Dairy firm Parag Milk Foods Ltd’s initial public offering (IPO) has been subscribed only about 23% so far, as the issue received a tepid response from investors on the second day as well.
Qualified institutional investors subscribed 13% of the portion reserved for them while non-institutional investors and retail investors bid for 22% and 66% of their quota, respectively.
The issue got off to a slow start on day one as high-net-worth individuals and corporate investors largely stayed away, and retail and institutional investors too barely took a sip. The issue will close for subscription on Friday.
Although many public issues start slow but get oversubscribed multiple times on the final day, this signals a poor investor interest to begin with.
Parag Milk will be the second dairy firm to float an IPO after Prabhat Dairy Pvt. Ltd within a year. Prabhat Dairy’s IPO in September last year had received a poor response and its shares made a tepid debut on the stock markets. Shares of Prabhat Dairy have barely changed since listing.
Ahead of the IPO, Parag Milk raised Rs 342.86 crore ($52 million) from a clutch of anchor investors, including sovereign wealth funds of Norway and Abu Dhabi. Other investors include funds under Nomura, Morgan Stanley, Tata MF, Neuberger Berman and Quantum.
The IPO comprises a fresh issue of shares to raise Rs 300 crore and an offer for sale of about 20.05 million shares that could mobilise almost Rs 470 crore for the sellers.
The dairy firm has trimmed the fresh issue and slightly increased the offer for sale. In the draft red herring prospectus filed in October, Parag Milk had proposed to raise Rs 325 crore through the fresh issue and had pegged the number of shares to be sold by IDFC Alternatives and Motilal Oswal Private Equity and other shareholders at 19.85 million.
IDFC Alternatives has retained the number of shares it is selling at the same level in the red herring prospectus, but Motilal Oswal PE is now selling more than previously announced.
IDFC Alternatives and Motilal Oswal PE hold 19.21% and 9.11% stake in the company, respectively, besides convertible debentures that will be converted into equity. Both are part-exiting.
Parag Milk is seeking a valuation of as much as $300 million (about Rs 2,000 crore) in the IPO.
VCCircle was the first to report that Parag Milk might look at listing its shares even as other media reports suggested that it was in talks with various strategic players, including Dutch dairy cooperative FrieslandCampina to sell a majority stake.