No retail limit gains for PowerGrid issue

The upcoming share sale by Power Grid Corporation may not benefit from the recent doubling of the limit for retail investors to 2 lakh as the stock market watchdog is yet to notify the change announced last week. The state-run transmission firm will hit the market with a follow-on public offer on November 9, looking to raise Rs 8,000 crore. With only two working days left for the issue, the earlier limit of Rs 1 lakh on retail investment is likely to be in force. 

“The rule has not been notified so far... We are not sure if it would come out before the issue opens,” said an official with the disinvestment department. 

Under the current rules, at least 35% of the offer has to be set aside for retail investors in the case of book-built issues. Those participating in this category, however, can bid for shares worth a maximum of Rs 1 lakh only. Sebi has increased that limit to Rs 2 lakh to encourage greater retail participation. 

Issue managers are not confident of gaining from the higher limit even if the notification is issued on Monday. “If the notification comes even on Monday a lot would depend on its language and the cut-off date,” said a banker associated with the issue. 

If the notification makes it mandatory for all public offers henceforth then Power Grid could issue a public corrigendum to that effect, but there would be no change in plan and the issue will open as per schedule, he added. 

Power Grid public offering of Rs 8,000 crore would be the second major issue after the largest Indian initial public offer from Coal India that raised of Rs 14,000 crore. The higher limit would have certainly helped the issue, as it follows closely the hugely successful Coal India offer. Retail investors had bid 2.31 times the shares reserved for them. Investors who had bid for the maximum amount or 400 shares have been allotted 199 shares. 

If Coal India lists at a good premium as is expected, retail investors will be in a position to book profit and be in position to invest the proceeds in the Power Grid offer. 

The Power Grid issue will close on November 12. Retail investors will get a chance to bid for more than 29 crore shares which will be offered to them at a 5% discount. The company’s share has dropped in the run-up to the offer. On Wednesday, it closed at Rs 100.4 on the BSE. The share is likely to be priced at a good discount to the market price, giving investors sizeable gains on listing. 

Earlier this year, the government completed two share sales in NHPC and Engineer India, raising Rs 1,079 crore and Rs 980 crore, respectively. 

The retail investors got EIL shares at a Rs 50 discount, yielding nearly 20% gain on listing. 

The proposed issue comprises a 10% sale by the government and sale of a similar quantum of fresh shares by the company. Currently, the government holds 86.36%, which will fall to 69.43% after the issue . India’s largest transmission utility has a network of about 74,297 kms of transmission lines.