Shares of state-owned MSTC fell 5 per cent during their stock market debut on Friday. The weak listing follows lukewarm response to the company’s Rs 225-crore initial public offering (IPO). Shares of MSTC ended at Rs 113.8 compared to its IPO price of Rs 120 per share. The stock touched a low of Rs 111 during intra-day trade on the National Stock Exchange (NSE) where nearly Rs 5 crore worth of shares changed hands. Another Rs 86 lakh worth of shares changed hands on the BSE, where the stock touched a low of Rs 110 and a high of Rs 117. At current market rate, MSTC is valued at Rs 804 crore.
The government had to lower the IPO price band for MSTC and extend the closing date due to demand shortfall. Earlier, MSTC IPO closed on March 20 instead of scheduled close of March 15. The IPO price band was changed from Rs 121-Rs 128 per share to Rs 120-128. The issue was priced at the lower end at Rs 121. While the non-institutional segment of MSTC’s IPO had garnered full subscription, the company had struggled to garner full subscription from institutional investors.
Three-fourth of MSTC’s IPO had to be filled by institutional investors as the company had failed to meet the profitability criteria. Earlier, this week an official with the Department of Investment and Public Asset Management (Dipam) said it was working on reducing the dependence on investments from public sector undertakings (PSUs), such as Life Insurance Corporation (LIC) and State Bank of India (SBI).
“Last fiscal, the investment from LIC and PSU banks was about Rs 25,000 crore in disinvestment proceeds. This financial year, we have achieved around Rs 85,000 crore from divestments, with investments of Rs 5,000-6,000 crore has come from PSU banks and insurance firms," Dipam joint secretary Venudhar Reddy Nukala said earlier this week. He was speaking at a roadshow for another PSU IPO Rail Vikas Nigam.
In 2018-19, the government came out with five PSU IPOs. All the five issues were less than Rs 500-crore in size. Besides MSTC, the centre launched IPOs of Midhani, Rites, Ircon International and Garden Reach Shipbuilers.