Indian IPO

All details about Hot Indian Primary Market.

Monday, October 29, 2007

Mundra Port IPO opens on Nov 1, price band at Rs 400-440

Mundra Port and Special Economic Zone, developer and operator of the Mundra Port, one of the leading non-captive private sector ports in India based on volume of cargo during fiscal 2007 is entering the capital markets with its initial public offering (IPO) of 40,250,000 equity shares of Rs 10 each for cash, at a price to be decided through a 100% book building process.

The issue comprises of a net issue of 40,100,000 equity shares to the public and a reservation of 150,000 equity shares for eligible employees. The issue and the net issue will constitute 10.05% and 10.01%, respectively, of the fully diluted post issue paid-up capital of the company.

The price band has been fixed between Rs 400 to Rs 440 per equity share. The issue will open on November 1, 2007 and will close on November 7, 2007.

The equity shares of the company, offered through this IPO, are proposed to be listed on the NSE and BSE.

At least 60% of the issue will be allocated to qualified institutional bidders (QIBs) on a proportionate basis, of which 5% will be available to mutual funds only. Further, at least 10% of the net issue will be available to non-institutional investors and at least 30% of the net issue will be available for allocation on a proportionate basis to retail individual investors.

The company is part of the Adani Group, which has interests in different industries including commodities trading, coal mining, power trading, power generation, real estate development, agro processing and logistics, shipping and port operations. The company has the exclusive right to develop and operate Mundra Port and related facilities until February 2031 pursuant to the concession agreement entered on February 17, 2001 with the Gujarat Maritime Board and the Government of Gujarat.

The objects of the issue are to part financing of construction and development of basic infrastructure and the allied facilities in the proposed SEZ at Mundra; construction and development of a terminal for coal and other cargo at Mundra Port; contribution towards investment in Adani Petronet (Dahej) Port Private Limited; contribution towards investment in Adani Logistics Limited; contribution towards investment in Inland Conware Private Limited and general corporate purposes.

The global co-ordinators and book running lead managers to the issue are: DSP Merrill Lynch Limited, JM Financial Consultants Private Limited and SSKI Corporate Finance Limited. The book running lead mangers to the issue are Enam Securities Private Limited, Kotak Mahindra Capital Company Limited, ICICI Securities Limited and SBI Capital Markets Limited.

Thursday, October 25, 2007

Barak Valley Cem IPO opens on Oct 29, price band Rs 37-42

Barak Valley Cements, a cement manufacturer in the north-east region, will enter the capital market with an initial public offer (IPO) of 56,60,000 equity shares of Rs 10 each for cash at a price to be decided through a 100% book building process.

The issue comprises a reservation of 1,13,000 equity shares for permanent employees on a competitive basis and the net issue to the Public of 55, 47,000 equity shares. The net issue would constitute 25.03% of the post-issue paid up capital of the company.

The issue will open for subscription on October 29, 2007, and will close on November 1, 2007. The company has fixed the price band between Rs 37 and Rs 42 per equity share.

The equity shares are proposed to be listed on the NSE and BSE.

Of the total equity offer, up to 50% of the issue will be allocated on a proportionate basis to qualified institutional buyers (QIBs), out of which 5% shall be available for allocation on a proportionate basis to mutual funds only. Further, not less than 15% of the Net Issue will be available for allocation on a proportionate basis to non-institutional bidders and not less than 35% of the net issue will be available for allocation on a proportionate basis to retail individual bidders, subject to valid bids being received at or above the Issue Price.

The objects of the issue are to part finance expansion of clinkerisation capacity from present 420 TPD (tonnes per day) to 600 TPD, cement grinding capacity from 460 TPD to 750 TPD, investment in wholly owned subsidiary — Badarpur Energy (P) Ltd.; for setting up a 6 MW biomass based power project, to meet the working capital requirements and for general corporate purpose.

Consolidated income for fiscal 2006 and fiscal 2007 were Rs 536.7 million and Rs 745 million respectively. The profit after tax for fiscal 2006 and 2007 were Rs 116.0 million and Rs 142.7 million respectively. For the quarter ended June 2007, the income and profit after tax were Rs 209.9 million and Rs 36.2 million respectively.

The book running lead manager to the Issue is UTI Securities Limited and the co- book running lead manager is Karvy Investor Services Limited.

Mundra Port SEZ’s IPO likely on Nov 1

The SEBI on Wednesday cleared the proposed Rs 1,500-crore IPO of Mundra Port SEZ. MPSEZL is promoted by the Gujarat-based Adani group.

According to sources, the issue is expected to open on November 1. While the issue price is yet to be finalised, sources say that considering the fact that the company will issue 4.02 crore equity shares of Rs 10 each, the issue price should be in the range of Rs 380 per share.

According to sources, MPSEZ is the largest port-based SEZ project in the country and the first such public issue to hit the capital market. MPSEZL is the group’s logistics arm. The Adani group is the developer and operator of Mundra Port and is primarily engaged in providing bulk cargo services, container cargo, crude oil cargo and value-added port services, including railway services between Mundra Port and Adipur.

Fund use

The proceeds from the issue will primarily be used to part-finance construction and development of basic infrastructure and allied facilities in the proposed SEZ and south basin terminal for coal and other cargo at Mundra Port.

This apart, the IPO will also finance the projects lined up by Adani Petronet (Dahej) Port, Adani Logistics.

The 10,000-hectare SEZ will include industrial, business, and social infrastructure including industrial plots and recreation facilities, reports The Hindu Business Line.

Friday, October 19, 2007

Globus Spirits plans Rs 68cr IPO

Globus Spirits, a Delhi-based alcohol beverage company, is planning an initial public offering (IPO) to raise Rs 68 crore.

The company has filed a daft red herring prospectus (DRHP) with Securities & Exchange Board of India (Sebi). The Book Running Lead Manager of the proposed issue is SREI Capital Markets.

The company posted a gross turnover of Rs 116.67 crore in 2006-07 with a CAGR of over 30% in the last three years, and registered a PAT of Rs 8.66 crore.

The company proposes to modernise and expand its production facilities at Behror, Rajasthan and Samalkha, Haryana, develop and acquire IMFL brands, and revamp its storage and bottling capacity.

Thursday, October 11, 2007

FM says decks cleared for NHPC IPO

Finance Minister, P Chidambaram said that the decks cleared for Public sector National Hydro – Electric Power Corporation (NHPC) IPO.

The company, wholly-owned by the government, had filed DRHP with the capital markets regulator SEBI in April 2007. The IPO was proposed to include over 111 crore fresh equity shares and offer for sale of more than 55 crore shares.

The government had approved the planned IPO in December 2006. The company proposes to add a capacity of 5,300 MW in the 11th five year plan.

Tuesday, October 09, 2007

Rathi Bars plans Rs 25 crore IPO

Iron and steel maker, Rathi Bars will raise Rs 25 crore through initial public offer (IPO) to fund its production capacity expansion plans.

“We will hit the capital market with 71.43 lakh equity shares to raise about Rs 25 crore to fund our production capacity expansion programmes,” Rathi Bars Ltd managing director, Mr KK Rathi said.

The shares with a face value of Rs 10 each would be issued at Rs 35, he said. The issue would open on 18 October and close on 23 October.

“We are going to dilute 44 per cent of promoters holding through this public issue,” Mr Rathi added. The company has a plant here which has a production capacity of 70,000 tons per annum.

“Our present production in the unit is about 70,000 tons per annum and it has a capacity utilisation of 90-95 per cent. We want to increase it to one lakh tons per annum,” Rathi Bars director, Mr Anurag Rathi said.

The company has earmarked an investment of Rs 35 crore for purchasing and upgrading its equipment and other expansion plans. “The public issue will fund the bulk of the expansion programme. The rest of the fund will come from internal accruals and debt market,” he said. The company would expand its production capacity of the current plant only, he said. “We are not going to set up any new plants”, he added.Mr Anurag Rathi further said that production capacity expansion would be in phases and the first phase would be completed in 6-7 months, reports The Statesman.

Shriram EPC files DRHP with SEBI

Shriram EPC, a service provider of integrated design, engineering, procurement, construction and project management services, has filed its draft red herring prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) to enter the capital market with its initial public offering (IPO) of equity shares.

The company proposes to issue 5,000,000 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process. The issue will constitute 11.66% of the fully diluted post-issue paid-up capital of the company.

Out of the total equity shares being offered in the Issue, at least 60% of the issue will be allocated to qualified institutional buyers on a proportionate basis out of which 5% will be available for allocation on a proportionate basis to Mutual Funds only. Further, not less than 10% of the Issue will be allocated to non-institutional bidders and not less than 30% of the Issue will be allocated to retail individual bidders on a proportionate basis, subject to valid Bids being received from them at or above the issue price.

The company plans to primarily invest the proceeds of the Issue in its subsidiary and associate companies and fund purchases of plant and equipment for pipe rehabilitation projects.

The equity shares are proposed to be listed on the National Stock Exchange and the Bombay Stock Exchange.

The company's engineering, procurement and construction (EPC) business is focused on providing integrated turnkey solutions for renewable energy projects (including bio-mass based power plants and bio-ethanol production plants), process and metallurgy plants (including thermal power plants), water and wastewater treatment plants, water and water sewer infrastructure and pipe rehabilitation.

The WTG business has been focused on developing, manufacturing, erecting and commissioning 250 KW WTGs. Additionally, the Company is currently developing megawatt-class WTGs through one of its associate companies. The Company, its subsidiaries and associate companies have offices in Mumbai, New Delhi, Kolkata and Beijing; and WTG and cooling tower factories in Puducherry, Chennai and Umbergaon, Gujarat. Its EPC project experience and footprint encompasses 16 states in India. It has also completed wind energy projects in several locations across India and also internationally in Zambia and France.

Kotak Mahindra Capital Company Limited is the global coordinator and book running lead manager and ICICI Securities Limited is the book running lead manager. The co-book running lead manager is Motilal Oswal Investment Advisors Private Limited.

UCO Bank plans follow-on public issue by Q1FY09

UCO Bank plans to come out with a follow-on public issue by the first quarter of 2008-09 (Apr-Mar), Chairman and Managing Director S.K. Goel said today. "Once we get government approval for capital restructuring, we plan to come out with a follow-on pubic issue," Goel told reporters on the sidelines of an industry function, according to NW18.

UCO Bank has sought permission to convert equity capital worth Rs 300 crore to preference capital. The state-run bank plans to raise up to Rs 250 crore via the follow-on issue, Goel said. The government stake in the bank is seen down to 56% from 75%.

Monday, October 08, 2007

Nacil may divest 15% via IPO, put 5% for Esop

The newly-created holding company for national carriers Air India and Indian, National Aviation Company of India (Nacil), may offload 10-15% stake through an initial public offering (IPO) in 2008 to fund expansion and take on competition from private airlines, civil aviation minister Praful Patel told ET. The offer could involve issue of fresh shares and dilution in existing equity of Nacil.

"We are yet to take a view on the exact mode of equity dilution. Accenture and Ambit Finance, the consultants appointed to handle the merger, are now doing the valuation and we expect them to give a report by the year-end," Mr Patel said.

The IPO will be preceded by an offer of about 5% of equity to the 33,000 employees of the merged entity, Mr Patel said. Nacil, created in March, expects the integration process to be completed within two years. It has a paid-up capital of Rs 145 crore. It will fly under the Air India brand.

Air India and Indian have a combined fleet strength of 125 aircraft, about a third of the national total. They have ordered 111 more aircraft.

Mr Patel also said an empowered group of ministers examining the draft civil aviation policy will meet later this month and is expected to reach a conclusion on the rules governing qualifications to fly overseas. The criterion requiring five years of domestic service only allows Air India and Jet to fly abroad as of now. Newer private airlines want this rule to be relaxed so they too can commence overseas operations.

Furthermore, the limit on foreign direct investment (FDI) is also likely to be increased in select segments, but foreign airlines will not be allowed to take over Indian carriers just yet. "Why should they be gobbled up by international carriers?" Mr Patel asked.

Cabinet approval will be sought to allow 100% FDI in helicopter operations, seaplane companies, pilot training and maintenance, repair & overhaul (MRO) facilities. The foreign investment cap on cargo operations could be raised to 74%. India currently allows up to 49% FDI in most segments of civil aviation, barring airports, where the ceiling is 74% for existing ones and 100% for greenfield projects.

Thursday, October 04, 2007

Reliance Power to offload 10.1% stake via IPO

Reliance Power (RPL), part of the Reliance Anil Dhirubhai Ambani Group (R-ADAG) company, will offload a 10.1% stake in the proposed initial public offering (IPO). According to the draft red herring prospectus (DRHP) filed by RPL with the stock market regulator SEBI on Wednesday, the IPO will comprise 130-crore equity shares of Rs 2 each for cash at a premium to be decided through a 100% book building process.

The proceeds of the issue are proposed to be utilised for funding various projects. Reliance Power, currently a subsidiary of Reliance Energy (REL), has got two projects under its fold — a 4,000 mw Sasan ultra mega power project and a 1,200 mw Rosa project.

On Wednesday, the share price of REL moved up 7.5% to close at Rs 1450.40 on BSE. The public issue includes promoters’ contribution of 16 crore shares, and the balance 114 crore shares would constitute the net issue to the public. The issue will constitute 11.5%, and the net issue will constitute 10.1% of the post-issue paid-up equity capital of the company.

“At least 60% of the net issue to the public will be allotted on a proportionate basis to qualified institutional buyers (QIBs), of which 5% will be available for mutual funds. Around 30% of the net issue will be available for allocation on a proportionate basis to the retail individual bidders and 10% will be available for allocation on a proportionate basis to non-institutional bidders,” RPL said in a statement.

The equity shares of the company are proposed to be listed on BSE and NSE. Kotak Mahindra Capital, UBS Securities India, ABN Amro Securities (India), Deutsche Equities India, Enam Securities, ICICI Securities, JM Financial Consultants and JP Morgan India are acting as the book running lead managers to the issue.

Transformers and Rectifiers files DRHP with SEBI

Transformers and Rectifiers (India), one of the major players in the Indian market manufacturing a wide range of transformers ranging from power generation, transmission and distribution transformers, industrial transformers and a wide range of speciallity transformers has filed its draft red herring prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) to enter the capital market with its initial public offering of equity shares.

The objects of the proposed issue is the setting up of the proposed greenfield manufacturing facility at Moraiya, near Ahmedabad, Gujarat, for manufacturing transformers and to part-finance incremental working capital requirements.

The equity shares are proposed to be listed on the Bombay Stock Exchange and the National Stock Exchange.

Enam Securities Private Limited is the sole book running lead manager to the Issue.

The company proposes to issue 2,995,000 equity shares of Rs 10 each for cash at a premium to be decided through a 100% book-building process. The issue includes a reservation of 150,000 equity shares for eligible employees and the net issue to the public will be 2,845,000 equity shares. The issue will constitute 23.17% of the fully diluted post-issue paid-up capital of the company and the net issue will constitute 22.01% of the fully diluted post issue paid-up capital of the company.

Out of the total equity shares being offered in the issue, at least 60% of the net issue shall be allocated to qualified institutional buyers (QIBs) on a proportionate basis out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be available for allotment on a proportionate basis to all QIBs including Mutual Funds, subject to valid bids being received from them at or above the issue price.

If at least 60% of the net issue cannot be allocated to QIBs, then the entire application money will be refunded forthwith. Further, up to 10% of the net issue would be allocated to Non-Institutional Bidders and up to 30% of the Net Issue would be allocated to Retail Individual Bidders on a proportionate basis, subject to valid Bids being received from them at or above the Issue Price. Further, upto 150,000 Equity Shares shall be available for allocation on a proportionate basis to the eligible employees.

The company manufactures a wide range of transformers while focusing on quality, timely delivery and customization. It has developed its products based on its in-house design and engineering capabilities, and is perhaps one of the few players to have developed this wide range without any third party technical collaboration or assistance. Its core competencies are its in-house technical and design expertise, skilled workforce and well equipped manufacturing facilities which enables it to manufacture a wide range of transformers, to meet diverse client requirements.

The company manufactures transformers upto 220 kV Class, having an installed capacity of 7,200 MVA transformers per annum. It currently operates through two manufacturing units, located at Changodar, near Ahmedabad and Odhav, in Ahmedabad, both in Gujarat.

IRB Infrastructure to enter capital market

IRB Infrastructure Developers, an integrated infrastructure development and construction company in India with significant experience in the roads and highways sector, proposes to enter the capital markets with a public issue of 51,057,666 equity shares of Rs 10 each through 100% book building process.

It has also diversified into the business of real estate development sector. It has filed DRHP for this purpose with SEBI.

Deutsche Equities India Private Limited is the sole global coordinator and BRLM for the issue and Kotak Mahindra Capital Company Limited is the Co-BRLM for the issue.

IRB Infrastructure Developers is the holding company of the IRB Group. The company was formed to fund the capital requirement of the IRB Group's initiatives in the infrastructure and construction sectors.

As a part of its business strategy, the company now proposes to invest in its subsidiary IDAA and make prepayment and repayment of existing loans of the Company and the Subsidiaries through the net proceeds of the issue.

Deutsche Bank Hong Kong Branch, Jade Dragon (Mauritius) Limited (a subsidiary of Goldman Sachs) and CPI Ballpark Investments Limited (a subsidiary of Merrill Lynch) each hold 3.85% stake, and Somerset Emerging Opportunities Fund hold 0.54% stake in the equity share capital of the company.

The company's infrastructure development business involves construction, development and operation of infrastructure development projects. It is an established infrastructure company in the roads sector in India and has a large portfolio of completed and operational BOT projects in the Indian road infrastructure sector. The Company's construction business complements its infrastructure development business and involves engineering, procurement and construction work for construction project on a contractual basis, including in the roads sector.

TCG Lifesciences files DRHP with SEBI

TCG Lifesciences, one of the leading life sciences research services and informatics organisations promoted by Dr Purnendu Chatterjee and TCG Lifesciences Mauritius Limited with operations in India, the UK and the US, has filed its draft red herring prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) to enter the capital market with its initial public offering of equity shares.

The company proposes to issue 9,500,000 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process. The issue comprises a fresh issue of 9,000,000 equity shares and a reservation of up to 500,000 equity shares for eligible employees. The issue will constitute 14.41% of the fully diluted post issue paid-up capital of the company. The net issue will constitute 13.65% of the fully diluted post Issue paid-up capital of the company.

The company is considering a pre-IPO placement of upto 15,00,000 equity shares with certain investors. The company will complete the issuance of such equity shares prior to the filing of the red herring prospectus with the Registrar of Companies. If the pre-IPO Placement is completed, then (i) the issue size offered to the public would be reduced to the extent of such Pre-IPO Placement, subject to a minimum issue size of 10% of the post-issue capital being offered to the public and (ii) the employee reservation portion shall (if required) be accordingly reduced.

The issue is being made through the 100% book building process wherein at least 60% of the Net Issue will be allocated on a proportionate basis to qualified institutional buyers, out of which 5% shall be available for allocation on a proportionate basis to mutual funds only. Further, not less than 10% of the net issue will be available for allocation on a proportionate basis to non-institutional bidders and not less than 30% of the net issue will be available for allocation on a proportionate basis to retail individual bidders, subject to valid bids being received at or above the Issue Price. The objects of the Issue are primarily to finance capital expenditure; finance capital investments in subsidiaries; repay debt and for general corporate purposes.

The company’s business is structured to enable a translational medicine approach delivering fully integrated end-to-end discovery and development solutions to the global life sciences industry, which includes many large and mid-market global pharmaceutical and biotechnology companies. It offers solutions in discovery research, translational research, clinical development and enterprise informatics.

The equity shares are proposed to be listed on the National Stock Exchange and the Bombay Stock Exchange.

The BRLMs to the issue are Kotak Mahindra Capital Company Limited and Enam Securities Private Limited.

NKG Infrastructure files DRHP with SEBI

NKG Infrastructure, engaged primarily in execution of infrastructure projects like highways, roads & bridges, extension and grading of runway at airport, erection and installation of power sub-station and construction of buildings, has filed its draft red herring prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) to enter the capital market with its initial public offering of equity shares.

At present, it is executing 67 projects including projects in joint ventures across various states in India. The value of projects under execution is Rs 526.87 crore.

The company proposes to issue 63,00,000 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process constituting 44.41% of the fully diluted post issue paid-up capital of the company.

The objects of the issue are to deploy the proceeds for funding the capital expenditure requirements, investment in joint venture & BOT projects & augmenting the working capital resources.

The equity shares are proposed to be listed on the Bombay Stock Exchange and the National Stock Exchange. The book running lead manager to the issue is SPA Merchant Bankers Limited.

Its major clients include Public Works Department & other agencies of various state governments & development bodies like Noida Development Authority, Lucknow Development Authority, Ghaziabad Development Authority, etc. The private sector clients include construction companies like Era Construction India Ltd., Nagarjuna Construction Company Ltd. and Marg Construction Ltd.

Monday, October 01, 2007

Reliance Power public issue soon

The Anil Ambani-promoted Reliance Energy (REL) today announced that its wholly-owned subsidiary Reliance Power will go public soon. The company will file a draft red herring prospectus with the Securities and Exchange Board of India shortly.

Reliance Power is expected to mop up USD 3.5 billion (Rs 14,000 crore) from the market, which will be the biggest public float in recent times after public issues by DLF and ICICI.

The company plans to add 25,000 MW capacity through new projects and expansion of capacity over the next couple of years. Much of the funds raised will be used for this purpose.

Going by the market value of Rs 4 crore per MW of energy, the company is valued at Rs 100,000 crore, according to investment bankers.

On the basis of this valuation, Reliance Energy will offload nearly 8 per cent stake through the proposed IPO.

The company is in talks with several investment banks, among them Kotak Mahindra Capital, JM Financial, J P Morgan, HSBC and Enam. The company will appoint a separate banker to sell the issue overseas.

A major investment will go into the 4,000 MW Sasan coal-based power project which the company bagged recently. The plant, which is expected to be completed in five years, will supply power to Madhya Pradesh, Uttar Pradesh, Delhi, Rajasthan, Haryana, Punjab and Uttarakhand.

REL had floated a special purpose vehicle, Sasan Power, to execute the project and this was merged with Reliance Power, a five-year-old company which executed about 268 MW.

Explaining the higher investment in Sasan, a company executive said, “We are investing Rs 25,000 crore in a gas-based 7,000 MW plant in Dadri, but since coal-based plants are costlier to set up, we are planning to invest Rs 20,000 crore for the 4,000 MW plant in Sasan.”

Besides Dadri and Sasan, Reliance Power is also executing the 1,200 MW Rosa thermal power project in Uttar Pradesh. Work is underway on the first phase (2,800 MW) of the Shahapur project and another 1,200 MW will also be added at the Dahanu plant.

The Reliance Anil Dhirubhai Ambani Group has a market capitalisation of over Rs 200,000 crore on the stock exchanges, a net worth in excess of Rs 40,000 crore, cash flow of Rs 9,000 crore, and net profit of Rs 5,000 crore with zero net debt, reports Business Standard.

Open auction may decide IPO price

An auction-based method for pricing of initial public offers may replace book-building, with the government aiming to bring in more transparency and efficiency in share sale.

Market regulator SEBI’s primary market advisory committee (PMAC), which has been asked to prepare a paper on various price discovery mechanisms, is examining the issue. While no final decision has been taken, it is possible that SEBI might opt for a method similar to the Dutch auction process used in the Google initial share offer.

The government had discussed the proposal with SEBI after which the panel was entrusted with the task. According to one model being considered by the committee, qualified institutional buyers will be told to bid for shares in an open auction. The lowest bid will then become the fixed price for retail investors.

Generally, in an open auction, investors are asked to indicate the price and number of shares they wish to buy. The issuer then allocates certain shares in a descending order of prices till the amount of shares to be issued is exhausted. The lowest bid price is accepted as the deemed price and all investors pay this price. In case of oversubscription, allocation is done on a pro-rata basis.

Consider a situation where a company wants to sell one million shares. The underwriters rank the demand for shares in descending order of prices till one million shares are reached. If the total demand is for two million shares, then the highest price bids adding up to one million shares is considered. The lowest price becomes the price at which shares will be allocated.

“In an auction method, the issuer gets the right value for shares, institutional investors get shares at a price they want and retail investors can then buy it at the lowest price offered by a qualified institutional buyer,” Prithvi Haldea of Prime Database said.

Open auction has become the preferred way to discover the price in Japan and France, among other countries. In the US, the concept was pioneered by venture capitalist Bill Hambrecht and was used in the Google IPO, although the concept is yet to gain popularity in that country.

The government’s move to look at alternatives to book-building method for price discovery comes against the backdrop of an increase in pre-IPO share placements. In last few years, most companies hitting the capital market have opted for a private placement just ahead of the IPO. In most such deals, while institutional investors managed to bag shares at a lower price, retail investors, who bought shares through the IPO, had to pay a higher price.

Also, there is a strong view that book-building, which was introduced in India in 1999 as an alternative to fixed prices, did not lead to any real price discovery, since a price band is already prescribed. Experts feel underpricing is rampant, as the listing price in case of most IPOs is much higher than the issue price, reports The Economic Times.