Business Daily from THE HINDU group of publications
Monday, Sep 04, 2006
Business Daily from THE HINDU group of publications Monday, Sep 04, 2006 |
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Markets - IPOs Shailesh Menon
Safe options Orbit Corporation proposes to float 91 lakh equity shares where each share will have a detachable warrant that may be converted into an equity share of the company at a later date. IDBI Capital proposes to buy back equity shares (from resident individual allottees only) if share prices fall below the issue price.
Mumbai , Sept. 3 Leading book managers of IPOs are tagging safety net options to get back scared retail investors to the bourses. Merchant bankers such as Edelweiss Capital Ltd and IDBI Capital Market Services Ltd plan to roll out "safe" IPOs. While Edelweiss Capital has introduced `one detachable warrant per equity share' scheme for its public issue of Orbit Corporation Ltd, IDBI Capital proposes to buy back equity shares (from resident individual allottees only) if share prices fall below the issue price. Other lead managers such as UTI Securities and Kotak Securities are also thinking of coming out with similar public issues. Orbit Corporation, a real estate construction and development company, proposes to float 91 lakh equity shares in the market. Each share will have a detachable warrant that may be converted into an equity share of the company at a later date. The issue will constitute 25.09 per cent of the fully diluted post-issue equity capital prior to the conversion of the detachable warrants, and 40.11 per cent, assuming full conversion of the warrants. "The exchanges have shifted from being a retail-driven market to an institution-driven trading place. Well-structured warrant offerings benefit the issuers and investors. While the imputed value of warrants act as a discount to the investor, it also allows the issuer to raise further capital at any point of time without going through the issue process again," said Mr Naresh Kothari, Head (Institutional Equities), Edelweiss Capital. IDBI Capital, the lead manager for Usher Agro's IPO, is offering a buyback option (at distress) for investors. The lead manager is offering to buy back up to 800 equity shares from original resident individual allottees at the issue price of Rs 15 a share. The scheme will be open for a period of six months from the date of allotment of shares. "The buyback option is intended to insulate retail investors from risks involved in investing in fresh offerings. We are offering this option after considering the fundamentals of the company. We will come out with similar offerings across various sectors and stocks," Mr Ananta P. Sarma, Executive Vice-President, IDBI Capital, told Business Line. UTI Securities is examining the prospects of having a larger issue with adequate cushion for investors. But some merchant bankers are not so sure of the virtues of a safe issue, as it could reduce net worth of the company. "Companies with weak fundamentals alone go for safety nets," said a merchant banker.
Related Stories: More Stories on : Investment Banking | IPOs | Investor Protection
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