HRH Next Services IPO subscribed 66.29 times

About the IPO of HRH Next Services Ltd

The  IPO of HRH Next Services Ltd has a face value of ₹10 per share and it is fixed price issue. The issue price for the IPO has been fixed at ₹36 per share. The IPO of HRH Next Services Ltd has only a fresh issue component and no offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, the OFS is just a transfer of ownership and  hence neither EPS or equity dilutive. The fresh portion of the IPO of HRH Next Services Ltd entails the issue of 26,58,000 shares (26.58 lakh shares), which at the fixed IPO price of ₹36 per share aggregates to a fresh fund raising of ₹9.57 crore. Since there is no offer for sale (OFS) portion, the fresh issue size doubles up as the overall IPO too . The overall IPO size will also comprise of the issue of 26,58,000 shares (26.58 lakh shares) at ₹36 per share which will aggregate to overall IPO size of ₹9.57 crore.

Like every SME IPO, the IPO of HRH Next Services Ltd also has a market making portion with a market maker inventory allocation of 1,35,000 shares. The market maker for the issue is Nikunj Stock Brokers Ltd and they will provide two-way quotes to ensure liquidity on the counter and low basis costs. The promoter holding in the company will get diluted post the IPO from 97.88% to 69.61%. The company will use the fresh funds for expansion of its services via two call centres, capex for new computer system and for meeting working capital needs. Finshore Management Services Ltd will be the lead manager to the issue, and Cameo Corporate Services Ltd will be the registrar to the issue.

Final subscription status of HRH Next Services Ltd

Here is subscription status of HRH Next Services Ltd at close on 29th December 2023.

As can be seen from the above table, the overall IPO of HRH Next Services Ltd got subscribed an impressive 66.29 times. The HNI / NII portion led the stakes with 66.91 times subscription, followed by the Retail portion at 63.61 times subscription. There was no dedicated QIB allocation in this IPO. That is a very strong and smart 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 strong traction for the IPO across both the categories of investors; retail and HNI / NII investors.

Allocation quota for various categories

The issue was open for retail investors and 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 1,35,000 shares were allocated as market maker portion to Nikunj Stock Brokers 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.

In the above IPO of HRH Next Services Ltd, there is no QIB allocation in the IPO. The anchor allocation to the anchor investors is normally done out of this QIB allocation and hence the company has not done any anchor allocation in the IPO. Normally, the anchor is done to institutional investors, which gives confidence and assurance to the retail shareholders about the institutional interest in the stock The anchor allocation is normally adjusted and deducted from the QIB quota and only the net number of shares is available for public issue under the QIB portion.

However, in this case, there is neither any QIB quota, nor any anchor allocation to investors ahead of the IPO. Normally, the anchor portion bidding is done on the day before the IPO opens and such anchor investments are subjected to lock in at two levels. Half the anchor allocation is locked in for 30 days while the balance anchor allocation shares are locked in for a period of 90 days. The allocation of market maker inventory of 5.08% is outside the anchor portion. The market making portion is more towards ensuring liquidity post listing and ensuring low basis spreads on the stock.

How subscription built up for the IPO of HRH Next Services Ltd

The oversubscription of the IPO was dominated by the retail investors followed by the HNI / NII category in that order. The table below captures the day-wise progression of the subscription status of HRH Next Services 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 HRH Next Services Ltd.

• The HNI / NII portion got the best subscription in the HRH Next Services Ltd IPO at 66.91 times and it got 1.12 times subscribed on the first day of the IPO itself.
   
• The Retail portion was behind the HNI / NII portion in terms of subscription at 63.61 times overall and it got 4.83 times subscribed at the end of the first day.
   
• While the retail and HNI / NII portion got fully subscribed on the first day of the IPO itself, even the overall subscription was filled up on the first day itself. The overall IPO which saw subscription of 66.29 times also got fully subscribed at 2.98 times at the close of the first day of the IPO itself.
   
• The retail, and HNI / NII portion saw the best traction on the last day of the IPO. The HNI / NII portion saw the total subscription ratio moving from 4.40X to 66.91X on the last day of the IPO. Even the retail portion saw the total subscription ratio move from 17.33X to 63.61X on the last day of the IPO.
   
• The last day traction story was true regarding the overall IPO subscription ratio also. The subscription ratio overall moved from 10.86X to 66.29X on the last day of the IPO.

With the IPO closed for subscription at the end of December 29th, 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 01st January 2024 while the refunds would be initiated on 02nd January 2024. The shares of HRH Next Services Ltd (ISIN - INE0R3501012) would be credited to the demat accounts of eligible shareholders by the close of 02nd January 2024 while the stock of HRH Next Services Ltd is expected to be listed on 03rd January 2024. The listing will happen on the NSE SME segment for small companies, which is distinct from the regular mainboard IPO space.