WABCO India. | Representative image (PC-wabco-auto.com)
Around 4.62 lakh shares of auto ancillary firm WABCO India were auctioned on the NSE for around Rs 7,500 a share, brokers tracking the stock told CNBCTV18.com. This is a 33 percent premium to WABCO’s closing price of Rs 5,643 last Thursday (March 25), the day on which the sellers sold the shares, but could not deliver them on Monday.
Shares are auctioned when a seller is unable to deliver the shares which he/she has sold, to the stock exchange clearing house. The seller then has to buy the shares in the auction, and deliver it to the clearing house.
Online broker Upstox, backed by Ratan Tata and Tiger Global, weighs US SPAC listing
The huge auction comes close on the heels of Wabco India’s offer for sale (OFS) issue, in which the promoters sold around 24 lakh shares. The issue was open for bidding on March 25 and March 26 with a floor price of Rs 5,450, an 11 percent discount to the last traded price.
WABCO shares, which had closed at Rs 6,108 a day before the bidding for shares in the OFS began, slumped 8 percent to Rs 5,606 on the first day of the bidding. And the bidding trends suggested that the final price was likely to be closer to the floor price. Brokers said many investors who held shares of WABCO sold their shares in the secondary market, hoping to buy them cheaper through the OFS.
In all, around 9 lakh shares of WABCO were traded on the NSE on Thursday, compared to the usual average of 3000-4000 shares on any given day.
However, those hoping to buy the shares close to the floor price through the OFS were in for a shock. Traders tracking the stock say that in the last hour of trade on Friday–the final day for bids—some investors bid for huge quantities of WABCO shares at Rs 5,662 and Rs 5,670. As a result, the final price for the OFS was set at Rs 5,662 apiece.
As these bids came quite late in the day, the sellers did not have time to buy the shares from the open market. Even otherwise, they would have suffered a loss had they bought the shares in the open market. That is because WABCO shares suddenly surged on Friday, climbing 13 percent over the previous close.
A similar situation had played out in the shares of machine tools maker Wendt in January this year. The promoters of Wendt had announced the floor price for the OFS at a near-30 percent discount to the market price.
Many investors sold their shares in Wendt in the open market, hoping to buy them cheaper through the OFS. On that occasion too, a group of investors revised their bids in the OFS window in the final minutes of bidding, causing the allotment price to be finalized way above the floor price. As a result, around 10,000 shares were auctioned the following day as many sellers could not deliver the shares they had sold.
Veteran brokers feel it is too much of a coincidence that bids for a huge quantity of shares revised in the closing minutes of bidding, twice in the last couple of months.