| Finishing lap
New Delhi, June 20: The cut-off price for Maruti Udyog’s maiden offer has been fixed at around Rs 125 per share. Each share has a face value of Rs 5.
An inter-ministerial group (IMG) met today to set the price at which the shares will be offloaded to the investors who submitted bids in response to the recent flotation. The formal announcement on pricing and IPO allocation is likely to be made tomorrow evening.
The government is selling over 7.2 crore shares, amounting to 25 per cent of the overall equity in Maruti, through the IPO.
The IMG also decided to award small shareholders and high networth individuals over 45 per cent of the issue, including the greenshoe option, earmarking the rest for institutional investors.
The government will exercise its right to sell another 72 lakh shares — 10 per cent of the equity — under the greenshoe option, which will also be earmarked for retail investors. The issue has been oversubscribed over 10 times and, hence, the greenshoe option.
At these rates, the government is likely to mop up between Rs 1,000 crore and Rs 1,100 crore by selling some 7.22 crore shares. This stock offering by the government to the public at large is likely to be followed by similar IPOs by National Aluminium Co and Bharat Petroleum Corporation Ltd.
IMG sources said most bids came in between Rs 120 and Rs 125 and, at these rates, the issue was over-subscribed by over six times. But the number of bids at Rs 125, for about 33 crore shares exceeded the bids at Rs 120 which were for 18 crore shares.
Hence, the preference to fix the price at nearer Rs 125.
The overall bid range was between the floor price of Rs 115 and an unusually optimistic high of Rs 390. In all, over 1.5 lakh retail investors have bid for the stock surprising many analyst who believed the intrinsic value of Maruti should see the stock priced at a realistic premium of Rs 70.
Post-issue, the government will retain a 20.8 per cent stake in the carmaker. The stock offering has turned out to be a watershed for India’s troubled bourses which had seen myriad swings over the last few years.
The IMG was attended by officials of the ministries of heavy industry and disinvestment, Maruti managing director Jagdish Khattar and other executives of the car company as also representatives of merchant bankers and legal advisors. The recommendations have been accepted by disinvestment minister Arun Shourie, sources said.