Capillary Technologies IPO Sees 38% Subscription on Day 2; Grey Market Premium Around 4-5%

Capillary Technologies' maiden public offering is experiencing moderate investor interest, with 38% of the shares subscribed by noon on the second day of bidding. The IPO aims to raise Rs 877.5 crore through a combination of a fresh issue of Rs 345 crore and an offer for sale (OFS) of Rs 532.5 crore by existing shareholders. The price band for the issue is set between Rs 549 and Rs 577 per share, and the subscription window is open until November 18.

Subscription levels indicate varied investor appetite: Retail Individual Investors (RII) have shown significant enthusiasm, subscribing 65% of their reserved quota. Non-Institutional Investors (NII) and Qualified Institutional Buyers (QIB) have subscribed 36% and 29% of their respective portions, indicating cautious participation from larger entities.

Ahead of its listing, Capillary Technologies' unlisted shares were trading with a grey market premium (GMP) of approximately 4-5%. This figure, representing the expected listing gain, has fluctuated since the IPO opened.

The company had already garnered Rs 394 crore from 21 anchor investors on November 13, a day before the public issue commenced. A significant portion of this anchor book allocation was taken up by domestic mutual funds, including prominent names like SBI Mutual Fund, ICICI Prudential MF, and Kotak Mahindra AMC.

Proceeds from the fresh issue are earmarked for strategic investments in cloud infrastructure (Rs 143 crore), product research and development (Rs 71.6 crore), and upgrading computer systems (Rs 10.3 crore). The remaining funds will support inorganic growth initiatives and general corporate needs.

Impact

This IPO directly impacts the Indian primary market by introducing a new tech stock. It can influence investor sentiment towards SaaS companies and the broader tech sector. The listing performance will be closely watched by institutional and retail investors. Rating: 7/10.

Explanation of Difficult Terms:

• IPO (Initial Public Offering): The first time a private company offers its shares to the public to raise capital.
• Grey Market Premium (GMP): The premium at which unlisted shares trade in the grey market before listing on the stock exchange. It indicates market sentiment for the IPO.
• Retail Individual Investors (RII): Individual investors who apply for shares worth up to Rs 2 lakh in an IPO.
• Non Institutional Investors (NII): High Net Worth Individuals (HNIs) and corporate bodies who bid for shares exceeding Rs 2 lakh.
• Qualified Institutional Buyers (QIB): Large institutional investors like mutual funds, FIIs, insurance companies, etc., who are considered sophisticated investors.
• Anchor Investors: Large institutional investors who commit to subscribing to a portion of the IPO shares before the public issue opens, providing initial confidence to other investors.
• Offer for Sale (OFS): A process where existing shareholders sell their shares to new investors, allowing them to exit or monetize their investment. The company itself does not receive funds from an OFS.
• Software-as-a-Service (SaaS): A software distribution model where a third-party provider hosts applications and makes them available to customers over the Internet.
• Cloud-native: Applications designed specifically to run in a cloud computing environment, leveraging its features like scalability and flexibility.
• Cloud Infrastructure: The hardware and software components that make up a cloud computing environment, including servers, storage, networking, and virtualization.
• Return on Net Worth (ROE): A profitability ratio that measures how effectively a company uses shareholder equity to generate profits.