While analysts have varying recommendations on the ongoing Monte Carlo IPO, the company’s shares are commanding a premium of R125-135 in the grey market, according to people in the know.
The R350-crore issue has been priced at R630-645, which amounts to 19.37%-20.93% in the grey market over the upper price-band.
According to some analysts, while grey market premium may seem attractive, the company’s fundamentals remain weak. “One may be attracted by the current grey market premium, but the fundamentals lack strength and are not comforting. At R645 per share, company’s market cap will be R1,400 crore, which is aggressive given the trading nature of business, single brand, corporate governance including inter-group dealings, seasonality and geographic concentration of revenues and finally the promoter track-record,” said SP Tulsian, an independent analyst.
The offer includes partial stake sale by Samara Capital via investment firm Kanchi Investments whose holding will decline to 10.94% from 18.51% post IPO. The promoter holding will decline from 81.06% to 63.63% post the IPO. “Since it is an offer for sale, no proceeds from the IPO will go to the company,” Tulsian added.
Meanwhile, some analysts suggest participating in the issue with a 2-year investment horizon. “The company’s net sales have grown at a CAGR of 16.3% over FY12 to FY14. Although, the EBIDTA margins have declined from 22% in FY2012 to 18.7% in FY2014, we believe they are at sustainable levels,” Bhavin Patadia at Angel Broking said in a note.
“We recommend subscribing to the issue at the lower end of the price band from a two-year perspective. From a one-year perspective, we see limited upside potential as valuations seem to be fair,” Patadia added.
The IPO was subscribed 0.61 times as on 5.00 pm IST on Wednesday with the retail book getting subscribed 0.79 times, as per exchange data .
The Qualified Institutional Buyers’ (QIB) book was subscribed 0.74 times. The bidding is open till Friday. On Tuesday, anchor investors were allotted 16.29 lakh shares for a consideration of R105.12 crore. The anchor investors included Aditya Birla PE, DB International (Asia), Birla Sun Life Trustee and Tata AMC.