‘Infosys deal got good response from foreign investors’

Written By Unknown on Senin, 08 Desember 2014 | 21.03

Sanjay Sharma, MD & Head ECM at Deutsche Equities India in an interview to CNBC-TV18 spoke about the sale of  Infosys shares by some of the co-founders and their family members.

He said the book was reasonably subscribed and since it was done over the weekend there was a lot of participation from foreign investors, almost to the tune of 80 percent. However, the Asian and domestic investors too participated but got less time to do so. The response was seen from both existing and new investors, he added.

However, the stock was down around 5 percent in trade today after 3.3 cr shares changed hands in multiple block deals this morning.

Deutsche Bank was the sole book runner of the sale and the books were covered just after the launch . A reuters report this morning said "four founders" of Infosys had sold the shares, worth USD 1.1 billion at Rs 1,988 per share (a 4 percent discount to Friday's closing price).

The report suggested the founders were selling the stake for "personal and philanthropic purposes". Four of the original founders, co-founders and their families are offering 32.6 million shares in Infosys at a fixed price of 1,988 rupees (USD 32) each, a 4 percent discount to Friday's close.

The bank is also a part of Coal Indi a divestment process and expects a good response for that took.

He is very encouraged by the retail flows into mutual funds and does not see any investment fatigue for divestments in the near-term at least.

Below is the transcript of Sanjay Sharma's interview with CNBC-TV18's Menaka Doshi, Senthil Chengalvarayan and Anuj Singhal.

Menaka: You were instrumental in the promoter equity sale at Infosys, the reason why the stock is down some 5-6 percent because you sold to discount to market price and thanks to that we are seeing a 1 percent loss on CNBC-TV18s 15th birthday.

A: The deal went off well. It was done over the weekend given the fact that Infosys trades both local and ADR, so we had very limited time. We launched it early morning and closed it before market today. We got a very good response from both domestic and international investors' even though domestic investors did not have much time they came in substantially; broadly 80 percent foreign and 20 percent domestic.

Menaka: How many times was the book oversubscribed?

A: I can't comment on it but reasonably oversubscribed.

Menaka: If it was reasonably oversubscribed why did you feel compelled to sell it at a fairly big discount to market price?

A: 4 percent for such a large trade is not a big discount.

Menaka: Is it commensurate with what you would have done in other block deals?

A: Yes. For this size of the deal it is pretty good. I would say 3.9 percent and not 4 percent. If you look at from the Infosys peak it is just about 8 percent down from the Infosys peak which has happened ever on the stock.

Menaka: The kind of appetite that you saw where did this come from, where did the interest predominantly come from?

A: Given the fact that we had done it over the weekend – the interest was across some of the key large investors both shareholders and otherwise, a lot of it came from US and Asia. Given the fact that we launched early morning very limited time for Indian investors and practically no time for European investors, in that context I think we got very good demand. Couple of large orders of 200 million plus.

Senthil: Were there any new investors in this or are they all existing shareholders?

A: It was a mix of existing and new investors. From a domestic perspective, I would say most of the existing investors because they had very limited time to react. However on the international side there were new investors as well.

Senthil: I know you can't give us details but were there any significant new investor somebody who is either a large hedge fund, a large sovereign fund. Is there anything significant that you can tell us without disclosing names?

A: Not really. However broadly speaking 80 percent foreign is something which I will stick to.

Anuj: Is this it for Infosys founders for now or may be in next 2 or 3 months there is one more set which is pending and as you said there were some investors which were left may be European, some Indian. So, could there be one more set of deal that could take place?

A: That is something which I would not like to comment upon. Infosys founders had exited this amount which is just about 17-18 percent of their overall holding. I really can't comment on what their next step would be.

Anuj: Let us talk about the overall market scenario. This was quite a bit of paper that got absorbed and in the future what is the pipeline looking like? We have couple of government OFS and there would be couple of IPOs as well?

A: We did the Sail issue last week and of the other 2 or 3 large deals which are pending are Coal India, ONGC and NHPC. We are a part of the Coal India trade. I think the target would be to try and close that before the fiscal year ends in March. We will see how the government decides on timing on that.

Anuj: Is there enough demand for Coal India because there has been some issue about what is happening with the company?

A: If you look at even from a Sail perspective which was the smallest deal in the pipeline it went off pretty well. I think Coal India just given the scale of the company and the liquidity I would see pretty good demand on it.

Senthil: We have been talking about how you need disinvestment to give new paper, new appetite and attract new investors. So, in a sense this is a disinvestment, very quiet but this was an Infosys disinvestment. What does it tell you about the market?

A: Overall if you look at disinvestment apart from the typical institutional investors which they target you have seen given the Sebi relaxation of having 10 percent retail we saw substantial amount of retail coming into Sail as well. We had almost 2 times covered on the retail bucket.

Menaka: In fact I thought you might be disappointed with some of the demand given that you were only 2 times covered, not even fully 2 times covered on the book right?

A: Given the fact that this was the first off the block, new guidelines in terms of retail.

Menaka: That is what should worry you. For the first off the block you have managed to cover book only twice, as you bunch up issues in the last quarter of this year and they desperately need to meet that disinvestment timeline as well as the targeted money, you are going to find it tougher and tougher to find buyers?

A: I don't think so. There are 3 months left. So, you don't need to squeeze everything in a short span of time.

Menaka: They have not squeezed anything, they have done one issue?

A: There are as I said three deals which are in the pipeline if you look at it from an OFS perspective, two of them being large Coal India and ONGC. As long as they spread that out reasonably with a 2-3 week gap I think it should not be a problem.

Menaka: You don't see any degree of investor fatigue coming in, in the last quarter of this financial because of the bunching up of some of these sales?

A: No, not at all because if you look at from the beginning of the year given the euphoria of the new government coming in there was anticipation that huge amount of supply would come into the market which has not happened. My view is very clear the supply always phases it out so that the market can absorb it.

Menaka: Are you also going to be handling some of the SUUTI stock sale?

A: I can't talk about it because that is something which what I understand is they are going through the ETF route. I have no further knowledge on that.

Menaka: So, they have decided on the ETF route on this?

A: That is what I am looking at more from the press. I have no other information.

Anuj: In the past week we saw 2 or 3 midcap companies come out with QIP issues. Anecdotally that represented a bit of peak for the market. Is there a bit of a risk of that happening this time around as well because there is quite a bit of paper that is hitting the markets now?

A: If you look at QIPs or OFS which are follow-on-offers which companies can be ready and then be very quick to time to the market depending on what the window arises and as I was saying earlier, most of the companies who are in the pipeline would have that ready and as and when they see windows they will come and tap it. I don't see there is going to be any clubbing of deals whether it is on the public sector or private sector.

Menaka: You watch the equity capital markets very closely. I am not asking you for a price forecast but have you made of this spectacular run we have had through the course of this calendar year and where you see markets headed from hereon?

A: Participation from a variety of investors - retail investors, the robustness of this move up all of that shows that it is going into the positive momentum both FII flows, and also retail and the indirect flows which are coming in the mutual funds. After a long time you are seeing mutual fund inflows of almost USD 3 billion in the market so far which has happened only in the last 3-4 months which is a very good indication of flows which will push the markets up.

Menaka: Are there any other promoters lined-up to sell stake, making hay while the equity markets shine?

A: I would certainly give a call once the deal is done.

Senthil: How long did this deal take from decision to execution? Now that it is over when did the promoters decide that they wanted to now offload this?

A: It was pretty quick from the time the decision was made. I would say 2-3 weeks.

Senthil: So, they decided 2-3 weeks ago that this is a good time to sell some of their stake after the bonus?

A: Yes.


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