Quest Laboratories IPO Subscribed 85.26 times

About the Quest Laboratories Ltd IPO

The stock of Quest Laboratories Ltd has a face value of ₹10 per share and it is a book built issue. The price for the book building issue is set in the price band of ₹93 to ₹97 per share. Being a book built issue, the final price will be discovered within this band. The IPO of Quest Laboratories Ltd has only a fresh issue component and no offer for sale (OFS) portion. It must be remembered that 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, Quest Laboratories IPO will issue a total of 44,49,600 shares (44.50 lakh shares approximately), which at the upper band IPO price of ₹97 per share aggregates to fresh fund raising of ₹43.16 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 44,49,600 shares (44.50 lakh shares) which at the upper band IPO price of ₹97 per share will aggregate to overall IPO size of ₹43.16 crore.

Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,28,000 shares. Rikhav Securities Ltd will be the market makers to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing. The promoter holding in the company currently stands at 90.36%. However, post the fresh issue of shares in IPO, promoter equity holding share will get diluted to 65.82%. The fresh issue funds will be used by the company for funding the capital expenditure towards purchase of land and machinery for expansion of existing manufacturing facility, and funding working capital needs. Shreni Shares Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Rikhav Securities Ltd. The IPO of Quest Laboratories Ltd will be listed on the SME IPO segment of the NSE.

Final subscription status of Quest Laboratories Ltd

Here is the subscription status of the Quest Laboratories Ltd at the close of 17th May 2024. In the table below, the anchor investment and market quota are given in italics. That is because, while they are part of the issue, they are not used in the overall calculation of the oversubscription. The final data has been captured from the National Stock Exchange (NSE) data as at 19.00 hours on May 17, 2024.

Data Source: NSE

As can be seen from the above table, the overall IPO of Quest Laboratories Ltd got subscribed an impressive 85.26 times. The HNI / NII portion led the stakes with 184.10 times subscription, followed by the Retail portion at 57.63 times subscription. The QIB portion of the IPO also got a healthy subscription of 87.20 times. That is a very strong and robust 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 2,28,000 shares were allocated as market maker portion to Rikhav Securities 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: Company RHP

In the above IPO of Quest Laboratories Ltd, the anchor allocation of 12,36,000 shares was carved out of the QIB portion, as a result of which the QIB offer to the public reduced from the original 46.47% of the issue size to 18.69% of the issue size. The anchor allocation bidding opened on May 14th, 2024 and also closed on the same day. A total of 12,36,000 shares were allocated across 4 anchor investors. The anchor allocation was done at the upper end of the IPO price band of ₹97 per share (which includes face value of ₹10 per share and premium of ₹87 per share).

The total anchor allocation value was worth ₹11.99 crore. The 4 anchor investors who got allotted the full 100% of the anchor portion included an array of hedge funds and alternate investment funds (AIFs), apart from domestic bodies corporate that also participated in the anchor allocation of the IPO. The 4 anchors who got anchor allotment were Persistent Growth Fund – Varsu India Growth Story (50.00%), Craft Emerging Market Fund PCC (31.36%), Rajasthan Global Securities Ltd (10.29%), and TGISME Fund (8.35%). Out of the anchor shares allocated to investors on May 14th, 2024, a lock in of 30 days will be applicable for 50% of the shares (up to June 20th, 2024) and a lock-in of 90 days will be applicable for the remaining shares (up to August 18th, 2024). The allocation of market maker inventory of 5.12% is outside the anchor portion.

How subscription built up for the IPO of Quest Laboratories 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 Quest Laboratories 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 Quest Laboratories Ltd as of the close of the IPO on 17th May 2024.

• The HNI / NII portion got the best subscription in the Quest Laboratories Ltd IPO at 184.10 times and it got 0.76 times subscribed on the first day of the IPO itself.

• The Retail portion was behind the HNI / NII portion in terms of subscription at 57.63 times overall and it got 2.17 times subscribed at the end of the first day.

• The QIB portion was third in the pecking order in terms of subscription at 57.20 times overall and it got 0.01 times subscribed at the end of the first day.

• While Retail portion got fully subscribed on Day-1, the HNI / NII portion got fully subscribed on Day-2, while the QIB portion got fully subscribed only on the last day. However, the overall IPO got fully subscribed on the first day of the IPO itself, due to the impact of retail portion of the IPO.

• The overall IPO which saw subscription of 85.26 times got subscribed at 1.26 times at the close of the first day of the IPO. Let us now turn to how the last day traction on the IPO subscription played out across categories.

• Let us start with the HNI / NII portion. The HNI / NII portion saw the total subscription ratio moving from 2.39X to 184.10X 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 6.34X to 57.63X 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 0.01X to 57.20X 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 3.71X to 85.26X on the last day of the IPO.

Overall, the IPO of Quest Laboratories Ltd saw above-median subscription in the SME IPO.

Next steps after the closure of the IPO

The issue opened for subscription on 15th May 2024 and closed for subscription on 17th May 2024 (both days inclusive). The basis of allotment will be finalized on 21st May 2024 and the refunds will be initiated on 22nd May 2024. In addition, the demat credits are expected to also happen on 22nd May 2024 and the stock will list on 23rd May 2024 on the NSE and the BSE. Go Digit General Insurance Ltd will test the appetite for private sector insurance originating stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 22nd May 2024 under ISIN Number (INE0TNW01017).