Even as the share price of Cochin Shipyard share prices zoomed on listing to hit the upper circuit of Rs 522 on BSE, analysts are cautioning the retail investors to stay away from the scrip. Analysts believe that the stock is certainly overpriced at these levels, and the surge in prices does not have anything to do with fundamentals. Rajat Sharma from Sana Securities believes that the rise in prices is more of an IPO phenomenon. Speaking to FE Online, Rajat Sharma said, “Any new IPO that hits the market, generates a lot of response on the listing day.” According to the analyst, the rise in the prices is not backed by fundamentals of the sector, and in the shipping business the margins are unlikely to go improve going forward. The analyst pointed out to the fact that companies like Shipping Corporation of India have not returned anything in the last 10 years. In fact, Shipping Corporation of India has returned negative 3.8% in the last decade.
The share prices have soared as the retail investors are are lapping up new stocks for lack of choice, said another analyst requesting anonymity. His belief is that currently the share is overpriced at these levels and investors would do well to stay away. The analyst pointed out that the sector is likely to remain under pressure, and is very export dependant.
Shares of Cochin Shipyard which got a bumper response to its IPO earlier this month with 76 times subscription, made an impressive debut on the bourses today with a stellar listing on the stock exchanges. Cochin Shipyard shares opened tepid at Rs 435 on BSE, with a modest gain of 0.7% to its issue price of Rs 432, but soon surged 20% to the day’s high of Rs 522, hitting the upper circuit for the day.
The company raised Rs 1,468.11 crore at the higher end of the price band by the issue and sale of a total 33.97 million shares. The government divested 11.32 million shares through an offer for sale while the company issued 22.65 million fresh shares, bringing the government stake down to 75% post-issue
Chairman of the public sector shipyard in India, Madhu S Nair said, the company will be investing Rs 3,100 crore over the next five years for capacity expansion in both ship building as well as on the repairs side. Cochin Shipyard is constructing a new bigger dry-dock facility which would make the firm a strong contender for constructing the country’s next indigenous aircraft carrier, PTI reported citing a Cochin Shipyard official earlier.