IBL Finance IPO Subscribed 17.95 times

About the IBL Finance IPO

IBL Finance IPO has a face value of ₹10 per share and it is a fixed price issue. The fixed issue price for the IPO has been set at ₹51 per share. The IPO of IBL Finance Ltd has only a fresh issue component and no offer for sale (OFS) portion. The fresh issue of shares is EPS dilutive and equity dilutive. As part of the fresh issue portion of the IPO, IBL Finance IPO will issue a total of 65,50,000 shares (65.50 lakh shares), which at the fixed IPO price of ₹51 per share aggregates to a fresh fund raising of ₹33.41 crore. Since there is no offer for sale (OFS) portion, the fresh issue size also doubles up as the overall IPO size. Therefore, overall IPO size will also comprise of the issue of 65,50,000 shares (65.50 lakh shares) which at the upper IPO band price of ₹51 per share will aggregate to overall IPO size of ₹33.41 crore. Here again, the IPO size in terms of number of shares may differ from previous reports on the company due to last minute changes that the company may make to adjust the size of the issue across different categories of investors. However, such changes are normally not too significant in nature.

Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation. A total of 3,30,000 shares have been allocated to Market-Hub Stock Broking Private Ltd (market maker) which will be used as market maker inventory. The market maker will use this inventory to provide two-way quotes to ensure liquidity on the counter and low basis costs, post listing. The company has been promoted by Manish Patel, Piyush Patel, and Mansukh Patel. Promoter stake post the IPO will dilute from 85.55% to 62.89%. The fresh funds will be utilized to augment the Tier-1 capital, which is mandatory to expand the lending book for most NBFCs and financials. Fedex Securities Private Ltd will be the lead manager to the issue, and Link Intime India Private Ltd will be the registrar to the issue. Market-Hub Stock Broking Private Ltd will be the market maker to the IPO.

Final subscription status of IBL Finance IPO

Here is subscription status of IBL Finance Ltd at close on 11th January 2024.

As can be seen from the above table, the overall IPO of IBL Finance Ltd got subscribed a moderately strong 17.95 times. The retail portion led the stakes with 24.03 times subscription, followed by the HNI / NII portion at 11.13 times subscription. There was no dedicated QIB allocation in this IPO. That is a very moderately strong 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 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 3,30,000 shares were allocated as market maker portion to Market-Hub Stock Broking Private 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 IBL Finance 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 normally 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 5.31% 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 IBL Finance 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 IBL Finance 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 IBL Finance Ltd.

• The retail portion got the best subscription in the IBL Finance Ltd IPO at 24.03 times and it got 7.30 times subscribed on the first day of the IPO itself.
   
• The HNI / NII portion was behind the retail portion in terms of subscription at 11.13 terms overall and it got 1.67 times subscribed at the end of the first day.
   
• While the retail and HNI / NII portion got fully subscribed on the first day of the IPO itself, even the overall subscription was filled up on the first day itself. The overall IPO which saw subscription of 17.95 times also got fully subscribed at 4.64 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 3.37X to 11.13X on the last day of the IPO. Even the retail portion saw the total subscription ratio move from 13.97X to 24.03X 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 8.97X to 17.95X on the last day of the IPO.

The overall subscription is actually lower than what you get to see in the case of SME IPOs, but that should help improve the chances of getting allotment in this IPO.

What are the next steps in the IBL Finance IPO?

With the IPO closed for subscription at the end of 11th January 2024, 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 12th January 2024 while the refunds would be initiated on 15th January 2024. The shares of IBL Finance Ltd (ISIN - INE0O7401018) would be credited to the demat accounts of eligible shareholders by the close of 15th January 2024 while the stock of IBL Finance Ltd is expected to be listed on 16th January 2024. The listing will happen on the NSE SME segment for small companies, which is distinct from the regular mainboard IPO space.