Updater Services IPO subscribed 87% on final day, retail portion booked 99%
Updater Services’ initial public offering (IPO) appears to have struggled to attract significant investor interest, even on its final day of bidding, which was September 27. The subscription rate for the IPO stood at 87 percent, with bids coming in for 1.04 crore equity shares out of the total 1.2 crore shares offered.
Retail investors seem to be the more enthusiastic participants, as they have subscribed to 99 percent of the shares allotted to them. On the other hand, the portion of the IPO reserved for high net worth individuals has only been subscribed to 44 percent. This tepid response from high net worth individuals may contribute to the overall lower subscription rate for the IPO.
Qualified Institutional Buyers (QIBs) play a significant role in the success of every book-built issue, and their participation in the Updater Services IPO has been noteworthy. QIBs have shown interest by subscribing to 1.05 times the portion allocated for them, indicating a relatively strong response from this investor segment.
It’s worth mentioning that for any IPO to proceed successfully, QIBs are typically required to subscribe to at least 90 percent of the shares reserved for them. Updater Services has allocated 75 percent of its offer size to QIBs, with 15 percent for high net worth individuals and the remaining 10 percent for retail investors. Despite the QIBs’ positive response, the overall subscription rate for the IPO, which opened on September 25, stood at 16 percent by the end of the second day of bidding, suggesting that investor interest from other segments may be more subdued.
Updater Services’ maiden public issue is aimed at raising Rs 640 crore at the upper price band. This IPO comprises two components: a fresh issuance of shares valued at Rs 400 crore and an offer-for-sale (OFS) worth Rs 240 crore. The OFS involves selling shares held by existing shareholders, including the promoter company Tangi Facility Solutions.
In a significant development, anchor investors, who are part of the Qualified Institutional Buyer (QIB) category, have already invested Rs 288 crore in Updater Services on September 22. Notable names among the anchor investors include Citigroup, Societe Generale, Copthall Mauritius Investment, Nomura Singapore, BNP Paribas Arbitrage, Franklin India, ICICI Prudential Mutual Fund, and Aditya Birla Sun Life Insurance, among others. Their participation demonstrates confidence in the company’s prospects and the IPO’s potential. The funds raised through this IPO will be crucial for Updater Services as it seeks to expand and enhance its business operations.
Updater Services has disclosed its intended utilization of the net proceeds generated from its initial public offering (IPO). Out of the total fresh issue proceeds, the company plans to allocate Rs 133 crore toward reducing its debt and another Rs 115 crore for addressing its working capital requirements. Additionally, it intends to set aside Rs 80 crore from the fresh issue funds for inorganic initiatives, potentially signaling a strategic expansion or acquisitions in its growth strategy. The remaining funds will be earmarked for general corporate purposes.
The IPO is offered within a price band of Rs 280-300 per share, and at the upper end of this range, the company’s post-issue market capitalization would amount to Rs 2,001 crore. According to the IPO schedule, Updater Services aims to finalize the basis of share allotment by October 4, with the equity shares expected to be credited to the demat accounts of successful investors by October 6. Trading in the company’s equity shares is set to commence on October 9, although this timeline may be subject to change should the company decide to follow a T+3 listing timeline later on.
Currently, Updater Services’ listing schedule aligns with the older T+6 timeline, which means that the shares are expected to start trading six working days after the IPO closing date. However, there is a transition period in effect until November 30th of this year. During this period, companies that have launched public issues since September 1st can choose to follow the T+3 timeline for listing voluntarily. Starting from December 1, 2023, the T+3 listing timeline will become mandatory for all IPOs.
In the grey market, which is an unofficial platform where IPO shares can be bought and sold before the official listing, Updater Services’ shares are reportedly not very active. Analysts, speaking on anonymity, have noted that the shares are trading at just a 1-2 percent premium over the upper price band. This suggests that there may not be significant speculative activity or demand for the company’s shares in the grey market leading up to the listing.
