Investors eye companies planning to list subsidiaries

Some of the companies that are unlocking investor value by listing their subsidiaries separately are in great demand, particularly after State Bank of India reserved a portion of the SBI Card and Payment Services initial public offer for retail investors. SBI also plans to list SBI Securities.

Though dates for the initial public offer have not been finalised, SBI Cards plans to raise Rs 500 crore through issue of fresh equity and another 130,526,798 equity shares will be on offer for sale by the promoters. SBI has reserved 13,052,680 shares for its existing shareholders. Each shareholder can invest up to Rs 2 lakh under the shareholders’ quota.

Following the development, SBI shares spurted to Rs 310 on Wednesday, from their 52-week low of Rs 244 on October 9.

Similarly, HDFC and HDFC Bank plan to list their holding in HDFC Securities and HDB Finance, while ICICI Bank and Kotak Mahindra Bank will list their subsidiaries, ICICI Pru Mutual Fund and Kotak Securities, respectively.

Among corporates, Reliance Industries has announced plans to spin off its holding in telecom giant Reliance Jio and Reliance Retail into separate entities.

In a move that is perceived as preparation for RJio’s listing and reduction of debt, RIL has transferred some of the assets and liabilities of RJio into two investment infrastructure trusts (InvITs) and brought in Brookfield Asset Management as an investor. The Brookfield firm had agreed to subscribe to Rs 25,215 crore worth units in the Tower Infrastructure Trust.

Jio's Ebitda stood at Rs 15,102 crore last fiscal, against Rs 6,734 crore in FY'18, though the sharp jump in EBITDA is not enough for RIL to recover investments of Rs 3.5 lakh crore in the next 10 years.

Atish Matlawala, Senior Analyst, SSJ Finance & Securities, said there are a number of companies which will list their subsidiaries in the next few months.

All these companies will reserve some portion of their IPO for shareholders of the parent company, thus improving the shareholders’ chances of getting allotment, he said.

If the IPO size is between Rs 1,000-1,500 crore, he said, it made sense to become a shareholder of the parent company before it files a RHP (Red Herring Prospectus) for the IPO. Usually, the date of filing the RHP is considered the cut-off date to be eligible for subscribing to shareholders’ portion of the IPO, he said.

In case of large IPOs of over Rs 8,000 crore, usually, all retail applicants will get at least one lot. However, if somebody wants to invest the full quota of Rs 2 lakh for the retail investor, it is advisable to become a shareholder before the cut-off date, he said.