* Initial share sale withdrawn due to poor investor demand
* Only 23 percent of the book covered on last day
* Worries about new tax proposal hits investor sentiment
(Adds details, quotes)
MUMBAI, May 4 (Reuters) – India’s Samvardhana Motherson
Finance Ltd scrapped its initial public offering of shares to
raise about $311 million due to poor response amid souring
foreign investor sentiment over uncertainty about a proposal to
tax portfolio investments.
The poor response to the offering, which would have been the
biggest so far this year, is expected to dim the outlook for
upcoming share sales including the Indian government’s plans to
sell some of its shares in state-run companies.
The Samvardhana IPO was covered only about 23 percent of the
total book size by 5 p.m. (1130 GMT) on Friday, the last day of
bidding, according to stock exchange data. It was launched on
Wednesday.
“The response was mainly hit by worries about GAAR. Foreign
investors are not in a mood to commit money in the absence of
any clarity on that,” a source with direct knowledge said.
“In the near future, I don’t think any big issuer would hit
the market in the absence of any clarity on the new tax rules,”
said the source, who declined to be named as he was not
authorised to speak to the media.
Foreign investors have been critical about some proposals
India unveiled as part of its budget for the fiscal year that
began in April, including the General Anti-Avoidance Rule
(GAAR), a rule that would crack down on the use of tax havens.
Foreign investors have been net sellers of about 35 billion
rupees in India’s broader debt markets in April, according to
provisional regulatory data, erasing earlier stronger purchases.
They have also sold 6.3 billion rupees in Indian stocks.
Samvardhana, which makes and designs auto components, said
in a statement it was withdrawing the IPO due to weak equity
market conditions and currency volatility.
The company was selling shares in the price band of 113-118
rupees a share to raise 16.65 billion rupees ($311 million).
India’s main stock market index has fallen 2.4
percent in the last two months. It had risen nearly 15 percent
in the first two months of this calendar year, triggering hopes
of a slew of share sales after a dismal 2011.
Indian companies raised $6 billion through equity deals in
the first quarter of this year, more than double the amount
raised in the same period last year, Thomson Reuters data
showed.
Standard Chartered and JPMorgan were the
bookrunners for the Samvardhana Motherson issue.
($1=53.5 rupees)
(Reporting by Sumeet Chatterjee; Editing by Aradhana Aravindan)
Article source: http://www.reuters.com/article/2012/05/04/samvardhana-ipo-idUSL4E8G45PK20120504
