Power Grid issue may not impact rupee

An outflow of around $1-2 billion over the next few days after the allotment of equity shares in state-owned Power Grid Corporation's recently concluded initial public offer (IPO) was unlikely to hit the rupee adversely, said dealers.

"There is so much money coming into the IPO, the excess money may get deployed elsewhere in the market. It may have only a marginal impact on the rupee," said Yogesh Kapur, senior vice-president at Enam Securities.

Enam Securities is one of the lead managers of the Power Grid IPO apart from Citigroup and Kotak Mahindra Capital.

The rupee has risen 11 per cent since January 1, helped by strong dollar inflows from portfolio investors and the recent interest rate cut by the US Federal Reserve.

The Indian unit touched a new nine-year high of Rs 39.61 a dollar today, up almost by a rupee from Rs 40.45 a fortnight ago. Earlier this month, Power Grid's 573.93-million share IPO was priced at Rs 52 a share.

The issue was subscribed almost 65 times, while the qualified institutional buyers' (QIB) portion was subscribed 115.9 times. The total bids received from the QIB portion stood at $36-37 billion, said Kapur.

"As per the guidelines, shares will be allotted on a pro-rata basis. In the QIB portion, less than 1 per cent of what is applied will be allotted," said Aaditya Gutgutia of Enam Securities.

The outflow might take place over the next three-four days, Gutgutia said. "Funds have put in 10 per cent of investments, which are estimated around $3.5-4 billion. Out of this, foreign funds might be allotted only $200-250 million," said Kapur.

The rupee is unlikely to be impacted by the outflow, as investments by foreign funds remain robust, at over $3 billion so far this month.

"I don't think the entire amount may go out of the country. Funds must have easily got an idea of the pricing when the IPO got closed. So the excess money may have been channelled into other secondary market investments," said a dealer at a US bank.