Five Star Business Finance Ltd IPO gets just 70% subscription at close

Five Star Business Finance IPO worth Rs.1,960.01 crore , consisted entirely of an offer for sale for the full amount. There was no fresh issue portion in the IPO, so no fresh funds came in and it was not EPS dilutive. The IPO saw very tepid response on Day-1 and Day-2 of the IPO and closed with an undersubscription at the close of Day-3. The company had only gotten 70% subscription as of the close of bidding on the last day of the IPO. As per the combined bid details put out by the BSE at the close of Day-3, Five Star Business Finance Ltd IPO was subscribed at 0.70X or just 70% overall, with only the QIB segment, at least getting fully subscribed. The HNI / NII segment and the retail segment did not even manage to fill their respective quotas, so it remains to be seen what the company does now.

As of close of 11th November 2022, out of the 304.89 lakh shares on offer in the IPO, Five Star Business Finance Ltd saw bids for 212.04 lakh shares. This implies an overall subscription of just 0.70X or 70% of the issue size. The granular break-up of subscriptions was in favour of the QIB investors while the HNI / NII segment and the retail segment did not even manage to get a full subscription. Normally, the QIB and HNI segment see a lot of traction on the last day, but that was not visible in the case of Five Star Business Finance.

Five Star Business Finance Ltd IPO Subscription Day-3

QIB Portion

Let us first talk about the pre-IPO anchor placement. On 07th November 2022, Five Star Business Finance Ltd did an anchor placement of 1,25,05,094 shares at the upper end of the price band of Rs.474 to 21 anchor investors raising Rs.588 crore. The list of QIB investors included a number of marquee global names like Smallcap World Fund, Fidelity, Volrado, Abu Dhabi Investment Authority, Norwegian Pension Fund, Carmignac Portfolio, Bay Capital and Segantii India Mauritius; apart from a host of Indian mutual fund and insurance companies.

The QIB portion (net of anchor allocation as explained above) has a quota of 87.11 lakh shares of which it has got bids for 154.46 lakh shares at the close of Day-3, implying a subscription ratio of 1.77X for QIBs at the close of Day-3. 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 Five Star Business Finance Ltd IPO subscription overall, the actual demand did not turn out to be quite robust for the IPO.

HNI / NII Portion

The HNI portion got subscribed just 0.61X (getting applications for 40.12 lakh shares against the quota of 65.33 lakh shares). That is a rather tepid and disappointing 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 fell short of even the basic required numbers.

Now the NII/HNI portion is reported in two parts viz. bids below Rs10 lakhs (S-HNI) and bids above Rs10 lakhs (B-HNI). The bids above the Rs10 lakh category (B-HNIs) typically represents most of the major funding customers. If you break up the HNI portion, the above Rs10 lakh bid category got subscribed 0.78X while the below Rs10 lakh bid category (S-HNIs) got subscribed 0.28X. 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 a paltry 0.11X at the close of Day-3, showing almost nil retail appetite. It must be noted that retail allocation is 35% in this IPO. For retail investors; out of the 152.44 lakh shares on offer, valid bids were received for only 17.46 lakh shares, which included bids for 14.90 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.450-Rs.474) and has closed for subscription as of the close of Friday, 11th November 2022.