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Retail investors of Justdial’s initial public offering (IPO) have started cashing in on gains, as shares of the company have generated about 30 per cent returns in less than a week. According to a banker who handled the Rs 900-crore IPO, about 40 per cent of the original retail investors had exited in the first week after its listing.
Justdial debuted on the stock market on June 5, with more than 10 per cent gains. The stock closed at Rs 647.4, against an issue price of Rs 530. Currently, the shares are 22 per cent higher than the issue price. Retail investors are sitting on 36 per cent gains, as they were offered shares at a discount. Perhaps, this has led to their exit.
The exodus of the retail investors, however, has come as a blessing in disguise to the promoters. Soon, the promoters would request the Securities and Exchange Board of India (Sebi) to release the funds they had earmarked for providing a safety net. “We will check with the depositories for the exact data on the retail investors’ exit. Then, we will write to Sebi, requesting for the release of the cash from the escrow,” said a banker associated with the issue.
The Justdial offering had provided for a safety net mechanism for retail investors. The IPO had reserved 10 per cent of the issue for retail investors.
The banker said promoters had deposited about Rs 85 crore in the escrow account to compensate retail investors in case the Justdial stock price fell below the issue price in the first six months after the listing. However, if retail investors exit before the completion of the six-month period, the company can request for the release of funds from the escrow account, as the safety net feature is meant for IPO investors alone.
About 70,000 retail investors had been allotted shares in the Justdial offering — just 25 shares each.
Though the escrow account is interest-bearing, the yields are lower compared to other debt instruments or returns of equity generated in business.
