Parag Milk Foods cuts issue price, extends closing

Rs 750-cr IPO fails to garner mandatory institutional participation

Parag Milk Foods was on Friday forced to cut its initial public offering (IPO) price and extend the closing date after its Rs 750-crore issue failed to garner the mandatory institutional investor participation.

The dairy products firm has lowered its price band to Rs 215-227 a share from the earlier band of Rs 220-227 a share. The IPO, which was supposed to close on Friday, will now close on Wednesday (May 11).

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On an overall basis, Parag Milk’s 19.2-million share offering has been subscribed 1.32 times, with 25.4 million bids. However, the qualified institutional buyer (QIB) portion of the IPO got only 55 per cent subscription. As Parag Milk did not meet the Securities and Exchange Board of India (Sebi)’s profitability criteria, its IPO was a qualified institutional buyer (QIB)-backed issue.

According to Sebi norms, if a company that doesn’t have a profitability track record comes out with an IPO, it should get at least 75 per cent of QIB participation as opposed to 50 per cent in normal IPOs. Also, retail participation in such IPOs is restricted to only 10 per cent against 35 per cent.

According to provisional data provided by the stock exchanges, Parag Milk’s QIB portion was subscribed only 55 per cent. Even after adding anchor participation, the QIB portion is covered by 82 per cent. The retail portion of the IPO was subscribed 1.72 times. Only 10 per cent of the IPO was reserved for retail investors and they are being offered an additional discount of Rs 12 per share. The high net worth individual segment was subscribed 2.7 times.

“As there were regional holidays in Asia during the issue period, the company expects additional interest from QIBs in the extended issue period,” said Parag Milk.