Sona Machinery IPO Final Subscription 273.50 times

About the Sona Machinery Ltd IPO

The stock of Sona Machinery Ltd has a face value of ₹10 per share and it is a book building issue. The price for the book building issue is set in the price band of ₹136 to ₹143 per share. Being a book built issue, the price will be discovered in the above band. The Sona Machinery IPO has only a fresh issue component and no offer for sale (OFS) portion. The fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive. As part of the fresh issue portion of the IPO, Sona Machinery Ltd will issue a total of 36,24,000 shares (36.24 lakh shares), which at the upper band of IPO price of ₹143 per share aggregates to fresh fund raising of ₹51.82 crore. Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. 

Therefore, the overall IPO size will also comprise of the issue of 36,24,000 shares (36.24 lakh shares) which at the upper band IPO price of ₹143 per share will aggregate to overall IPO size of ₹51.82 crore. Like every SME IPO, this issue also has a market making portion. The market making inventory of the company is 1,82,000 shares. Hem Finlease Private Ltd will be the market maker, and the market maker will use these shares as inventory to provide two-way quotes to ensure liquidity on the counter and low basis costs, post listing. Post the IPO, the promoter stake in Sona Machinery Ltd will dilute from 100% to 73.59%. The funds will be used by the company towards capex for setting up a manufacturing unit in Ghaziabad, as well as repayment of outstanding debt and letters of credit (L/C). Hem Securities Ltd will be the lead manager to the issue, and Maashitla Securities Private Ltd will be the registrar to the issue. The market maker for the issue is Hem Finlease Private Ltd

Final subscription status of Sona Machinery Ltd

Here is the subscription status of the Sona Machinery Ltd as at close on 07th March 2024.

As can be seen from the above table, the overall IPO of Sona Machinery Ltd got subscribed an impressive 273.50 times. The HNI / NII portion led the stakes with 554.42 times subscription, followed by the Retail portion at 235.06 times subscription. The QIB portion of the IPO also got a healthy subscription of 129.72 times. That is a very strong and smart response to an SME IPO, especially if you consider the median subscriptions that similar other SME IPOs have got in the past. The subscription has shown strong traction for the IPO across all the three categories of investors; QIB, retail and HNI / NII investors.

Allocation quota for various categories

The issue was open for QIBs, retail investors and the HNI / NII investors. There was a broad quota designed for each of the segments viz. the retail, QIB and the HNI / NII segments. A total of 1,82,000 shares were allocated as market maker portion to Hem Finlease Private Ltd, which will act as the market maker inventory to provide bid-ask liquidity on the counter post listing. Market maker action not only improves liquidity in the counter but also reduces the basis risk. The table below captures the allocation reservation done for each of the categories out of the total number of shares offered in the IPO. 

Data Source: NSE
 

In the above IPO of Sona Machinery Ltd, the anchor allocation of 10,32,000 shares was carved out of the QIB portion, as a result of which the QIB offer to the public reduced from the original 47.46% of the issue size to 18.98% of the issue size. The anchor allocation bidding opened on March 04th, 2024 and also closed on the same day. A total of 10,32,000 shares were allocated across 8 anchor investors. The anchor allocation was done at the upper end of the IPO price band of ₹143 per share (which includes face value of ₹10 per share and premium of ₹133 per share). 

The total anchor allocation value was worth ₹14.76 crore. Out of the 8 anchor investors who got allotted 100% of the anchor portion; 4 of them was allocated at least 10% in the anchor portion each. These 4 anchor investors with more than 10% allocation each included; Bengal Finance & Investments Ltd (27.13%), Meru Investment Fund PCC – Cell I (20.35%), Finavenue Capital Trust – Finavenue Growth Fund (12.69%) and Persistent Growth Fund – Varsu India Growth Story Scheme I (12.69%). Other than these 4 anchor investors, another 4 anchor investors got 6.78% each of the anchor allocation. Out of the anchor shares allocated to investors on March 04th, 2024, a lock in of 30 days will be applicable for 50% of the shares (up to April 10th, 2024) and a lock-in of 90 days will be applicable for the remaining shares (up to June 09th, 2024). The allocation of market maker inventory of 5.02% is outside the anchor portion.

How subscription built up for the IPO of Sona Machinery Ltd

The oversubscription of the IPO was dominated by the HNI / NII followed by the Retail category and the QIB category in that order. The table below captures the day-wise progression of the subscription status of Sona Machinery Ltd. The IPO was kept open for 3 working days.

Here are the key takeaways from the subscription numbers on a day-wise basis for Sona Machinery Ltd as of the close of the IPO on 07th March 2024.
   

• The HNI / NII portion got the best subscription in the Sona Machinery Ltd IPO at 554.42 times and it got 8.65 times subscribed on the first day of the IPO itself.

• The Retail portion was behind the HNI / NII portion in terms of subscription at 235.06 times overall and it got 19.62 times subscribed at the end of the first day.

• The QIB portion was third in the pecking order in terms of subscription at 129.72 times overall and it got 6.71 times subscribed at the end of the first day.

• While the Retail portion, QIB portion and the HNI / NII portion got fully subscribed on the first day of the IPO itself, the QIB portion also got obviously fully subscribed on the first day of the IPO. 

• The overall IPO which saw subscription of 273.50 times at the close of the first day of the IPO; and was 13.58 times subscribed on the first day of the IPO itself. Let us now turn to the last day traction of various categories. 

• Let us start with the HNI / NII portion. The HNI / NII portion saw the total subscription ratio moving from 34.49X to 554.42X on the last day of the IPO. That is a substantial amount of traction on the last day. 

• Like the HNI / NII portion, even the retail portion saw very good traction on the last day of the IPO. On the final day of the IPO, the total subscription ratio for retail investors moved from 63.59X to 235.06X on the last day of the IPO.

• The strong last day traction was the case in the QIB investors also, which is natural as they see most of the flows on the last day. The QIB portion saw the total subscription ratio moving from 6.78X to 129.72X on the last day of the IPO. 

• Finally, regarding the overall IPO subscription ratio, the move was obviously strongest on the last day of the 3-day IPO. The overall subscription moved from 41.13X to 273.50X on the last day of the IPO.

Overall, the IPO of Sona Machinery Ltd saw above median subscription in the SME IPO.

Next steps after the closure of the IPO

The issue opened for subscription on 05th March 2024 and closed for subscription on 07th March 2024 (both days inclusive). The basis of allotment will be finalized on 11th March 2024 and the refunds will be initiated on 12th March 2024. In addition, the demat credits are also expected to happen on 12th March 2024 and the stock is scheduled to list on 13th March 2024 on the NSE SME segment. This is the segment, in contrast to the mainboard, where IPOs of small and medium enterprises (SMEs) are incubated. The demat credits to the demat account to the extent of allotment will happen by the close of 12th March 2024 under ISIN Number (INE0Q6H01012).