LIC Helps Hindustan Aeronautics IPO Hit Finish Line; Sandhar Issue Covered 40%

Hindustan Aeronautics Ltd’s initial public offering (IPO) was fully covered on its final day Tuesday, thanks to support from Life Insurance Corporation (LIC) of India, while the public issue of Sandhar Technologies Ltd picked up pace after a slow start on Monday, reaching 40% subscription.

State-run aerospace and defence firm Hindustan Aeronautics’ IPO, which hit the Street after a five-year struggle, managed to sail through on the tail end of its final day.

The IPO, which has no anchor investors, received 33.7 million bids for 34.10 million shares on offer. The public issue was subscribed 99%, with a large portion of the bids flowing in the last few hours of the IPO, stock-exchange data showed.

Institutional buyers bid for 28.89 million shares, or 1.72 times the portion reserved for them.

Insurance behemoth LIC bid for shares worth Rs 2,500 crore, said three people aware of the development.

That accounts for roughly 60% of the total Rs 4,229 crore that the government aimed to raise through the public issue. LIC’s participation in the IPO could not be independently ascertained.

Foreign portfolio investors did not bid for a single share in the issue, data showed.

High net-worth individuals (HNIs) and corporate bodies bid for just 3.4% of the shares from their quota as IPO financing looked risky considering the weak undertone in the secondary markets.

In IPO financing, short-term capital is borrowed from various avenues, barring the banking one.

The portion set aside for retail investors, who cannot individually bid for shares exceeding Rs 2 lakh in value, was covered about 38%. The employee category, offering discounts, was subscribed 21%.

The public issue was subscribed 24% on the first day on Friday. It picked pace on the second day on Monday, with the IPO getting subscribed 45%.

Hindustan Aeronautics Ltd was seeking a valuation of Rs 41,464 crore ($6.4 billion) through its IPO, as calculated at the top end of the public issue’s share price band, Rs 1,215-1,240.

Retail investors were offered a discount of Rs 25 on the price at which the shares were allotted.
The promoter, the Union government, aimed to sell 34.10 million shares representing 10.2% stake in the firm through the public issue.

At the time of filing for the IPO last October, the government had decided to sell 36.15 million shares. However, the company bought back 27.11 million shares, or 7.5% stake, from the government two months later.

After this buyback, the number of shares for which money has been paid reduced from 361.5 million to 334.38 million, and, as a result, the size of the offer shrunk from 36.15 million to 34.10 million shares.

The government will get three years from the date of listing to bring its stake down to 75% or below to meet norms on minimum public holding.

Proceeds from the IPO could go towards meeting the fiscal deficit target for the current financial year, which has been revised from 3.2% to 3.5% of gross domestic product due to increased government spending.

A plan to list the firm was originally approved in 2012 but the company did not want to make key information public as part of the listing process. In 2013, it sought an exemption from the market regulator regarding the disclosure rule but did not get one.

In October last year, HAL filed its draft prospectus. In the same month, it got regulatory clearance.

Merchant bankers SBI Capital Markets and Axis Capital managed the IPO.

The Bengaluru-based firm was incorporated in 1963. It designs, develops, manufactures, repairs, overhauls and services a wide range of products including aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.

Its listed global peers include The Boeing Co., Airbus SE, Lockheed Martin, United Technologies and General Electric.

Other directly and indirectly listed firms in India’s defence space include Bharat Electronics Ltd, Reliance Naval (formerly Reliance Defence Engineering), Mahindra & Mahindra, Larsen & Toubro, and Cyient.

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