Shares of Hindustan Copper are likely to remain in focus on Wednesday, 26 August, as the retail leg of the government’s Offer for Sale (OFS) opens for bidding.
The retail offering follows a strong response from non-retail investors on Tuesday, with the issue receiving more than three times the subscription. Encouraged by the demand, the government has decided to exercise the entire greenshoe option, increasing the potential stake sale to 6% from the initial base offer of 3%.
Under the OFS, the government initially offered to sell a 3% stake in Hindustan Copper, with an option to offload an additional 3% in the event of oversubscription. At the floor price of ₹514 per share, the total potential OFS size could amount to nearly ₹2,982 crore.
The non-retail portion was fully subscribed, paving the way for the government to exercise the additional 3% greenshoe option. The issue will now be open to retail investors, who can submit bids between 9:15 am and 3:30 pm through the separate OFS window available on the BSE and NSE.
At least 10% of the OFS size has been reserved for retail investors, while an additional 25,000 shares have been set aside for eligible employees.
The floor price of ₹514 represents a discount to Hindustan Copper’s recent market price, making the offer closely watched by investors as the government moves ahead with the second and final day of the stake sale.
Hindustan Copper OFS subscribed 3.41x on Day 1
The government’s Hindustan Copper OFS saw strong institutional participation on the first day of bidding on Tuesday, with the offer subscribed 3.41 times.
Following the overwhelming response, the government has decided to exercise the full greenshoe option, the Secretary of the Department of Investment and Public Asset Management (DIPAM) said in a social media post.
The decision will double the size of the stake sale from the initial 3% base offer to 6%, with the additional 3% stake being sold through the greenshoe option.
Should you participate in Hindustan Copper OFS?
Retail investors may be tempted by the apparent 10% discount offered in the Hindustan Copper OFS, but that discount may no longer be available in practice, according to an Economic Times report quoting Vaqarjaved Khan, Senior Fundamental Analyst at Angel One.
Khan pointed out that Hindustan Copper shares fell more than 7% on Tuesday, marking their steepest single-day decline in nearly five months. Although retail bidding opens on Wednesday, the price at which retail investors can acquire the shares is determined by the institutional book built on Tuesday.
As reported by The Economic Times, Khan said the ₹514 floor price should not be treated as an entry price. If institutional investors clear the OFS at a price significantly above ₹514, the discount retail investors expect could effectively disappear. He also noted that the offer does not provide an additional retail discount, leaving investors without a further cushion.
On the fundamentals, however, Khan remains positive on Hindustan Copper. According to the Economic Times report, the company’s Q1 profit surged 163% year-on-year to ₹353 crore, while margins were close to 54%. Hindustan Copper is also investing ₹7,189 crore to expand its capacity to 12.2 MTPA by FY30.
However, Khan cautioned that the improvement in margins is largely being driven by higher copper prices rather than the underlying mining operations.
His view, as reported by The Economic Times, is that investors should consider the OFS if they are looking to build a three-year exposure to copper, rather than participate solely in the expectation of a short-term gain.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
