 40.66. A level below 30 is defined as oversold while a value above 70 is considered overbought. Coal India shares have a price-to-earnings (P/E) ratio of 10.04 and a price-to-book (P/B) value of 8.90.

What analysts suggest

Jefferies: Global brokerage firm Jefferies retained its ‘Hold’ recommendation on Coal India with a target price of Rs 225.

“After a strong 123 percent rise in EPS over FY21-23, we expect earnings to decline 15 percent YoY in FY24. Stock trades at a reasonable 6.1 times FY24E PE with 9 percent dividend yield, although longer-term concerns around ESG as well as capability to deliver sustainable volume growth and take continued linkage price hikes remain. We fine-tune estimates and retain Hold with Rs 225 PT at 6 times FY25E PE,” the note stated.

Motilal Oswal retained its buy rating on Coal India with a target price of Rs 285.

“We maintain our e-auction premium estimate for FY24 at 99 percent. We have reduced our adjusted EBITDA/APAT estimates for FY24 by 9.2 percent/9.9 percent to factor in higher employee cost provisions. COAL remains our top pick in the metals and mining sector. At CMP, the stock trades at an inexpensive valuation of 3.9 times FY24E EV/EBITDA,” the brokerage house said.

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Centre to offload stake in Coal India via OFS, stock slides 5%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The shares of Coal India fell five percent in trade today, after Central Government said it will sell stake in India’s largest coal miner. Coal India was the biggest Nifty 50 loser in the trade on Thursday. The size of OFS is around Rs 4,000 crore. The OFS opened today for non-retail investors. Retail investors can bid on Friday.

The floor price has been fixed at Rs 225 a share, at a discount of nearly seven percent as compared to Wednesday’s closing price of Rs 241.2.

CNBC-TV18 had earlier reported that the government was likely to sell stake in Coal India.

The government will divest three percent equity including a Green Shoe option of 1.5 percent. SBI cap is the broker.

The government was planning to sell five percent to 10 percent stake in CIL, Hindustan Zinc and Rashtriya Chemicals and Fertilizers (RCF) to push a stock market boom and boost revenue in the final quarter of the financial year, as per an earlier report by Bloomberg in November 2022.

The Coal India IPO was the biggest till the Paytm and LIC offers. Back in 2010, Coal India raised around Rs 15,200 crore through the sale of 10 percent shares in the company at Rs 245 per share.

The Central government now has a 66.13 percent stake in the PSU, with the public holding a 33.17 percent stake.

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IPO vs OFS — these two are as different as cheese and chalk, but why not SEBI draw the line in between

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mankind Pharma is going public with offer-for-sale (OFS) by its promoters. Public could bid in the narrow price range of Rs 1026 to Rs 1080 per share of rupee one each from 25th April to 27th April. Strictly speaking, this is not an Initial Public Offer (IPO) as OFS is as different from an IPO as cheese is from chalk. The proceeds of an IPO go into the coffers of the company whereas the proceeds of an OFS go into the coffers of the promoters, venture capitalists and private equity investors (all the three compendiously referred to as promoters hereinafter) who often want to ride piggyback on IPO.

In India, it is common for unlisted companies to go public through the IPO-cum-OFS route. Promoters ride piggyback on IPO as there is no differential pricing between shares offered by the company i.e. IPO and the ones offered by the promoters i.e. OFS. It is common knowledge that ever since the SEBI ushered in the 100 percent book building dispensation for IPOs, there has been aggressive pricing that has quite often resulted in listing losses for the public when they were looking for listing gains.

Also Read: Mankind Pharma IPO Day 2: 87% subscribed, GMP and other details. Should you buy?

Under the 100 percent book building route, even loss-making companies can make IPOs at mind boggling premium at the price discovered by the participants in the book building exercise. The rationale for such premium despite losses is the perception that the company has a bright future and indeed the public is investing in its future. Touché!

Mankind however is a profit-making company and the OFS isn’t going to dilute the EPS or earnings per share as there is going to be no fresh accretion to the share capital of the company. 

In an IPO-cum-OFS, at least there is some justification for calling the combo exercise an IPO albeit in a facile way but when it is a pure OFS, as in the case of Mankind and earlier in the cases of Coal India and LIC disinvestments by the government, there is no justification whatsoever for such looseness of labelling the exercise. This is not just quibbling because the implications of the two are vastly different. A combo offer so to speak engenders the worst form of conflict of interest as the promoters have a vested interest in getting an exaggerated valuations from merchant bankers.

Also Read: Sebi mulls stricter IPO rules 

A pure OFS dressed up as an IPO is something the market regulator SEBI should simply not countenance as when disinvestments take place they should be done under market conditions i.e., through the transparent screen-based trading that characterises our secondary market. To route them through the opaque primary market (price discovered by a tight clique of Qualified Institutional Buyers or QIBs who alone are allowed to participate in the book building exercise) does grave injustice to the public as while promoters exit at attractive prices, the allottees including the promoters are left to contend with the rough and tumble of the secondary market once they are left to fend for themselves there.

It is time for the SEBI and the Parliament to revisit OFS. It should always be a stand alone IPO without the water being muddied by the concomitant OFS. Once the shares are listed following IPO, the promoters must seek their fortunes in the bourses the hard and the transparent way. Necessarily, it has to be in trickles over a period of time and not through block deals which is another market distortion strangely countenanced by the SEBI. More on block deals in another article, suffice it to say herein that promoters should not be allowed to exit through primary market riddled with imperfections in valuations. Valuers are often lofty and extravagant in their predictions of the future outlook.

Coming back to the Mankind OFS, the price of Rs 1080 per share is approximately 33 times the company’s earnings per share (EPS) (which incidentally is approximately Rs 33 per share) which while being kosher and comparable in the Indian pharma sector, raises quite a few issues. First, Mankind is more a consumer product company and not a drug major in the same league as Sun Pharma and others. Second, EPS as the name suggest is earnings per share and isn’t a measure of return on investment (ROI).

Assuming a 100% payout, a dividend of Rs 33 on Rs 1080 is just a 3% ROI. It is true that investors in shares look more to capital gains than to dividend as their principal reward for risk-taking but the truth often glossed over is there is no one to guard the price line.

The SEBI dismantled the voluntary safety net regime in May 2018 which consisted in retail investors being bought back by the promoters up to 1000 shares per investors in case the market price plunged below the IPO price within six months of listing. Voluntary safety net begot a tepid response with no one wanting to place his head on the chopping block. One is apt to wonder if the SEBI should at least hold the promoters and merchant bankers to account by ushering in a mandatory safety net mechanism in case of OFS so that the pricing of shares in the primary market is more reasonable. Come to think of it, a Rs 1079 premium on every one-rupee share translates into an incredible and astonishing 1,07,900% premium!! Is it justified? Should the promoters be allowed to get away with such outrageous exit price untested in a transparent market?

Far too long, investors have been condemned to stew in their own juice—-if you invest in equity, don’t expect any handholding. It is such a blasé attitude that is responsible for equating all equity investors as a monolithic block. Venture capitalists and retail investors cannot be treated as equals. So, if the powers that be do not want to disturb the status quo and allow primary market valuations to be continued to be applied for exit by promoters as well, the least they must do for the retail investors is to offer them a mandatory safety net. It will mean curtains to the aggressive IPO pricing that has been the bane of the primary capital market in India as promoters would tone down their vaulting ambitions in the grim knowledge that they may have to disgorge what they gorged on OFS.

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Mankind Pharma IPO to open on April 25, here’s all you need to know

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mankind Pharma, a leading domestic pharmaceutical and consumer health company, is all set to hit the market with a pure offer for sale (OFS) worth Rs 4,000 crore tomorrow, April 25. The IPO will conclude on April 27, 2023.

The promoters of the company are selling one crore shares or 2.5 percent equity. As a result, the promoter holding will fall to 76.5 percent against earlier 79 percent. Two PEs are selling three crore shares. Chryscap is selling 2.5 percent and Cairnhill Ltd which owns 11 percent equity in the company is selling five percent of the holding.

The issue is priced between Rs 1026 to Rs 1080 per share. Kotak Mahindra Capital Company Limited, Axis Capital Limited, IIFL Securities Limited, Jefferies India Private Limited, and J.P. Morgan India Private Limited are lead managers to Mankind Pharma IPO and the equity shares offered through Red Herring Prospectus are proposed to be listed on both BSE and NSE.

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Rajeev Juneja, Managing Director of Mankind Pharma, in an interview with CNBC-TV18 stated that the company saw good interest from foreign institutional investors and domestic mutual funds during the roadshows. He added that the company will continue to focus on the Indian market, although exports have been a small portion of their sales.

According to Juneja, 13 percent of the company’s sales come from National List of Essential Medicines (NLEM), while 75 percent of the products are manufactured inhouse and that gives them an edge over other companies that outsource their manufacturing.

Also Read: M&A Outlook 2023 — here’s why pharma to be a promising sector for further investments this year

However the company’s margins remained under pressure due to rise in in API prices, Juneja said.

Mankind Pharma, the fourth largest pharma company in terms of domestic sales, is the manufacturer of popular brands like Manforce, PregaNews, and Unwanted 72, which have gained immense popularity among consumers. The company’s 98 percent sales  are from India. Pharma accounts for 90 percent of the total sales, while consumer health accounts for 9-10 percent sales.

Tier 2-4 cities and rural account for 47 percent of sales, while 37 percent for industry. The company’s key USP is affordability and accessibility. The products are priced 15-20 percent cheaper.

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Sebi mulls stricter IPO rules

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Sebi on Tuesday proposed putting a cap on IPO proceeds earmarked for making future acquisitions without identifying specific targets and monitoring funds reserved for general corporate purposes. Also, the regulator suggested certain conditions for the offer for sale (OFS) by the significant shareholder and recommended that 50 percent of the anchor book should be given to those investors who agree with 90 days or longer lock-in.

The suggestion comes amid a slew of new-age technology companies that are filing draft papers with Sebi to raise funds through initial public offerings (IPOs). The Securities and Exchange Board of India (Sebi) has sought public comments on the proposal till November 30.

In its consultation paper, Sebi has proposed to prescribe a combined limit of up to 35 percent of the fresh issue size for deployment on such objects of inorganic growth initiatives and general corporate purpose (GCP), where the intended acquisition / strategic investment is unidentified in the objects of the offer.

However, such limits will not apply if the proposed acquisition or strategic investment object has been identified and suitable specific disclosures are made at the time of filing of the offer document. It is seen that lately in some of the draft offer documents that new age technology companies are proposing to raise fresh funds for objects being termed as ‘funding of inorganic growth initiatives, Sebi said.

This initiative includes future acquisitions, investing in new business initiatives and strategic partnerships by the company without identifying the target acquisition or specific investments proposed to be deployed out of issue proceeds at the time of filing offer document, it added.

Also, the regulator has proposed that the issue proceeds earmarked under should be brought under monitoring. The utilisation of the GCP amount by the issuer company may need to be disclosed in the quarterly monitoring agency report.

At present rules, the amount for GCP should not exceed 25 percent of the amount being raised by the issuer and current proceeds raised for GCP are not required to be monitored by the monitoring agency. The regulator observed that companies are coming up with issues, which are very large in size. Thus, with a larger issue size, the GCP amount also becomes very substantial. “Given the large size of IPOs, there is a need to provide adequate information about the utilisation and monitoring of such a large portion of issue proceeds, earmarked under GCP,” Sebi noted.

The regulator has proposed that IPOs of companies where there are no identifiable promoters, divestment of stake by significant shareholders (shareholders holding >20 percent) be capped at 50 percent of their pre-issue holding. Further, for such significant shareholders, who are selling through OFS in IPO, their remaining post issue shareholding can be locked-in for six months from the date of allotment in an initial share sale. This should also be applicable even if significant shareholders are of venture capital fund, category I and category II alternative investment fund (AIF).

Under rules, issuer companies with promoters are required to maintain Minimum Promoter Contribution (MPC), up to at least 20 percent of post-issue capital as MPC, which is locked-in for 18 months post listing. It is meant principally to ensure skin in the game for the promoters to inspire confidence while approaching the public shareholder to raise fresh capital. However, in the case of IPOs where there is no identifiable promoter, there is no requirement of MPC and lock-in post listing, as there is no promoter. “There may therefore be a need to bring some parity to inspire confidence amongst the investors by existing shareholders, who are having significant shareholding. This may be specially required for loss-making companies coming with IPO,” Sebi noted.

Instead of increasing the lock-in period for all anchor investors from 30 days, it has been suggested that not less than 50 percent of the anchor book should be given to those anchor investors who may be agreeable with 90 days or longer lock-in period.

Text inputs from PTI

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Paytm gears up for pre-Diwali IPO launch; FIIs show interest

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Digital payments and financial firm Paytm, is gearing up for a pre-Diwali initial public offering (IPO) launch. CNBC-TV18 has learnt that the demand from foreign investors is building up and the IPO valuation is in the range of about $20 to 22 billion.

It is noteworthy that Paytm has filed a DRHP for an IPO of up to Rs 16,600 crore. The total issue size of Rs 16,600 crore consists of a fresh issue and an offer for sale (OFS) of up to Rs 8,300 crore each.

Read Here : Explained: Paytm IPO and the road ahead

CNBC-TV18 is gathering from sources that FIIs and especially several large sovereign wealth funds are expressing the most demand at this range. The company is expecting the SEBI approval to come in and this week so they are in time for a pre-Diwali launch.

Also Read: IPO-bound Paytm employees add 5.45 lakh more shares for monetisation

CNBC-TV18 reached out to Paytm on these valuation developments, and they declined to comment saying that they are in a silent period currently.

Large investors ANT, Alibaba, Softbank, Berkshire Hathaway, Elevation Capital and Paytm Founder Vijay Shekhar Sharma are set to sell shares through the OFS, as per the document. The DRHP also mentions RNT Associates of Mr Ratan Tata as a selling shareholder.

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Hindustan Aeronautics OFS likely this month

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Hindustan Aeronautics is in focus and sources are indicating that the government is likely to launch its offer for sale (OFS) this month.

CNBC-TV18 learnt from sources that government may look at bringing out an OFS or offer for sale issue for Hindustan Aeronautics Limited and that could happen as early as this month itself.

According to sources, in the initial phase, the government may look at divesting about 0.15 percent of its stake in Hindustan Aeronautics Limited. Remember the government owns about 75.15 percent stake in the company and with the divestment of 0.15 percent stake, it will be able to comply with the minimum public shareholding norms.

Also, the government is open to exploring options when it comes to even selling a larger portion of the stake in Hindustan Aeronautics. The government has also spoken to bankers and asked them to give feedback or a report in terms of what is the market appetite as far as Hindustan Aeronautics OFS is concerned.

Looking at that report, the government could also consider and explore ways in which it can divest a higher stake of course, over and above 0.15 percent stake which it looks to dilute through this OFS issue.

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Ami Organics IPO: Management says only one promoter selling 2% equity in OFS

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Specialty chemicals maker Ami Organics, on Tuesday, said it has fixed a price band of Rs 603-610 per share for its Rs 570-crore initial share sale. The three-day initial public offer (IPO) will open on September 1 and conclude on September 3.

The IPO comprises a fresh issue of equity shares worth Rs 200 crore and an offer for sale (OFS) of up to 60,59,600 equity shares. The company has reduced its fresh issue size to Rs 200 crore from Rs 300 crore after raising Rs 100 crore in pre-IPO placement. The proceeds will be used for certain financial facilities and for funding the working capital requirements of the company.

Read Here: Ami Organics IPO subscribed 52% so far on Day 1

In an interview with CNBC-TV18, Abhishek Patel, CPO of Ami Organics, said, “We had acquired Gujarat Organics in FY21. So, all the growth you see in our financials in terms of revenue, which is 42 percent growth, is generated in the organic business only. Inorganic consolidation is not happening on the FY21 balance sheet. So, you can expect additional revenue and profitability out of this through an acquired business unit of Gujarat Organics from FY22 onwards only.”

The company is involved in developing and manufacturing of pharma intermediates for regulated and generic APIs and new chemical entities and also key starting materials for agro and fine chemicals.

In terms of dilution and primary issues, Patel said, “Since it is a Rs 300 crore total primary including the pre-IPO round, we are having Rs 140 crore for payment of debt and Rs 90 crore for our long-term working capital. In terms of OFS, let me tell you that we have an angel investor who invested in the company since 2004 and the investor along with their friends and relatives are offering their share for OFS. Promoter and promoter groups are largely not selling any share in this OFS, only 2 percent of the equity is offered by one promoter out of four in the OFS. So, promoters are largely into the business, they will remain in the business. They have the confidence to take it forward to the next level.”

On capacity utilisation, Patel said, “In terms of capacity utilisation, our capacity utilisation at the existing unit located at Sachin was 63 percent in FY21. So there is some headroom available in this facility. Plus, we acquired two business units from Gujarat Organics, which had capacity utilisation below 40 percent and that facility is fungible in nature to produce our existing product as well. So that gives us a very good headroom in terms of capacity.”

On capex, he said, “In terms of capex, there will be only regular kind of maintenance capex which is required for regular business only. Since we have acquired two business units just now, we have ample capacity for upcoming growth in the next two financial years.”

For full management commentary, watch the video.

-With PTI inputs

Also read: Should you subscribe to Ami Organics IPO?

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