HP Adhesives shares list at premium despite weak market momentum; stock debuts 16% above IPO price

HP Adhesives stock began trading at Rs 319 per share, up 16.42% or Rs 45 apiece from the issue price of Rs 274 per share.

HP Adhesives shares listed on the stock exchanges today. (Image: REUTERS)

Shares of HP Adhesives listed at a premium to the IPO price on the stock exchanges today, trumping the weak market momentum. The stock began trading at Rs 319 per share, up 16.42% or Rs 45 apiece from the issue price of Rs 274 per share. Minutes into the initial day of trade, HP Adhesives stock price jumped 5% from the listing price to hit the upper circuit at Rs 334.95 per share. HP Adhesives is a multi-product, multi-category consumer adhesives and sealants company. The company manufactures a wide range of products such as PVC, cPVC and uPVC solvent cement, among other products for large PVC pipe manufacturing companies under co-branding or private label on an order basis. On listing, HP Adhesives had a market capitalization of Rs 586 crore.

HP Adhesives’ Rs 126 crore IPO was a mix of a fresh issue of equity shares worth Rs 113 crore and an Offer for Sale (OFS) worth Rs 12.5 crore. Overall the issue was subscribed 20.96 times with retail investors oversubscribing their portion of the issue 81.24 times. The non-Institutional Investor (NII) portion of the issue was subscribed 19.04 times while the Qualified Institutional Buyer (QIB) portion was bid 1.82 times. 

The consumer adhesives industry clocked in 8-10% CAGR between FY15-2, according to Religare Broking. They added that the industry de-grew during the pandemic but is expected to have recovered strongly in the second half of the fiscal year driven by a pickup in infrastructure and construction activity and rising demand from end-user industries such as packaging, electronics and woodworking. Talking about HP Adhesives the brokerage firm said that the company will benefit from industry tailwinds given its multi-product portfolio, strong distribution network and diversified customer base in both domestic and international markets. “On the financial front, the company’s performance has been decent. As compared to its peers, the company’s valuation is at a discount. From a long term perspective, we have a positive view on the company,” they added.

HP Adhesives said it will use the funds raised through the IPO to fund capital expenditure and working capital requirements. Pre-IPO the promoter of the firm held a 95.31% stake in the company and post-IPO this is down to 71.35%. Public holding has increased from 4.69% to 28.65%. “At the higher price band of Rs 274, the company is demanding a TTM P/E multiple of 49.2x, which seems to be at a premium considering the small business size,” analysts at Choice Broking. The brokerage firm had a subscribe ration on the issue.

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