Indigo Paints, Home First grey market premiums soar, IRFC gmp falls further; which one should you subscribe?

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January 20, 2021 11:14 AM

Indian Railway Finance Corporation (IRFC) initial public offer was subscribed 1.22 times on day two of the bidding process. The issue will conclude today for subscription

indigo paints, IPO, indigo paints IPO

Indian Railway Finance Corporation (IRFC) initial public offer was subscribed 1.22 times on day two of the bidding process. The issue will conclude today for subscription. While Indigo Paints Rs 1,170.16-crore IPO has opened for subscription today and will close on January 22, 2021. Indian share markets will see a third IPO also this week with Home First Finance launching its initial public offer tomorrow (January 21). In the grey market today, a strong premium was seen only in Indigo Paints shares. The shares were trading at Rs 2,330 apiece, up Rs 840 or 56.37 per cent from the IPO price of Rs 1,490 apiece. While Home First Finance Company India shares were commanding a grey market premium of Rs 165 or 32 per cent from the issue price. However, IRFC grey market premium fell to Rs 0.80-0.90 from Rs 1.3 yesterday today.

Also read: Indigo Paints grey market premium surges over 50% ahead of IPO; should you subscribe?

Aditya Kondawar, Founder and COO, JST Investments told Financial Express Online, that investors should avoid subscribing all these three IPOs. “All these companies are coming with an IPO at very high valuations when the listed peers with proven pedigree and track record are available at much cheaper valuations,” Kondawar said. Seeing the high grey market premium in Indigo Paints shares, Kondawar recommended only high-risk investors to subscribe to issue for listing gains. The listing of Indigo Paints will happen after Union Budget 2021, which can be full of unknown announcements, Kondawar said that the risks in Indigo Paints are high. Sequoia Capital-backed Indigo Paints raised Rs 348 crore from 25 anchor investors on Tuesday.

Abhay Doshi, Founder, UnlistedArena.com – dealing in Pre-IPO & Unlisted Shares – prefers Indigo Paints and Home First Finance Company. As the primary market is busy with back to back spree of IPOs, Doshi’s first preference is Indigo Paints. Even as the issue is aggressively priced as compared to its listed peers, Indigo Paints has performed exceptionally well. Indigo Paints has reported 41.9% CAGR growth from revenue from operations for fiscal 2010-2019. While Doshi’s second preference is Home First Finance Company India as the issue looks fairly priced. “Real estate sector is showing sign of bottoming out, government initiative like ‘Housing for all’ would benefit such companies,” he said.

Also read: IRFC grey market premium still weak; hope of blockbuster listing dashed?

The third IPO of 2021, Home First Finance Company IPO will conclude on January 25, 2021. The grey market premium rose to Rs 165 from Rs 100 yesterday. INDmoney in a report said that IRFC’s valuation appears to be most attractive (at PB of 1x). It also has strong fundamentals and has delivered good growth in recent years. It has a low-risk profile since it caters to the Indian Railways and other Public sector Undertakings. “Given strong business fundamentals and good growth prospects this can be considered for the long-term as well,” it added.

Also read: Home First Finance IPO: 3rd IPO of 2021 opens Jan 21; check issue price, grey market premium, other details

For Indigo Paints IPO, it said even as the growth outlook seems to be attractive, the issue is priced aggressively (PE of 142 times FY20 earnings), similar to its highly valued listed peers Asian Paints and Berger Paints India. “As is the case for IPO, strong businesses are priced very aggressively and Indigo Paints is no exception,” it said. Mumbai based housing finance company, Home First Finance has lower return ratios than its listed peer Aavas Financiers. “The issue also seems to be fully priced. Hence, we believe that IRFC ranks better in terms of valuation and growth prospects,” INDmoney said.

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