Godrej Properties‘ stock offering to raise up to $90 million received bids for 18 percent more than the shares on offer, boosting the outlook for a newly approved process that companies can tap to cut founder stakes.
The share sale was the first issue under the institutional placement programme (IPP), which allows companies to auction shares to institutional investors to pare the founder holding to at least 75 percent.
Founders of property companies like DLF, Oberoi Realty, Prestige Estates and Purvankara Projects hold more than 75 percent stake and will have to cut their holding by June 2013.
Mumbai-based Godrej Properties’ founders owned nearly 84 percent of the company as on end December, the stock exchange data showed, and the share sale will reduce this to a little more than 73 percent.
The auction is also expected to help the company, which builds residential and commercial properties across the country, to bring down its debt-to-equity ratio, analysts said.
Institutional investors, both domestic and overseas, bid for 8.7 million Godrej Properties shares of the 7.4 million shares on offer at the close of the auction at 5 p.m., the stock exchange data showed.
The company sold shares in the range of 575 rupees to 620 rupees a piece, a discount of 2 to 9 percent on its closing price on Tuesday, when it announced the price band after the market hours.
Godrej Properties is expected to raise 4.6 billion rupees($90 million) at the upper end of the band. The company is expected to announce the final allotment price of the issue early next week.
The issue has a greenshoe option of 740,000 shares, but it was not immediately clear whether the company, a part of the diversified Godrej group that also has interests in retail and consumer goods, would exercise it.
UBS Securities and India’s Kotak Mahindra Capital were the bookrunners for the issue.
“The price band (for the issue) was decided after feedback from investors and looking at the market environment which is still weak,” said Chetan Savla, Senior Executive Director at Kotak Investment Banking, a unit of Kotak Mahindra Capital.
Shares in Godrej Properties, which the market values at $884 million, ended down 3 percent at 620 rupees on Thursday, while the broader Mumbai market fell 2.3 percent.
A more than 11 percent rise in India’s main market index so far this year has revived share sales in Asia’s third-largest economy.
A slew of state-run and private-sector companies were forced to shelve their share sale plans last year due to weak investor appetite amid euro zone debt crisis and slowing domestic corporate earnings growth.
