Can I interest you in a 5% discount?

by Manshu on March 4, 2010

in IPO/NFO

Image by State Records NSW

The NMDC Follow-on Public Offer (FPO) is going to be the next big disinvestment by the Indian government. The low retail subscription to previous IPOs and FPOs coupled with the need to raise funds from disinvestment to plug the fiscal deficit is prompting the government to sweeten its deal for retail participants.

The red herring prospectus of the NMDC FPO states that retail participants will get a 5% discount on the price set during the book – building process, and even more interestingly - ET reports that the price band may be set at 30 – 35% lower than the current stock price of Rs. 435.

This is interesting because the government really needs some retail participation in these offers to raise sufficient amounts to meet the divestment target, and retail investors have not really been interested in these offers of late.

The sale will start on March 10 and end on March 12, and we will know the price band on March 8th. I plan to do an IPO post on NMDC before that, but I just wanted to do quick post about this discount, and at least one factor you should keep in mind while thinking about it.

I wanted to do it a little ahead of time because very shortly there will be a lot of news articles about the NMDC FPO, and this discount, and I expect little bit of frenzy as well.

I think retail investors should keep in mind that the discount given is on the current price, but not long ago the price of the stock was Rs.140 odd. This company is in the iron-ore business, which like any other commodity is cyclical in nature. Iron – ore prices have risen sharply in the last year or so, and so when you think about the 30% or 5% or whatever the final number turns out – you need to think about these other things too. This is not to say that the offer will be over-priced, and I might even invest in it myself though I am not decided about that yet. Just something for you to think about in case the frenzy becomes too much.

Views: 10678


Get free daily updates in your email:






{ 7 comments… read them below or add one }

Indian Thoughts March 4, 2010 at 11:34 pm

This is helpful.
I am interested in investing in this FPO.
Thanks :)

Reply

Manshu March 5, 2010 at 6:49 am

All the best to you…I am not so sure about this at this time, and I have a feeling that I will end up passing this offer.

Reply

sanjay March 5, 2010 at 4:40 am

i will definately invest may be in small lot.

Reply

sanjay March 5, 2010 at 4:41 am

what is moderation?

Reply

Manshu March 5, 2010 at 6:49 am

I think you probably saw the screen that says: “Your comment is under moderation”, and hence the question.

When someone posts a comment for the first two time on this website, it does not appear automatically on the site.

It waits for manual approval from the admin. This is because of the huge amount of spam comments that blogs like this get. (Which just prompted me to see how many spam comments I have received till date and the number is 50,026!)

If the two comments from the same person get approved, then from thereon – the comment does not wait for approval and publishes immediately. The process of the comment waiting for approval is called moderation and is probably what you are referring to.

Now that I have approved two comments from you, from now on – your comments will get published automatically without going to moderation.

Reply

sumayya March 6, 2010 at 2:49 am

Well NMDC is quite a fundamentally strong stock. I used to study it a while back. Nice post.

Reply

Manshu March 6, 2010 at 2:10 pm

A lot of these companies which were disinvestmented earlier had good fundamentals, but were not priced attractively. Let’s see if anything changes with this offer.

Reply

Leave a Comment

{ 1 trackback }

Previous post:

Next post: