It was a mixed reaction by the investors as the Rs 828 crore Initial Public Offering (IPO) of Fujiyama Power Systems closed its third and final day.
The institutional buying interest was indicated in the subscription numbers, but the retail demand was low.
In the meantime, the Grey Market Premium (GMP) remained at Rs0, and this implies that the market is not anticipating a significant listing premium upon the start of execution of the stock in the exchanges.
The IPO was priced from November 13 through November 17, and investors will now wait to get the allotment prices and the listing performance to know how the market feels about the long-term prospects of the company.
Day 3 Subscription Trends Reflect Lopsided Grouping
Qualified Institutional Buyers (QIBs) were the toughest on the last day and made a moderate push on the IPO.
In the morning subscription data indicated that most of the bidding was at about 45 percent and that QIBs had subscribed to over 80 percent of their allotment quota.
Retail involvement was also less, and less than 40 percent of subscriptions belonged to the institution, and the high net worth and non institutional investors were even less interested.
The trend also changed a bit toward the afternoon as the institutional investors raised their bids.
Towards the end of the bidding period, subscriptions had reached the total mark, largely because of the QIB category.
This later rush indicated that institutional investors have confidence in the business model of the company and its prospects of future growth, whereas retail investors remained skeptical.
Some of the analysts pointed out that the rooftop solar market in which Fujiyama Power Systems has its operations is gaining long term interest as India gradually moves on the way to clean energy.
But uncertainty about gains on short term listings might have affected many of the small investors.
The IPO of the company comprised a fresh issue of Rs 600 crore and an offer of sale of Rs 228 crore shares. The range of prices was set at between Rs 216 and Rs228 per share, and the smallest retail lot by the bidders was 65 shares.
The monies realized in the fresh issue will be utilized in various ways, such as the establishment of a new manufacturing facility in Ratlam, Madhya Pradesh, the payment of outstanding debt, and the provision of general corporate requirements.
According to market observers, the difference in the number of subscriptions between investor types demonstrates the perceptions of various groups of investors about the company.
Long term potential may be considered in institutions, whereas short term sentiment as made by retail investors is likely to influence choice in this case, but it has been low, and that is partly because of the zero GMP.
Grey Market Premium Stays are at Zero, Indicating Cautious Sentiment
One of the greatest discussion topics regarding the Fujiyama Power Systems IPO has been its premium in the Grey Market that stayed at Rs0 during the period of subscription.
It is strange that in the informal grey market the share of the company was being traded at the very upper price band and there was no premium.
A zero GMP usually indicates that the traders and informal investors are not anticipating the stock to be listed at a comparatively higher price by the time it is listed in the market.
The low GMI also means that there is little hype on the IPO. Several high profile IPOs have seen the grey market and high premiums being highly active in the last few months, but Fujiyama failed to attract the same excitement.
To analysts, the valuation of the IPO might already be in the higher range, and thus there is minimal room to jump the listing.
Other investors could also be waiting to know the performance of the company after the listing before making long term decisions.
Although the grey market spirit is dampened, the basics of the company are still successful. Fujiyama Power Systems, with its focus on rooftop solar systems, inverters, solar panels, and home power solutions, has demonstrated the continuous increase over the last years.
Its development strategies with the new manufacturing hub may enable the expansion of operations and enhance profitability in the near future.
IPO allotment will be completed on November 18, and the shares will probably be listed on November 20 both on the NSE and BSE.
The listing will be closely monitored by investors and analysts to gain an insight into the true value of the company in the eyes of the wider market, particularly when there is no support of the grey markets
