NEW DELHI: Two stocks – Kalyan Jewellers and Suryoday SFB – made weak market debuts on Friday, listing at up to 15 per cent discount to their issue prices. On Thursday, debutant Craftsman Automation got listed at a 9 per cent discount. The day before, it was Anupam Rasayan, which too made a poor debut on Dalal Street.

This, when some of these IPOs received ‘subscribe’ ratings for listing gains from top brokerages despite aggressive valuations. And they did see decent subscriptions, too, in the past couple of weeks

It seems the days of money easy making on IPOs are getting over on Dalal Street.

Kalyan Jewellers got listed at Rs 73.90 on BSE, a 15.06 per cent discount to its issue price of Rs 87. The company had been hit by Covid disruptions. In FY19 as well, its revenues were hit by severe floods in South India, which brings in 60 per cent of Kalyan’s revenues.

Analysts were not happy with the poor capital allocation and the company’s balance sheet. Besides, jewellery stocks have had a tepid listing history in the past.

Despite all this, retail investors were most bullish on the issue, bidding for 2.82 times the quota size. The issue was subscribed 2.61 times overall.

Suryoday Small Finance Bank’s 4 per cent listing discount was somewhat expected, as analysts had warned of high valuations at 2.2 times 9MFY21 book value and 2 times FY21E BV, which they said had more than factored in the likely scalability of the business.

They were also worried about the SFB’s asset quality. But retail participation at 3.09 times was highest among all investor classes. Overall, the issue was 2.37 times subscriptions.

Had the SFB classified borrower accounts as NPA after August 31, 2020, its gross NPA ratio as of December 31, 2020 would have been 9.28 per cent, on a proforma basis, analysts point out.

“There has rarely been a case where an IPO has been priced reasonably. What investors should look at is whether the company has healthy future prospects to justify the demanding valuations. For example, Anupam Rasayan was from a strong sector, it also had strong growth prospects. But even after factoring in the future growth, it looked overvalued. In other instances, Rossari Biotech last year asked for premium valuations over peers. But it did not look overvalued on future earnings projections. That justified its valuation back then. And it performed and is still performing,” said Astha Jain of Hem Securities.

Jain also cited an example of Nazara Technologies, noting that the issue does look aggressively priced on face of it, given the losses the gaming company was incurring.

But the asking valuations justified the huge market opportunity it has, and the growth it may be able to report going ahead. She sees a strong listing for the stock and believes it can be a long-term bet.

Nazara IPO saw the third highest-ever subscription for an issue size of over Rs 200 crore. The previous record was held by MTAR Technologies, the Hyderabad-based precision engineering solutions company, whose issue had been subscribed more than 200 times last month. In Nazara, the HNI quota was subscribed 390 times, the QIB (qualified institutional bidders) quota 104 times and the retail quota 75 times. The stock is likely to be listed next Tuesday.

Over the past few months, a host of debutant stocks such as MTAR Tech, Nureca, IndiGo Paints and Mrs Bectors have had stellar listings on Dalal Street.

But nearly all recent issues such as Laxmi Organics (107 times), Anupam Rasayan (44 times), Easy Trip (159 times), MTAR (201 times), Heranba (83 times), RailTel (42 times) and Nureca (40 times) have witnessed strong investor response.

Hemang Jain of Motilal Oswal Securities said some of the managements are becoming a bit greedy in terms of IPO pricing, which is the main reason listing gains have started drying up despite the excitement being seen in subscription levels.

“It makes more sense to go stock-specific. Something like MTAR or Nazara are the names we feel are very niche. The business opportunities for these companies are such that one can look at allocating a small component of their capital to them. Some of these companies can give you a multi-bagger returns in a bull market. That said, it requires a lot of understanding of the businesses. Stay selective. There are a lot of opportunities to avail of,” Jani told ETNOW.

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