ET MUMBAI: India’s first Indian Depository Receipts by Standard Chartered sailed through with the issue being subscribed over 2.2 times on the last day.
Till Thursday, the issue had seen subscription of only 26% but a string of FIIs, local mutual funds and corporates stepped in a few hours before the closure to save the day for the British bank which will raise over Rs 2,400 crore from the offering.
“The response from the investors have been awesome given that this was a new instrument and investors had to put in 100% of the application money upfront and a very difficult market condition. It was also difficult for domestic investors to do a comparison with StanChart,” said Jaspal Bindra, group executive director and chief executive officer, Asia, Standard Chartered.
This is the first issue where institutional investors had to bring in the complete bidding amount upfront rather than the earlier requirement of 10%. Investors were also wary because of volatile global markets since the start of the week.
A host of foreign institutions invested through participatory notes — instruments which allow offshore investors to trade in Indian stocks. These include CLSA, Credit Suisse and Swiss Finance Corporation with each putting in bids of around $80 million while RBS is said to have bid for around $70 million. SBI is said to have put in a bid of around Rs 100 crore, SBI Caps around Rs 60 crore, HDFC Bank around Rs 60 crore. Other big names who have invested in the issue include UBS ($70 million), Goldman Sachs ($50 million), Fortis ($20 million), Templeton, Reliance Industries, the Tata group, Adani, Videocon, Bank of India, Bank of Baroda, Union Bank, Deutsche Bank and Citi. Insurance companies stayed away from the issue because of investment regulations.
“Contrary to expectations there was generous bidding from FIIs. Many people had said that FIIs did not have any reason to invest,” said Bindra.
Though the IDRs were priced in a range of Rs 100 to Rs 115 most bids were between Rs 100 and Rs104. The IDR is likely to be priced at around Rs 104 and the issue is likely to be listed on June 11. Retail investors will be offered a 5% discount. Stanchart shares traded in the London Stock Exchange at £16.45 (Rs 1,110) on Friday. Ten IDRs represents one underlying share. The total value of the book was $1 billion. QIB book was oversubscribed at 4.4 times or $770 million, HNIs 1.9 times over $200 million and retail was subscribed only 0.22 times.
The bank had hired UBS, Goldman Sachs, JM Financial Consultants, DSP Merrill Lynch, Kotak Mahindra Capital and SBI Capital Markets to manage the offering.
Anchor investors led by Reliance Mutual Fund had picked 15% of the issue or 3.6 crore IDRs of the 24 crore IDRs on offer at Rs 104. Reliance Mutual Fund picked up 10.57 million shares, ICICI Prudential Mutual Fund bought 9.61 million shares, HDFC MF 6.03 million, Franklin Templeton 4.8 million, Birla MF 3.5 million and Sundaram MF 1.41 million. All these anchor investors have put in bids over and above their commitments.
After the initial response, bankers were expecting the issue to be oversubscribed by around 1.5 times. On being asked whether he was tensed on the issue failing he said: “We were not tensed. It was more a test of patience. Many of the investors had committed.”
Unlike normal shares which are traded in the exchange, IDRs are not subject to Securities Transaction Tax (STT) hence both long term and short term capital gains tax will be applicable. IDR holders will also have to pay tax on dividends as the dividend distribution tax is not paid by Standard Chartered. IDRs can be converted to shares with the consent of RBI after one year. However post such conversion investors will have to sell them within 30 days.
Zerodha (Trading & Demat Account)
RHP
