Five Star Business Finance IPO: Five Star Business Finance Is Undersubscribed But Gets Through

MUMBAI: Five Star Business Finance’s initial public offering received a lukewarm response from investors, with just 70% of the shares on offer receiving bids on Friday, the final day of the process. However, the IPO managed to go through after the institutional portion was fully subscribed. This is the first motherboard IPO that has been undersubscribed after Rs 7,250 crore public offering by Star Health and Allied Insurance, backed by Rakesh Jhunjhunwala, garnered just 79% subscription in December last year.

One of the IPO bankers said the issue was resolved as all the criteria set by the Securities and Exchange Board of India for an IPO with a sell offer had been met.

“As per Securities and Exchange Board of India rules for a sell offering, there should be a minimum of 1000 bids, the QIB portion should be fully subscribed and the minimum public participation should be 10% of the implied market capitalization” , said an investment banker.

The company received offers for 2.12 crores of shares against the 3.05 crores of shares offered, according to available exchange data. Overall, the number was subscribed 0.70 times.

The IPO began for subscription on November 9. At the lower end of the IPO price range of Rs 450-474, the portion reserved for the qualified institutional buyer was subscribed 1.77 times. The non-institutional segment was subscribed 0.61 times. The retail part was subscribed 0.11 times.

Five Star Business Finance raised Rs 588 crore from anchor investors ahead of IPO. Overall, it recorded a subscription of 73%. At the upper end of the price range of Rs474 each, including the anchor book, they garnered Rs 1593.06 crore. The IPO was a sale offer totaling Rs 1,960 crore by the company’s promoters and existing shareholders.

Limited, Capital Company Limited, Limited and Nomura Financial Advisory and Securities (India) Private Limited are the lead managers of the issue.

The company offers guaranteed business loans to micro-entrepreneurs and the self-employed, which traditional financing institutions mainly exclude.

Analysts were mixed on the issue. Some suggested underwriting the show with caution, but a majority found the valuations expensive as the show was entirely a sell offer.


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