The logistics arm of Kishore Biyani-led group, Future Supply Chain Solutions saw a muted demand on the bourses, and listed at Rs 674 on BSE today, as opposed to issue price of Rs 664, implying listing gains of 1.5%. The IPO of Future Supply Chain Solutions got subscribed by 7.56 times on December 8th, backed by strong demand from institutions. The issue saw total bids amounting to 5.18 crore shares as against the issue size of 68.49 lakh, implying demand to the tune of 7.56 times, data from BSE showed. Notably, since it was a complete offer for sale, the company will not receive any proceeds from the Rs 650 crore IPO, even as promoters cash out their stake.
As the shares are now listed, investors may be mulling whether to buy the shares now, if they missed out the IPO. Many top brokerages had said that the issue offers limited upside for the investors as the offer was overvalued. Angel Broking said that even though the valuation is lower than peers such as Mahindra Logistics, the issue does not provide significant upside to the investors.
“In terms of valuations, the pre-issue P/E works out to 39.9x its 1HFY2018 annualized earnings (at the upper end of the issue price band), which is lower compared to its peers like Mahindra Logistics. However, Mahindra Logistics has lower promoter group business (internal business), which is ~54% v/s. ~70% of FSCSL. Further, Mahindra Logistics had reported non-promoter revenue CAGR of ~46% v/s. de-growth of FSCSL over FY15-17. Despite the above favorable factors and lower valuations compared to Mahindra Logistics, we however, believe that all the positives are fully factored in the company’s current valuations, which does not provide any further upside for investors. Hence, we recommend Neutral rating on the issue,” Angel Broking had said in its IPO note.
On similar line, Choice Broking said that the issue was aggressively priced. “The company is demanding valuation compared to its peer Mahindra Logistics, which is trading at P/E multiple of 59.4(x) and 54(x) on the basis of FY17 and FY18E (annualized) EPS), looks cheap, however its one fifth of peer business size. Thus, considering the above observations, we are of the view that at P/E(x) of 58.2, the issue is aggressively priced leaving limited room for further upside. Thus, we assign ‘Subscribe with Caution’ rating to the issue,” the firm said in its report.
As the primary markets have been booming, many companies have timed their IPOs to get higher valuations, say analysts. “There is a lot of liquidity in the markets, as retail investors are pumping in amounts which is even offsetting the huge FII selloffs. Every company coming out with an IPO is getting a very good valuation,” Harshil Sethia of BP Wealth told FE Online recently.