Ideaforge IPO fully subscribed on day 1; GMP shoots up – details here

The public offer received bids for 1.71 crore equity shares against an issue size of 46.48 lakh, according to the latest data on stock exchanges, which means the IPO was subscribed 3.69 times.

Retail investors bought 12.48 times their allotted quota and employees 8.47 times the small portion set aside for them. About 13,112 shares have been set aside for employees who get them at a discount of Rs 32 a share to the final issue price.

High networth individuals (HNI) put in bids 5.13 times their reserved portion, while qualified institutional buyers (QIBs) had bought 34,760 shares against the 25.28 lakh shares set aside for them.

The issue opened for subscription on Monday (June 26) and will conclude on Thursday (June 29). The company’s shares are commanding a healthy premium of Rs 490 in the unlisted market today, indicating a strong demand for the public offer.

However, it is important to note that grey market premiums are just an indicator as to how the company’s shares are stacked up in the unlisted market and are subject to change rapidly.

The leading drone manufacturer, with a 50 percent market share in the Indian unmanned aircraft systems (UAS) market, is offering its shares in the range of Rs 638-672 apiece, and at the upper end of the price band, it is planning to raise Rs 567 crore.What should investors do?

“The company reaps an advantage of being a pure play in Drone manufacturing division over its peers. The company is fairly valued at the current valuation,” said analysts at Anand Rathi, recommending a ‘Subscribe- long term’ rating to the IPO considering its future growth prospects.

Motilal Oswal believes that Ideaforge could benefit from government impetus on the defence space as well as rising enterprise demand. Hence the brokerage has recommend ‘Subscribe’. Further given the current buoyant market and high interest for defence stocks, the issue could see listing gains as well, Motilal said.

The Mumbai-based company has experienced a remarkable revenue growth compound annual growth rate (CAGR) of 237.48 percent between FY 2020 and 2022. This growth has been supported by a favourable business environment, increased orders, and government initiatives like the PLI scheme for drones. However, there are risks to consider, said Anubhuti Mishra, equity research analyst at Swastika Investmart.

IdeaForge heavily relies on government-aided projects, which poses a significant risk due to its dependence on a single source of revenue. The entry of other major players into the market, such as the Adani Group, through joint ventures with foreign drone companies, adds further competition.

Moreover, the analyst said that IdeaForge’s lack of long-term contracts and reliance on established relationships for securing deals is a potential vulnerability. There is no apple-to-apple comparison in the listed space.

Considering both the opportunities and risks in IdeaForge, the analyst has assigned a ‘subscription’ rating for aggressive investors.

Advising investors to subscribe to the offer, Avinash Gorakshakar of Profitmart Securities said, “Ideaforge has a well established track record and a robust order book. With the government opening up the drone policy, the applications will be huge across industries. The solid promoter background also augurs well for the company.”Infosys to make huge gains

The company is backed by Infosys, Qualcomm, Celesta, Florintree, EXIM Bank, Indusage Technology Venture Fund, and Infina Finance.

Back in December 2016, Infosys had announced an investment from its Innovation Fund in ideaForge, the Indian start-up focused on Unmanned Aerial Vehicle (UAV) solutions. The tech giant owns 16,47,314 shares or 4.35 percent stake in ideaForge, according to the red herring prospectus.

Considering the upper limit of the issue’s price band, Infosys’ 1.62 lakh shares will likely be worth approximately Rs 110.15 crore.About the public offer

The issue comprises fresh issuance of shares worth Rs 240 crore and an offer-for-sale (OFS) of 48.69 lakh equity shares by promoter and investors.

Under the OFS, Ashish Bhat will offload 1.58 lakh shares, Amarpreet Singh will sell 8,362 shares, and Nambirajan Seshadri will sell 22,600 shares. Other selling shareholders include A&E Investment LLC, Agarwal Trademart Pvt Ltd, and Celesta Capital II Mauritius, among others.

The OFS money will go to selling shareholders, while the net proceeds from fresh issue will be utilised for repaying debts (Rs 50 crore), funding a working capital gap (Rs 135 crore), and investment in product development (Rs 40 crore), besides general corporate purposes.Investor bidding

Investors can bid for a minimum of 22 equity shares and in multiples of 22 shares thereafter. Hence, the minimum investment by retail investors would be Rs 14,784 per lot and the maximum would be Rs 1,92,192 for 13 lots as they are allowed to invest up to Rs 2 lakh.

IdeaForge has reserved 75 percent shares of the net offer for qualified institutional buyers, 15 percent for high networth individuals and the balance 10 percent for retail investors.

The offer also includes a reservation of 13,112 equity shares for company’s employees who will get those shares at a discount of Rs 32 per share to the final issue price.Anchor round

Ideaforge has raised Rs 254.88 crore from 31 anchor investors, which saw participation from several marquee investors such as Nomura, Invesco, HSBC, Nippon Life India, ICICI Pru Mutual Fund, Mirae Asset Mutual Fund, Axis Mutual Fund, HDFC Mutual Fund, Goldman Sachs, Carmignac Portfolio among others.

The allotment of share will be finalised by July 4, while the equity shares will be transferred to demat accounts of eligible investors by July 6. The unsuccessful investors will get their refunds by July 5.

Ideaforge will make its grand debut on the bourses on July 7.

JM Financial and IIFL Securities are the book running lead managers to the issue, while Link Intime India is the registrar