Maruti Udyog Ltd.


IPO priced at Rs.125 per share above the Floor Price of Rs.115

The Maruti IPO, which opened to an overwhelming response on June 12, closed on June 19. The issue was over-subscribed more than 10 times. The issue price has been fixed by Government at Rs.125 per share.

Government has also decided to avail of the option of placing an additional 10% in the market. Out of this, 85% would be allotted to non-institutional retail investors and 15% to non-institutional High Networth Individuals.

Thus, for 7.94 crore shares, Government will receive Rs.993 crore.

SEBI guidelines require that up to 60% may be given to institutional investors, and at least 40% should be kept for retail investors. However, Government has decided to allocate 60% to retail investors, leaving 40% for institutional investors.

Of the 60% allocated to retail investors, 45% will be allocated to investors who have bid for 1000 shares or less, and 15% allocated to individuals who have bid for more than 1000 shares.

Shares to individuals within each category will be allocated proportionately, as per SEBI guidelines.

If the Rs.1000 crore that was secured from Suzuki Motor Corporation in the form of control premium as part of disinvestment is added to the amount, which has been realized now, the price secured per share comes to Rs.250.

The Maruti IPO is unique in many ways. This has become the first such large IPO through the book building route to be priced over the Floor Price. This is the largest capital market transaction in the last 5 years and the largest Book Built IPO ever in India.

Another historic milestone achieved by the IPO is the over 3,00,000 applications received, largely comprising retail Indian investors, a dominant percentage of whom placed their orders at “cut-off” price, which facility is available to retail investors, which means that they do not need to indicate any price in their application but they receive the allocation at whatever issue price is fixed.

In addition to this, a large number of institutional investors placed large orders for equity shares very early in the bidding period, thereby sending a strong message about their investment interest in Maruti.

The IPO comprised an offer for sale by the Government of India of about 7.22 crore shares and the Government had the right to offer an additional 72 lakh shares, in case of over-subscription. Since, at the Offer Price determined for the IPO, the issue is oversubscribed 8.66 times, the Government of India has decided to exercise this right to offer additional shares and increase the number of shares to be allocated in the IPO.

The IPO was marketed to an unprecedented number of institutional investors both globally and locally. Many large and prestigious global investors have bid for large chunks of stock in the IPO.

Also, in order to ensure that Indian retail investors could participate conveniently and in large numbers in this attractive deal, an unmatched distribution program involving about 700 centers in 74 cities was set up. This was close to 2 times the number of cities in which other large public offers had been distributed in the past. This kind of distribution allowed the common man to participate easily in the Government’s disinvestment process

While determining the offer price, Government kept the following objectives in mind:

  • While determining the offer price, Government kept the following objectives in mind:

  • The offer price should be as determined such that it captures high quality demand, which is expected to extend stability to the market.

  • The offer price should also optimize the sale proceeds to the Government.

The classification of institutional investors and allocation amongst them were also determined according to a well laid down criteria.

All the principles and criteria for determination of issue price and allocation were with a view to remove subjectivity in decision-making.

In order to further ensure objectivity in decision-making, the names of the individual institutional investors were not disclosed to the IMG. Codes were used instead, so that the process of decision-making was absolutely objective.

The success of the Maruti issue is

  • A vote for Maruti

  • A vote for India

  • A vindication of the disinvestment strategy that response to a public offer is also best when a strong strategic partner is present.

Kotak Investment Banking led the IPO as Book Running Lead Manager. Co-Book Runners were ICICI Securities Ltd., JM Morgan Stanley Pvt. Ltd., and HSBC Securities and Capital Markets (India) Pvt. Ltd.