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Some bidders in Maruti IPO could draw a blank

Calcutta, June 22: Maruti Udyog may disappoint some retail investors. Despite scaling up the issue size and allocation for them to 60 per cent, it might not issue shares to all retail applicants, say merchant bankers managing the firm’s initial public offering (IPO).

“Though the offer document said allotment to retail bidders would be made proportionately in case of over-subscription, some might be kept out through lottery,” a merchant banker dealing with the allocation of shares said.

Retail investors have bid nearly 3.5 times the issue size of 7.94 crore shares, but they will be allotted only 60 per cent of it — roughly 4.76 crore shares. Under proportionate allotment, investors bidding for 100 shares should have received 17. However, the company has decided to hand out shares in multiples of 50 only.

“Some investors will have to be eliminated by drawing lots, and the rest will receive shares in proportion to the quantity they have bid for,” said a merchant banker. The axe could fall on those bidding for 100 shares.

Of the 60 per cent to be allotted to retail bidders, 15 per cent is reserved for high net-worth individuals (people bidding for 1,100 shares or more); the remaining 45 per cent is for those who applied for 100-1,000 shares.

Institutions cold

Despite the overwhelming subscription to the IPO, domestic institutions and mutual funds do not appear to have been too keen on it.

Merchant bankers say around 10 per cent of the shares — or close to 80 lakh — will be allotted to Indian institutions, including mutual funds. This means they will control not more than 3 per cent of Maruti’s shares.

Life Insurance Corporation, which is reported to have bid below the cut-off price of Rs 125, is among the big names that will not own a chip of the country’s largest car maker.

Foreign institutions are going to corner around 30 per cent of the 7.94 crore shares being divested by the government. That would be around 8 per cent of the Maruti’s equity capital.

Observers say increasing the allocation for retail investors augurs well for the market. Foreign institutions showed great appetite for Maruti, and the funds that missed the IPO can buy the share from the market.

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