March 20, 2018 / 4:41 PM / 2 years ago

India's state-run Hindustan Aeronautics IPO hits turbulence

MUMBAI/BENGALURU, March 20 (Reuters) - Indian state-run Hindustan Aeronautics Ltd’s initial public offering (IPO) of a 10 percent stake received a tepid response from investors who had subscribed for just 99 percent of shares, data released after Tuesday’s deadline for bids showed.

The government, which fully owned the military aircraft maker before the IPO, had managed to sell some 33.7 million shares against its target of divesting about 34.1 million shares, according to regulatory data as of 1430 GMT.

The official close for subscriptions was 1130 GMT and regulatory data was not updated after 1430 GMT.

Eight Indian companies aim to raise a total of more than $2 billion from IPOs in March, adding to a record $11 billion of fund-raising from initial share sales last year.

But a drop in markets from record highs has hurt sentiment, while the crowding of share sales has weighed on liquidity.

For Hindustan Aeronautics, India’s largest state-run defence firm, the excessive dependence on government orders and a bumpy execution cycle were viewed as negatives despite India’s push to increase self-reliance in defence production, analysts said.

A source involved in the Hindustan Aeronautics share sale said the IPO would proceed even if the books were not fully covered, as investors had bid for a minimum 10 percent stake in the company required to be sold.

At the upper end of the price range of 1,215-1,240 rupees, the offering would raise a maximum of 41.84 billion rupees ($642 million) for the government, against an original target of 42.3 billion rupees.

Retail investors and employees of the company will be given a discount of 25 rupees per share on the final offer price.

Institutional investors bid for 1.73 times the number of shares reserved for them, but the retail portion was subscribed just 0.4 times. High-net worth individuals bid for 3 percent of the shares reserved for them.

By comparison, a 44.73 billion-rupee IPO in privately owned Bandhan Bank that closed on Monday, had been subscribed nearly 15 times.

Five more IPOs, including the sale of private firm ICICI Securities worth up to $616 million, are scheduled for this week and next.

SBI Capital Markets and Axis Capital were managing the Hindustan Aeronautics IPO.

$1 = 65.1900 Indian rupees Reporting by Devidutta Tripathy and Vishal Sridhar Editing by Euan Rocha and Edmund Blair

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