Petronet LNG Ltd, whose initial public offer of 260 million shares opened this week, is likely to first allot shares to qualified institutional bidders -- bidding at Rs 15 a share in the event of the offer price being fixed at the lower end of the Rs 13-15 price band.
According to merchant banking sources, PLL board, in the event of the offer price being "dragged" down to Rs 13, may exercise its discretionary powers to allot shares to QIBs who have applied for shares at the higher end of the band.
The offer price of an IPO is primarily decided by the QIBs. The highest price at which the minimum number of QIBs -- in PLL's case 10 per cent -- put their money often becomes the offer price.
Most of the QIBs bid at the lower end or the floor of the book building price band as was evident in the case of public offering of government equity in IPCL and IBP where the offer price was fixed at the floor price.
"It is no incentive to bid higher when the offer price is dictated by those QIBs at the lower end and to correct this folly, PLL board has armed itself with discretionary powers to allot shares to QIBs bidding at Rs 15 first, than allot shares to those bidding at Rs 14 and only the remainder of the reserved quota will go to those bidding at Rs 13," they said.
