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DB Corp IPO biggest draw in 23 Months


16 December 2009 | DNA


The IPO of DB Corp, which publishes the Hindi daily Dainik Bhaskar, set a new record for oversubscription after the economic recovery. The issue was subscribed a whopping 39.54 times, according to data from the National Stock Exchange website, the highest since January 2008 when the Reliance Power IPO was oversubscribed 73.04 times.

Since then, Oil India has been the only other IPO that comes close-it was oversubscribed 30.82 times in September this year.

Market experts said following the example of DB Corp, the onus of attracting retail investors to future IPO’s rests with the people who bring them to the market. There has been a change in the midset of merchant bankers now—to bring some sanity into IPO pricing, keeping in mind the retail investor, said Mayank Shah, CEO, Anagram Securities.

Uday Kotak, head, Kotak Investment Banking, said the DB Corp issue heralds a change in India’s IPO market.

The DB Corp offer was priced at Rs185 to Rs212 and looked to raise Rs336-385 crore. Most of the issue proceeds would be used to set up publishing unit in new markets. The rest of the money will go towards reducing working capital loans and prepayment of term loans.

The IPO of DB Corp Ltd., publishers of the second largest daily newspaper in the country, Dainik Bhaskar, was oversubscribed 39.54 times. A total of 58.92 crore bids were received against the total issue size of 1.49 crore equity shares on offer, as per data available on the National Stock Exchange (NSE) website.

Stock analysts say that the response has been very encouraging, especially if one looks at the response to the recent IPOs of Godrej Properties and JSW Energy. "In that background, it’s fantastic. Even then, the response from the retail investor has been lukewarm. Till the time retail investors do not come, depth will not come into the market," says Jagannadham Thunuguntla, Equities Head at SMC Capital.

As per data on the NSE site, qualified institutional buyers (QIBs) oversubscribed 68.47 times; non-institutional investors or high networth individuals (HNIs) oversubscribed 25.86 times; whereas retail investors subscribed only 3.42 times the total meant for them.

The issue, which opened on December 11 at a price band of Rs 185 - Rs 212, closed yesterday. At this price band, the company hopes to take in Rs 336-385 crore. The stock will be listed on both Bombay Stock Exchange (BSE) and NSE.

"I feel that the stock is attractively valued at Rs 212. The stock is not for a short-term trader, but for a long-term one. If one looks at the print and media listed companies, it is the only one present in three languages. Wherever they entered, they have had a huge subscription. There is a long-term story in the company. The listing should be in the range of Rs 220-224," says Rohit Maheshwari, research analyst at KR Choksey Securities.

However, Thungutla says that even though the response to the IPO has been very encouraging, he is not sure whether the listing will be equally good.

The issue comprises 10 percent of the fully—diluted post issue capital of the company. Of this, 7 percent is fresh offering and the remaining 3 percent is on sale by Cliffrose Investment Ltd.

Before the IPO was launched, DB Corp had allocated 32.71 lakh shares at Rs 212 per equity share of Rs 10 each to nine anchor investors. This translates to approximately Rs 69.35 crore.

The anchor investors are: Government of Singapore, FID Funds (Mauritius) Ltd, FIL Trustee Company Pvt Ltd, Normura Funds Ireland, ICICI Prudential Life Insurance, Reliance Capital Trustees Co Ltd., IDFC Classic Equity Fund, India Capital Fund and BNP Paribas Arbitrage, as per information given by DB Corp to the exchanges.

Through the money raised, the company plans to set up new publishing units, upgrade the existing plant and machinery, enhance brand image through sales and marketing, reduce working capital loans and prepay existing term loans. The company has a debt of Rs 130 crore.

DB Corp has seven newspapers, 48 newspaper editions and 128 sub—editions in three languages (Hindi, Gujarati and English) across 12 states. It also has 17 radio stations under the My FM brand.

Vision statement

TO BE

THE LARGEST

AND MOST ADMIRED

LANGUAGE MEDIA

BRAND ENABLING

SOCIO - ECONOMIC

CHANGE