 "Mahanagar Gas subscribed 65 times")
The Rs 1,000-crore initial public offering (IPO) of shares of Mahanagar Gas Limited (MGL) garnered nearly 65 times subscription, highlighting investor appetite for primary market offerings continues to be robust. The 17.34-million share offering attracted over a billion bids, worth around Rs 47,000 crore. MGL, a joint venture between state-owned Gail India and BG Asia Pacific Holdings (formerly British Gas Asia Pacific), is one of the largest city gas distribution companies in India.
MGL's IPO witnessed strong demand across investor segments. The qualified institutional buyer (QIB) segment was subscribed around 73 times, high networth individual (HNI, or rich) segment saw a whopping 192 times subscription, while the retail (small investor) category saw nearly six times more demand than the shares on offer.
Analysts said the company's attractive valuations compared to peers and growth opportunities in the underpenetrated city gas distribution space attracted investors towards the IPO.
Good post-listing performances this year have boosted sentiment towards primary market, say investment bankers. They expect a steady flow of IPOs in the second half of the year. Next week, Thomas Cook India-promoted Quess Corp will launch its IPO to raise Rs 400 crore by issue of fresh shares.
MGL's IPO was entirely offer for sale by existing investors Gail and BG Asia, both of which sold shares worth around Rs 500 crore each.
After listing, the shareholding of these two firms will fall from 45 to 32.5 per cent each. The government of Maharashtra owns 10 per cent stake in MGL. The company had priced its offering between Rs 380 and Rs 421 per share. Given the heavy demand, the IPO is likely to be priced at the top end of the price band, at which the company will be valued at Rs 4,150 crore.
MGL's IPO was handled by Kotak Mahindra Capital and Citigroup Global Markets.
"At the upper limit of Rs 421, the stock would be valued at 12.2 times FY18 (estimated) earnings. Indraprastha Gas is currently trading at 15 times its FY18 (estimated) earnings of Rs 41.6. At 15 times FY18 earnings of Rs 34.6, we value MGL at Rs 518," Elara Capital had said in a note on MGL.
In another note, Phillip Capital had recommended MGL's IPO due to growth opportunities in the city gas distribution space.
"City gas distribution is a stable monopolistic utility business, with strong entry barriers and first-mover advantage. With oil prices recovering towards $50 per barrel, economics of gas-based fuels have improved considerably, which would lead to more substitution and higher volumes," it said.
MGL's IPO witnessed strong demand across investor segments. The qualified institutional buyer (QIB) segment was subscribed around 73 times, high networth individual (HNI, or rich) segment saw a whopping 192 times subscription, while the retail (small investor) category saw nearly six times more demand than the shares on offer.
Analysts said the company's attractive valuations compared to peers and growth opportunities in the underpenetrated city gas distribution space attracted investors towards the IPO.
Also Read
MGL's IPO hit the market after Parag Milk Foods' IPO in early May. Most recent IPOs have witnessed good investor demand and the stocks have done well after listing. Grey market operators peg MGL to list at a premium of around 30 per cent over the IPO price.
Good post-listing performances this year have boosted sentiment towards primary market, say investment bankers. They expect a steady flow of IPOs in the second half of the year. Next week, Thomas Cook India-promoted Quess Corp will launch its IPO to raise Rs 400 crore by issue of fresh shares.
MGL's IPO was entirely offer for sale by existing investors Gail and BG Asia, both of which sold shares worth around Rs 500 crore each.
After listing, the shareholding of these two firms will fall from 45 to 32.5 per cent each. The government of Maharashtra owns 10 per cent stake in MGL. The company had priced its offering between Rs 380 and Rs 421 per share. Given the heavy demand, the IPO is likely to be priced at the top end of the price band, at which the company will be valued at Rs 4,150 crore.
MGL's IPO was handled by Kotak Mahindra Capital and Citigroup Global Markets.
"At the upper limit of Rs 421, the stock would be valued at 12.2 times FY18 (estimated) earnings. Indraprastha Gas is currently trading at 15 times its FY18 (estimated) earnings of Rs 41.6. At 15 times FY18 earnings of Rs 34.6, we value MGL at Rs 518," Elara Capital had said in a note on MGL.
In another note, Phillip Capital had recommended MGL's IPO due to growth opportunities in the city gas distribution space.
"City gas distribution is a stable monopolistic utility business, with strong entry barriers and first-mover advantage. With oil prices recovering towards $50 per barrel, economics of gas-based fuels have improved considerably, which would lead to more substitution and higher volumes," it said.