How the I-Sec IPO scraped through

Our Bureau Chennai | Updated on March 27, 2018 Published on March 27, 2018

Ironic as it sounds, ICICI Securities, one of the top brokerages in the country, had to contend with the cold shoulder that investors gave it during the company’s ₹4,000-odd crore offer-for-sale.

While the volatile market conditions, tight liquidity prevalent closer to the year-end period and high valuations have been blamed, it is important to note the technicality on which the offer was considered ‘subscribed’.

The issue was subscribed to the extent of only 78 per cent (nearly 88 per cent including anchor investors).

If the offer had been an IPO, it would have failed to sail through and as a consequence refund to subscribers would have followed.

Relaxed OFS norms

In the case of an IPO, the issue of capital and disclosure requirement (ICDR) of SEBI states that “The minimum subscription to be received in an issue shall not be less than 90 per cent of the offer through offer document.”

But the regulation goes on to clarify the rule in the case of an OFS with “Nothing contained in this regulation shall apply to offer-for-sale of specified securities.”

There is only one other relevant criterion for an OFS here. Regulation 26(4) of the ICDR says that “An issuer shall not make an allotment pursuant to a public issue if the number of prospective allottees is less than 1,000.” In essence, there must be at least 1,000 subscribers in an OFS.

In the case of ICICI Securities, that number (1,000) would have been fairly easy to achieve, given that the retail portion had 88 per cent subscription.

As retail subscribers are allowed to invest only up to ₹2 lakh in IPOs, achieving the minimum subscriber requirement has been a breeze.

Published on March 27, 2018
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