Upmarket retailer ODEL saw its Initial Public Offer (IPO) oversubscribed by over 64 times at Rs. 16 billion compared with the IPO value of Rs. 250.5 million.
The high level of oversubcription (excess money of Rs 15.7 billion) has raised issues amongst some investors pertaining to reimbursing the excess monies to the owners by firms whose IPOs are oversubscribed. “The banks earn a tidy interest on money which belong to the applicants even for that short time till these amounts are returned to the applicants (by the banks),” a concerned IPO applicant said.
However Suresh Sellahewa, CEO CSE reasoned that the CSE rules say that the excess money should be returned to the rejected applicants within 10 market days. “There will interest payable to these applicants on any refunds not made within this period,” she said. Applicants are also advised in most IPOs about the 10-day period in which monies will be held.
A capital market expert noted that applicants always have the option of paying through Sri Lanka Interbank Payments (SLIPS) transfers or through bank guarantees to stop banks from earning ‘undue’ interest on rejected IPO applicant payments. He said that this is a concern the retailers will face especially at a time that CSE is slated to be swarmed by IPO oversubscriptions in the near future.
Some Rs 13.6 billion of the money for the ODEL IPO came through bank guarantees while Rs 2.4 billion worth of payments were done through bank drafts and cheques, ODEL said.
ODEL offered 16.7 million shares, an 11.5 % stake in the company's equity, at Rs 15 per share.