Low demand extends MSTC IPO closing; QIB segment subscribed only 79%

Demand shortfall in one category can be met from the excess demand in other categories

The government had to extend the closing for the Rs 226-crore initial public offering (IPO) of MSTC due to a shortfall in demand. This is a rare setback for the IPO of a state-owned company.

While the offering garnered overall subscription of 1.12 times, it failed to get mandatory 100 per cent subscription in the qualified institutional buyer (QIB) category. According to the data provided by the stock exchanges, the QIB segment was subscribed only 79 per cent. The high net-worth individual (HNI), retail, and employee categories were oversubscribed.

Typically, demand shortfall in one category can be met from the excess demand in other categories. However, as MSTC failed to meet the profitability criteria, the issue was required to have a full QIB subscription. Sources said the rule caught the government and the banker off-guard, forcing them to extend the IPO closing. The issue could be kept open for another three days, but there is no clarity on this.

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“The government and the bankers will meet soon to decide on the fresh closing date and the pricing,” said a person privy to the development.

In the past, despite weak demand IPOs of public sector undertakings (PSUs) have managed to sail through on the backing of Life Insurance Corporation (LIC). It is not clear, whether LIC has so far applied in the MSTC IPO.

“While the issue size is small to make difference but the execution of the deal could have been better,” said an investment banker.

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Of the Rs 226 crore, 75 per cent or Rs 169-crore worth of shares are meant for QIBs. So far, the IPO has garnered bids worth only Rs 134 crore from institutional investors.

MSTC IPO is entirely an offer for sale by the Government of India. Following the IPO, the government’s stake in the company will drop from 89.85 per cent to 64.75 per cent. Equirus Capital is the investment bank handling the IPO. MSTC operates in the metals and mining sector and has three business verticals — e-commerce, trading and recycling. The company offers e-auction solutions for the government sector.