Electro Force India IPO Final subscription 4.28 times

About the Electro Force (India) IPO

Electro Force (India) IPO has a face value of ₹10 per share and it is a fixed price issue with the price pegged at ₹93 per share. The IPO of Electro Force (India) Ltd has a fresh issue component and an offer for sale (OFS) portion. The fresh issue portion is EPS dilutive and equity dilutive. As part of the fresh issue, Electro Force (India) IPO will issue 60,00,000 shares (60 lakh shares), at ₹93 per share aggregates to fresh fund raising of ₹55.80 crore. The offer for sale (OFS) will entail the sale of 26,74,800 shares (26.75 lakh shares approximately), at ₹93 per share aggregating to OFS size of ₹24.88 crore. Therefore, the total IPO size will also comprise of the issue and sale of 86,74,800 shares (86.75 lakh shares approximately) at ₹93 per share, aggregating to overall IPO size of ₹80.68 crore. The issue has allocated 4,35,600 shares to the market maker (Arham Shares Private Ltd) to provide two-way quotes to ensure liquidity and low basis costs post-listing. Post the issue, the promoter stake will dilute from 100.00% to 62.93%.

Final subscription status of Electro Force (India) Ltd

Here is subscription status of Electro Force (India) Ltd at close on 21st December 2023.

As can be seen from the above table, the overall IPO of Electro Force (India) Ltd got subscribed a very modest 4.28 times. The retail portion led the stakes with 6.44 times subscription, followed by the HNI / NII portion at 2.12 times subscription. There was no dedicated QIB allocation in this IPO. That is a very modest and tepid 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 limited traction for the IPO across both the categories of investors; retail and HNI / NII investors.

Allocation quota for various categories

The issue was open for retail investors and the HNI / NII investors. There was a broad quota designed for each of the segments viz. the retail, and the HNI / NII segments. A total of 4,35,600 shares were allocated as market maker portion to Arham Shares Ltd, which will act as 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.

In the above IPO of Electro Force (India) Ltd, there is no QIB allocation in the IPO. The anchor allocation to the anchor investors is normally done out of this QIB allocation and hence the company has not done any anchor allocation in the IPO. Normally, the anchor is done to institutional investors, which gives confidence and assurance to the retail shareholders about the institutional interest in the stock The anchor allocation is adjusted and deducted from the QIB quota and only the net number of shares is available for public issue under the QIB portion.

However, in this case, there is neither any QIB quota, nor any anchor allocation to investors ahead of the IPO. Normally, the anchor portion bidding is done on the day before the IPO opens and such anchor investments are subjected to lock in at two levels. Half the anchor allocation is locked in for 30 days while the balance anchor allocation shares are locked in for a period of 90 days. The allocation of market maker inventory of 5.02% is outside the anchor portion. The market making portion is more towards ensuring liquidity post listing and ensuring low basis spreads on the stock.

How subscription built up for the IPO of Electro Force (India) Ltd

The oversubscription of the IPO was dominated by the retail investors followed by the HNI / NII category in that order. The table below captures the day-wise progression of the subscription status of Electro Force (India) 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 Electro Force (India) Ltd.

• The retail portion got the best subscription in the Electro Force (India) Ltd IPO at 6.44 times and it got 1.52 times subscribed on the first day of the IPO itself.
   
• The HNI / NII portion was behind the retail portion in terms of subscription at 2.12X times  overall and it got 0.34 times subscribed at the end of the first day.
   
• While the retail portion got fully subscribed on the first day of the IPO, the HNI / NII portion got fully subscribed only on the third and final day of the IPO. As a result, even the overall subscription was filled up on the second day of the IPO only. The overall IPO which saw subscription of 4.28 times also got subscribed at 0.93 times at the close of the first day of the IPO itself.
   
• The retail, and HNI / NII portion saw the best traction on the last day of the IPO. The HNI / NII portion saw the total subscription ratio moving from 0.59X to 2.12X on the last day of the IPO. Even the retail portion saw the total subscription ratio move from 3.45X to 6.44X on the last day of the IPO.
   
• The last day traction story was true regarding the overall IPO subscription ratio also. The subscription ratio overall moved from 2.02X to 4.28X on the last day of the IPO.

With the IPO closed for subscription at the end of December 21st, 2023, the next piece of action shifts to the finalization of the basis of allotment and later to the listing of the IPO. The basis of allotment will be finalized on 21st December 2023 while the refunds would be initiated on 22nd December 2023. The shares of Electro Force (India) Ltd (ISIN - INE0Q1W01012) would be credited to the demat accounts of eligible shareholders by the close of 22nd December 2023 while the stock of Electro Force (India) Ltd is expected to be listed on 26th December 2023. The listing will happen on the NSE SME segment for small companies, which is distinct from the regular mainboard IPO space.