Divgi TorqTransfer Systems Ltd IPO subscribed 5.44 times at close

Divgi TorqTransfer Systems IPO worth Rs. 412.12 crore, consisted of a fresh issue of Rs. 180 crore and an offer for sale (OFS) of Rs. 232.12 crore. The fresh issue component brings in fresh funds into the component but is also EPS and equity dilutive. On the other hand, the OFS is just a transfer of ownership and hence it is not equity dilutive. The IPO saw steady response on Day-1 and Day-2 of the IPO and closed with rather healthy subscription numbers at the close of Day-3. In fact, the company got fully subscribed only on the last day of the IPO; as most of the institutional bids came in on the last day of the IPO only.

As per the combined bid details put out by the BSE at the close of Day-3 on Friday 03rd March 2023, Divgi TorqTransfer Systems Ltd IPO was subscribed at 5.44X overall, with best demand coming from the QIB segment, followed by the retail segment and the HNI / NII segment in that order. In fact, only the institutional segment saw some good traction on the last day. The HNI portion did do well but there was no surge of funding applications coming on the last day of the IPO. While the overall HNI segment got full subscribed, the B-HNIs who put in bids of more than Rs10 lakhs saw the portion getting undersubscribed.

As of close of 03rd March 2023, out of the 38.42 lakh shares on offer in the IPO, Divgi TorqTransfer Systems Ltd saw bids for 208.87 lakh shares. This implies an overall subscription of 5.44X. The granular break-up of subscriptions was in favour of the QIB investors followed by the retail subscriptions with the HNI / NII investors getting the lowest subscription among the various categories. QIB bids and NII bids typically gather most of the momentum on the last day, and that was the case in this issue also in the case of QIB bids. However, the NII bids hardly picked momentum even on the last day and most of the action in the HNI / NII segment was only visible in the S-HNI segment and not in B-HNI segment.

Divgi TorqTransfer Systems Ltd IPO Subscription Day-3 (at 17.15 hours)

QIB Portion

Let us first talk about the pre-IPO anchor placement. On 28th February 2023, Divgi TorqTransfer Systems Ltd did an anchor placement of 31,43,290 shares at the upper end of the price band of Rs. 590 to 12 anchor investors raising Rs. 185.45 crore. The list of QIB investors included a number of names like Matthews Asia Fund, Aurigin Master Fund, ICICI Prudential MF, Nippon India MF, Quant MF, Edelweiss MF, Motilal MF and Aditya Birla Sun Life Insurance.

The QIB portion (net of anchor allocation as explained above) has a quota of 20.96 lakh shares of which it has got bids for 164.16 lakh shares at the close of Day-3, implying a subscription ratio of 7.83X for QIBs at the close of Day-3. Out of the bids for 164.16 lakh shares received in the QIB segment; 54.86 lakh shares pertained to FPIs, 50.08 lakh shares pertained to DFIs (banks and insurances), 35.36 lakh shares were bid by domestic mutual funds and other QIBs accounted for 23.86 lakh shares in all. QIB bids typically get bunched on the last day and while the heavy demand for the anchor placement had given an indication of the institutional appetite for the Divgi TorqTransfer Systems Ltd IPO subscription overall, the actual demand did turn to be quite robust for the IPO.

HNI / NII Portion

The HNI portion got subscribed 1.40X (getting applications for 14.63 lakh shares against the quota of 10.48 lakh shares). That is a rather tepid and timid response at the close of Day-3 largely because this segment normally sees the maximum response bunched on the last day. Bulk of the funded applications and corporate applications, come in on the last day of the IPO, and that was not exactly visible as the overall HNI / NII portion just about got fully subscribed on last day. However, the HNI portion did eventually manage to sail through.

Now the NII/HNI portion is reported in two parts viz. bids below Rs. 10 lakhs (S-HNI) and bids above Rs10 lakhs (B-HNI). The bids above the Rs. 10 lakh category (B-HNIs) typically represents most of the major funding customers. If you break up the HNI portion, the above Rs. 10 lakh bid category got subscribed just 0.89 times or 89%, while the below Rs. 10 lakh bid category (S-HNIs) got subscribed 2.41X. This is just for information and is already part of the overall HNI bids explained in the previous para.

Retail Individuals

The retail portion was subscribed 4.31X at the close of Day-3, showing steady retail appetite. It must be noted that retail allocation is 10% in this IPO. For retail investors; out of the 6.99 lakh shares on offer, valid bids were received for only 30.08 lakh shares, which included bids for 26.13 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.560-Rs.590) and has closed for subscription as of the close of Friday, 03rd March 2023.