NMDC issue gets over pricing blues

After a sedate start, the follow-on public offer of NMDC saw interest reviving on the second day of book building, with bids for 79 per cent of the shares on offer.

The issue had received bids for only 17 per cent of its size yesterday. According to data on the National Stock Exchange website, most of the bids were at the lower end of the Rs 300-350 price band.

Shares in the company fell on the Bombay Stock Exchange, with investors expecting the issue price to be set near the lower end of the range. NMDC shares declined 5.1 per cent to Rs 360.35, on a day when the BSE Sensitive Index rose 0.4 per cent.

While the institutional portion has been over-subscribed, most bids have come from domestic financial institutions such as Life Insurance Corporation and public sector banks like State Bank of India, Bank of Baroda and others. The response from foreign institutional investors has been lukewarm with some expecting action on the last day.

Bids have been received for 260.91 million shares against 332.24 million shares on offer. In the qualified institutional buyers (QIBs) portion, bids for 254.06 million have been put in by domestic financial institutions. In sharp contrast, FIIs have submitted bids for only 3.18 million shares. Overall, the segment has been subscribed 1.56 times.

While the QIB portion has been oversubscribed, the response in the retail and the high net worth individual categories has been subdued. The HNI category received bids for 0.3 million shares against 49.58 million shares on offer. Retail investors have also been waiting in the wings, putting bids for 3.3 million shares till the penultimate day of bidding.

The FPO's performance surprised the market with many analysts categorically advising their clients till yesterday to avoid the issue citing high valuation concerns. This was even after the government came out with a steeply discounted rate keeping in mind the mood of overseas investors, who thought the NMDC stock was overvalued, and retail investors, who cold-shouldered share sales last month by National Thermal Power Corporation (NTPC) and Rural Electrification Corporation (REC).