Megatherm Induction IPO Closing Subscribed 196.11 times

About the Megatherm Induction Ltd IPO

The stock of Megatherm Induction IPO has a face value of ₹10 per share and it is a book built issue. The price band for the IPO has been set in the range of ₹100 to ₹108 per share. The final price of the IPO will be decided within this price band. The IPO of Megatherm Induction Ltd has only a fresh issue component and no offer for sale (OFS) portion as part of the IPO package. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership.

As part of the fresh issue portion of the IPO, Megatherm Induction Ltd will issue a total of 49,92,000 shares (49.92 lakh shares), which at the upper band of the book building band of ₹108 per share aggregates to fresh fund raising of ₹53.91 crore. It may be noted here that the upper band price has been used as the benchmark in all the cases here. Since there is no OFS component in the IPO, the fresh issue portion will also double up as the overall size of the IPO. Therefore, the overall IPO size will also comprise of the issue of 49,92,000 shares (49.92 lakh shares) which at the upper IPO band price of ₹108 per share will aggregate to overall IPO size of ₹53.91 crore.

Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,50,800 shares. Hem Finlease Private Ltd will be the market maker for the IPO. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing. Post the IPO, the promoter stake in Megatherm Induction Ltd will dilute from 98.92% to 72.71%. The fresh issue proceeds will be used by Megatherm Induction Ltd for capex towards constructing the factory shed and installation of additional plant and machinery; apart from working capital funding needs. Hem Securities Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. Hem Finlease Private Ltd will be the market maker for the IPO.

Final subscription status of Megatherm Induction Ltd

Here is the subscription status of the Megatherm Induction IPO as at close on 31st January 2024.

As can be seen from the above table, the overall IPO of Megatherm Induction Ltd got subscribed an impressive 196.11 times. The HNI / NII portion led the stakes with 307.04 times subscription, followed by the Retail portion at 200.51 times subscription. The QIB portion of the IPO also got a healthy subscription of 105.14 times. 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 all the three categories of investors; QIB, retail and HNI / NII investors.

Allocation quota for various categories

The issue was open for QIBs, retail investors and the HNI / NII investors. There was a broad quota designed for each of the segments viz. the retail, QIB and the HNI / NII segments. A total of 2,50,800 shares were allocated as market maker portion to Hem Finlease Private Ltd, which will act as the 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 Megatherm Induction Ltd, the anchor allocation of 14,22,000 shares was carved out of the QIB portion, as a result of which the QIB offer to the public reduced from the original 47.48% of the issue size to 18.99% of the issue size. The anchor allocation bidding opened on January 25th, 2024 and also closed on the same day. A total of 14,22,000 shares were allocated across 6 anchor investors. The anchor allocation was done at the upper end of the IPO price band of ₹108 per share (which includes face value of ₹10 per share and premium of ₹98 per share).

The total anchor allocation value was worth ₹15.36 crore. The list of 6 anchor investors who got allotted 100% of the anchor portion were; Meru Investment Fund PCC Cell-I (20.25%), Bengal Finance & Investment Private Ltd (19.58%), Chhattisgarh Investments Ltd (19.58%), Zinnia Global Fund PCC – Cell Dewcap Fund (19.58%), Quantum State Investment Fund (13.76%), and Finavenue Capital Trust Finavenue Growth Fund (7.26%). These 6 anchor investors accounted for 100% of the overall anchor allocation. Out of the anchor shares allocated to investors on January 25th, 2024, a lock in of 30 days will be applicable for 50% of the shares (up to March 15th, 2024) and a lock-in of 90 days will be applicable for the remaining shares (up to June 14th, 2024). The allocation of market maker inventory of 5.02% is outside the anchor portion.

How subscription built up for the IPO of Megatherm Induction Ltd

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 Megatherm Induction 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 Megatherm Induction Ltd.

• The HNI / NII portion got the best subscription in the Megatherm Induction Ltd IPO at 307.04 times and it got 9.17 times subscribed on the first day of the IPO itself.
   
• The Retail portion was behind the HNI / NII portion in terms of subscription at 200.51 times overall and it got 19.38 times subscribed at the end of the first day.
   
• The QIB portion was third in the pecking order in terms of subscription at 105.14 times overall and it got exactly 1.00 times subscribed at the end of the first day.
   
• With the QIB, retail and HNI / NII portion getting fully subscribed on the first day of the IPO itself, the overall subscription was also filled up on the first day of the IPO itself. The overall IPO which saw subscription of 196.11 times also got fully subscribed at 11.94 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 56.15X to 307.04X on the last day of the IPO. Even the retail portion saw the total subscription ratio move from 87.75X to 200.51X on the last day of the IPO.
   
• The last day traction story was true for QIBs and the overall IPO also. The QIB portion saw the total subscription ratio moving from 1.53X to 105.14X on the last day of the IPO. Finally, regarding the overall IPO subscription ratio, it also moved from 56.35X to 196.11X on the last day of the IPO.

Overall, the IPO of Megatherm Induction Ltd is among the few SME IPOs in the last one year to have got subscribed more than 190 times and that is a good sign of things to come.

Next steps after the closure of the IPO

The issue opened for subscription on 29th January 2024 and closed for subscription on 31st January 2024 (both days inclusive). The basis of allotment will be finalized on 01st February 2024 and the refunds will be initiated on 02nd February 2024. In addition, the demat credits are expected to happen on 02nd February 2024 and the stock is scheduled to list on 05th February 2024 on the NSE SME segment. This is the segment, in contrast to the mainboard, where IPOs of small and medium enterprises (SMEs) are incubated. The demat credits to the demat account to the extent of allotment will happen by the close of 02nd February 2024 under ISIN Number (INE531R01010).