Shanthala FMCG Products IPO Subscribed 3.91 times

About the Shanthala FMCG Products IPO

Shanthala FMCG Products IPO opened for subscription on 27th October 2023 and closed for subscription on 31st October 2023. The face value of the company stock was ₹10 per share and it is a fixed price issue with the IPO price being fixed at ₹91 per share. The IPO of Shanthala FMCG Products Ltd has only a fresh issue component with no book built portion. As part of the fresh issue portion of the IPO, Shanthala FMCG Products Ltd will issue a total of 17,66,400 shares (17.66 lakhs approximately), which at the fixed IPO price of ₹91 per share aggregates to a total fresh fund raising of ₹16.07 crore. Since there is no offer for sale portion, the size of the fresh issue will also be the overall size of the IPO. Hence the overall IPO size will also comprise of 17,66,400 shares, which at the fixed IPO price of ₹91 per share will aggregate to ₹16.07 crore.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹109,200 (1,200 x ₹91 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹218,400. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. Like every SME IPO, Shanthala FMCG Products Ltd also has a market making portion with a market maker inventory allocation of 88,800 shares. The market maker for the issue is BHH Securities Ltd and they will provide two-way quotes to ensure liquidity on the counter and low basis costs post listing. The promoter stake in Shanthala FMCG Products Ltd will get diluted from 77.44% to 57.02% post the IPO. The fresh funds will go to meet working capital needs. First Overseas Capital Ltd will be the lead manager to the issue and Bigshare Services Private Ltd will be the registrar to the issue.

Final subscription status of Shanthala FMCG IPO

Here is the subscription status of the Shanthala FMCG Products IPO as at close on 31st October 2023.

As can be seen from the above table, the overall IPO of Shanthala FMCG Products Ltd got subscribed a rather tepid 3.91 times. The HNI / NII portion led the stakes with 4.76 times subscription, followed by the Retail portion at 3.05 times subscription. There was no QIB portion in the IPO. That is a very dull and tepid 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 very limited traction for the IPO across all categories of investors.

Allocation quota for various categories

The issue was open for retail investors, and the non-institutional investors, which predominantly comprise of 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 88,800 shares were allocated as market maker portion to BHH Securities 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.

The company does not have a QIB quota and hence also has not made any anchor allocation. Normally, an anchor allocation is made only when there is institutional and AIF appetite for the IPO. In this case, there was anchor quota and hence no anchor allocation was done. The only quota was a 5.03% reservation for the market makers to provide post listing liquidity spreads in the counter. The net issue (net of the market maker allocation) has been distributed equally between the retail investors and the HNI / NII investors.

How subscription built up for the Shanthala FMCG Products IPO

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 Shanthala FMCG Products 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 Shanthala FMCG Products IPO.

• The HNI / NII portion got the best subscription in the Shanthala FMCG Products IPO at 4.76 times and it got 2.10 times subscribed on the first day of the IPO itself.
   
• The Retail portion was behind the HNI / NII portion in terms of subscription at 3.05 terms overall and it got only 0.80 times subscribed (80%) at the end of the first day.
   
• While the HNI / NII portion got fully subscribed on the first day of the IPO itself, the retail portion got fully subscribed only on the second day of the IPO. However, the overall IOP was fully subscribed on the first day of the IPO due to the strong response to the HNI / NII quota on the first day.
   
• The QIB, retail and HNI / NII portion saw rather limited traction on the last day of the IPO. The HNI / NII portion saw the total subscription ratio moving from 2.80X to 4.76X on the last day of the IPO. Even the retail portion saw the total subscription ratio move from just 1.73X to 3.05X on the last day of the IPO.
   
• Just as the retail portion and the HNI portion saw relatively tepid incremental traction on the last day of the IPO, even the overall IPO saw limited traction on the last day with the subscription ratio for the overall IPO moving from 2.27X to 3.91X on the last day.

With the IPO closed for subscription at the end of October 31st, 2023, 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 03rd November 2023 while the refunds would be initiated on 06th November 2023. The shares of Shanthala FMCG Products Ltd (ISIN - INE0Q9Q01017) would be credited to the demat accounts of eligible shareholders by the close of 07th November 2023 while the stock of Shanthala FMCG Products Ltd is expected to be listed on 08th November 2023. The listing will happen on the NSE SME segment for small companies, which is distinct from the regular mainboard IPO space.