22 Jun 07 ICICI FPO retail investor category oversubscribed?
The retal investor category in the ICICI Bank FPO seems to be close to being oversubscribed. Only after the final subscription figures are out, we could know whether its is oversubscribed or undersubscribed. The situation is similar to that of DLF IPO where the retail category came close to being oversubscribed but was subscribed 0.975% only. As of 6 PM data I feel retail category could be subscribed 0.95% to 1.05%. Anyway, full allotment seems to be likely to all retail investors. This is an excellent arbitrage opportuinty since we would know exactly how many shares will be allotted as soon as the final subscription figures are out and tomorrow (on Monday) we can sell futures and book our profit. However an exact hedge is not possible since the lot size of ICICI Bank in futures is fixed at 350 shares. So three applications of 102 or 108 per application in the ICICI IPO is necessary to get a good hedge, but still it won’t be perfect.
Update : Retail investor category in the ICICI FPO has been oversubscribed as of 9.15 PM. Retail subscription is likely to be between 1.05 to 1.10 times the FPO issue size.
Final Update : The retail category in the ICICI Bank FPO has been subscribed about 1.04 times. However, since the eligible shareholders category has been undersubscribed, the unsubscribed portion in that category will be added to the retail category and hence retail investors will get full subscription in the ICICI FPO.
How arbitrage works : Since there have been lot of enquiries through emails and comments on how arbitrage process mentioned above would work, I’ll try to explain it in a more detailed way here.
Lets assume Mr. X applies in the ICICI FPO in 3 applications of 108 shares each. Total shares alloted to Mr. X will be 324. Since the FPO issue price of ICICI Bank is likely to be around Rs. 930, if you sell a futures contract of ICICI Bank of lot size 350 shares at 960, then you are booking a profit of Rs. 30 + Rs. 50 discount = Rs. 80 per share. So, no matter what price ICICI Bank is tradng when you get your allotment of 324  ICICI Bank shares, you have already booked your profit of Rs. 80 per share at Rs. 960. Hence you just need to reverse your positions by buying futures and selling the 324 shares.
To use the arbitrage strategy one will need to use the July ICICI Bank futures contract and not the june contract. The limitation of using this stragetgy is, you won’t get a perfect hedge since the lot size is 350 and you will be allotted only 328 shares in the FPO. If you have applied for less than 3 applications of 108 shares each you will need to team up with other investors. Do keep transaction costs in mind. Returns won’t be huge and hence this strategy is only for those with a low risk low return strategy.
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Dear Bullish Bhai,
I really will be greatful if you further explain in detail the exact meaning of your finding “as soon as the final subscription figures are out and tomorrow we can sell futures and book our profit”. I am not at all able to guess. Although I have bought and sold future in past, this is something new for me. Please reply in length.
Regards,
Akkbatra.
Dear Bullish Bhai,
Thanks for explaining the arbitrage process of booking profit in length. You are indeed a great help to investors, both new and seasoned.
Regards,
akkbatra.
Dear Bullish,
Isnt holding 3 demant accounts in a single person name illegal? Especially in case of IPO/FPO. I think that is what happened in Yes Bank IPO Scam and Karvy was barred for 3 months because of this.
Please claify.
@ Sriram – Yes, holding multiple accounts in the same name is clearly illegal and such applications can be easily detected by the registrar’s. However, I’m sure each and every person would have atleaset 1 dozen close friends whom he/xhe can trust. If I need to make more than 1 application, I apply in my dad’s, mom’s and sibbings’ accounts. That is perfectly legal. There is no bar on the number of applications that can come in from the same family.
Dear Sir,
I have applied for ICICI IPO on 19th June 2007 for 102 share. But till date no amount is debited from my bank. Can I expect the share ?
I have applied for ICICI FPO, 102 shares @890/- and given a cheque of Rs.25500/- (with part payment option). I haven’t got any update on this from ICICI. Can anyone guide me where i should check for the same?.
sir
i have applied for dlf issue&received the share at 525rs.but i have applied at cut off(550). but till date i have not received my remaining refund back.guide me where to contact
Just came to know of this. You can also see your call notice online on the website http://karisma.karvy.com/investor/jsp/home.jsp
you’ll have to register if you dont already have an online account with Karvy – Its free.
After logging in you need to:
1. click over the link “Duplicate Call Notice” in the left side menu.
2. Select your option DLF, ICICI bank
3. enter your application no
4. You will be able to see your call notice online.
cheers
@abhinav – thanks a lot for the information. Till yesterday the option was available only for DLF in the Karisma website. Glad they’ve added this facility for ICICI too. Good work by Karvy
I have not received second call notice. where we can get it. I tried to get from Karvy
. but still it has old notices. not updated latest notices. any info will be appreciated.