Just dial offers safety net to retail investors, co to buy back shares at IPO price if stock falls
Unlike previous public offers, Just Dial will adopt a scheme "safety net'' for retail investors proposed by the capital market regulator Sebi in 2012. A safety net is a scheme where the company promoters assure that they will buy back shares from the retail applicants at the IPO price, if its stock falls sharply during the first six months after listing.
Sebi had put out draft norms for safety net after its study showed that 62% of 117 companies listed between 2008 and 2011 fell below IPO price within the first six months of listing. The regulator fell short of making it mandatory after the proposal — the first of its kind anywhere in the world — met with strong criticism from investment bankers. Sebi has currently invited comments from market participants on the rule and so far it is for companies to decide on the offer.
The buy back under safety net will trigger if volume-weighted price of the share for the previous 60 days on completion of the safety net period of six months is below the allotment price for retail applicants. Just Dial offering safety net provision along with a10% discount on the issue price when many companies had offered only 5% discount in past.
''Just Dial IPO seems a win-win for me as it assures of returning my principal investment if the share price falls significantly below the issue price," said Momaya. "I'm still holding on to a few companies listed post IPO in 2010 in the hope that I may recover my principal some time.''
Sebi investigations had also revealed high operator activity in newly listed companies'stocks in the past few as their prices were hammered severely post IPO.
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He believes that safety net could become a virtual norm if 3-4 other IPOs find success in cheering retail investors with it. Sebi officials say they want to make it mandatory after they test retail investors' comfort.
But, safety net is already fuelling the grey market. The Just Dial IPO is quoting at a premium of Rs 70 to the upper end of Rs 470-543 band in the grey markets of Gujarat, Maharashtra and other states in the north as punters in this illegal market believe the IPO would be lapped up by retail investors.
"Just Dial's safety net on top of discount to retail investors has punters that the IPO could gain on listing, so they are booking their trades at premium before the issue opens for subscription," said an Ahmadabad based grey market player. Just Dial has managed to raise Rs 208 crore from anchor investors like Goldman Sachs, HSBC, DSP Blackrock Fund, Fidelity, HDFC Capital Builder and Birla Sunlife among others, who bought 3.9 million shares at Rs 530 piece. "The safety net will protect retail investors.
As of now, it is not mandatory for companies to provide safety net but, we decided in favour of the same in consultations with company," said an investment banker managing the issue.
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Local search engine Just Dial's Rs 950-crore IPO opens tomorrow
The estimated Rs 950-crore IPO of local search engine Just Dial will begin tomorrow and is one of the largest initial public offers by an Indian Internet company.
The IPO, which does not have issue of fresh shares, would see promoters offloading 17.49 million shares. This would make up for 25.2 per cent of the company's paid up equity capital.
The issue price range is Rs 470 - 543 and the discount to retail investors is Rs 47 (10 per cent to the floor price).
"This is for the first time that any company is offering such a huge discount of 10 per cent at the lower price band," KRIS Director Arun Kejriwal said.
The Just Dial IPO, if successful, will be the biggest IPO in calendar year 2013. Last year, Bharti Infratel raised Rs 4,118 crore in 2012's biggest IPO.
Founded by V S S Mani, the company, which started offering local search services in 1996 under the Justdial brand, has already raised Rs 208 crore by issuing shares to anchor investors including Goldman Sachs and HSBC.
Citigroup and Morgan Stanley are the book-running lead managers to the issue. The company plans to list its shares on the BSE, NSE and MCX-SX.
According to CRISIL Research, Just Dial provides search services across two main genera: company search - a specific or any business; category search - product or service based on a given classification.
The IPO, which does not have issue of fresh shares, would see promoters offloading 17.49 million shares. This would make up for 25.2 per cent of the company's paid up equity capital.
The issue price range is Rs 470 - 543 and the discount to retail investors is Rs 47 (10 per cent to the floor price).
"This is for the first time that any company is offering such a huge discount of 10 per cent at the lower price band," KRIS Director Arun Kejriwal said.
The Just Dial IPO, if successful, will be the biggest IPO in calendar year 2013. Last year, Bharti Infratel raised Rs 4,118 crore in 2012's biggest IPO.
Founded by V S S Mani, the company, which started offering local search services in 1996 under the Justdial brand, has already raised Rs 208 crore by issuing shares to anchor investors including Goldman Sachs and HSBC.
Citigroup and Morgan Stanley are the book-running lead managers to the issue. The company plans to list its shares on the BSE, NSE and MCX-SX.
According to CRISIL Research, Just Dial provides search services across two main genera: company search - a specific or any business; category search - product or service based on a given classification.
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