HNIs sore over TCS allotments

The TCS issue was the largest private sector open offer and received huge demand from all segments.

According to market sources, investors in the high networth investors (HNI) segment, which was subscribed 19.15 times, are not too a happy lot though.

The reason for this is that the shares allotted to investors in this category was the lowest in terms of proportion as it received a record number of applications. Also, this segment is known to be a major benefactor of margin funding and have to pay up in full the bid amount at the time of applying.

Players said that this increases the cost of buying per share and if the allotment is much lesser than the applied number, the cost tends to shoot up considerably. In fact, marketmen point out that a number of small investors, anticipating a huge premium on listing had used their money as margin to bid for a larger number of shares.

Tarun Dev, a small investor, said, "I was hoping for a larger allotment and hence applied for 301 TCS shares through margin funding. I paid Rs 1.1 lakh as margin money on August 3 and have just received 16 shares for my application. I will have to pay interest for the balance amount till I get my refund back. This has increased my cost per share drastically."

He added that in the hindsight if he had applied for 56 shares in the retail category and paid only about Rs 50,000, he would have been allotted 20 shares and would not have had to pay a high interest on the balance amount. Marketmen indicate that interest rates for margin funding range from 10 per cent to 18 per cent and in some cases even higher.

TCS shares were in huge demand in the grey market with the premium touching a high of Rs 200 per share before allotment and listing and in some places such as Ahmedabad it went higher as HNIs, realising that the non-institutional investors segment was hugely oversubscribed, bought shares from the retail investors even before the listing.

Explained a broker on conditions of anonymity, "Most investors wanted TCS in their portfolio and retail investors have a lot of faith in the Tata brand name.

The issue was expected to be oversubscribed and certain high networth investors and also retail investors went into pre-agreed deals with people known to them through the broking fraternity, which is fairly well networked, to buy allotted shares at a pre-determined premium which initially started at about Rs 120-130, but soon zoomed up to Rs 190-200.

Investors, using the grey market and margin funding to procure a larger number of shares, were sufferers as the TCS issue opened with a huge premium but eventually lost ground on selling pressure.

The recently concluded TCS IPO received a record number of applications. The retail portion of the 100 per cent book-built issue of 55.45 million shares of Rs 1 each was subscribed 2.85 times, while the high networth investors (HNI) portion was subscribed 19.15 times.

The total offer was subscribed 10.32 times and TCS priced the issue at Rs 850 a share, near the top end of the previously set Rs 775-900 price band. Oualified institutional borrowers (QIB) was subscribed nearly 4 times. Merchant bankers said that retail investors who had bid for 56 shares would get 20, those bidding for 49 shares would get 17.