Housing finance company Aptus Value Housing Finance and specialty chemical-maker Chemplast Sanmar had a weak debut on the bourses on August 24, continuing the trend seen in CarTrade Tech and Nuvoco Vistas Corporation in the previous two sessions.
Aptus Value debuted at Rs 329.95, which was also its intraday low, a 6.5 percent discount to the issue price of Rs 353. The stock recovered losses to hit the day’s high of Rs 354.60 and was hovering around the issue price at the time of writing this copy.
Chemplast Sanmar started off at Rs 525, a 3 percent discount to the issue price of Rs 541. It slipped to Rs 510.30 in the initial few minutes but recovered to claw back above IPO price to hit the day’s high of Rs 550. It came under pressure again and was hovering around Rs 541.
Experts had expected a tepid listing for both issues.
Aptus Value Housing Finance
Given the subdued listing, experts advise holding the stock on the hope that strong fundamentals would help the company to do well once the market volatility subsides.
“We would recommend investors to hold on the positions in case the stock prices dip below the IPO price on listing. We believe that the company has got strong fundamentals and should do well once the volatility in the market subsides,” said Jyoti Roy, DVP-Equity Strategist at Angel Broking.
Gaurav Garg, Head of Research at CapitalVia Global Research, said Aptus Value Housing is a good long-term proposition it has the lowest non-performing assets (NPAs) in the sector and has a lot of room for expansion in underserved markets.
Aptus Value, which provides loans to individuals buying residential properties as well as loans against properties to self-employed in the rural and semi-urban marketplaces, raised Rs 2,780 crore through its IPO. The issue was oversubscribed by 17.20 times.
As of December 31, 2020, the firm was one of the largest companies in south India in terms of assets under management (AUM) that grew at a CAGR of 34.54 percent during FY19-FY21 to Rs 4,067.76 crore in March 2021.
Prashanth Tapse, VP Research at Mehta Equities also said investment in Aptus Value should be considered for the long term only and those who invested for short- term would face some pressure as a muted listing would be a cause of concern.
Rajnath Yadav, Research Analyst, Choice Broking, assigned “subscribe with caution” rating to Aptus Value Housing due to expensive valuation of the issue despite good fundamentals.
With contained credit cost, strong disbursements management and focus on underpenetrated low and mid-income segment, business growth profitability was expected to remain robust, he said.
Chemplast Sanmar is one of India’s leading manufacturers of specialty paste PVC resin on the basis of installed production capacity as of December 2020. It is also the third-largest manufacturer of caustic soda and the largest maker of hydrogen peroxide, in South India.
The company acquired 100 percent equity interest in CCVL, which is the second-largest manufacturer of suspension PVC resin in India and the largest manufacturer in South India as of December 2020.
Experts recommended holding the company for the long term but short-term investors can book gains if the stock climbs above the issue price.
“With robust diversified product profile, dominant market positioning in key products and healthy outlook for business growth, we assign a ‘subscribe for long term’ rating for the issue,” said Rajnath Yadav, Research Analyst at Choice Broking.
Considering the current negativity in the broader market, he said long term investors should remain invested.
Due to the consolidation of the CCVL, the financial performance of the company was not comparable to the preceding years. Over FY18-21, Chemplast has reported a 6.7 percent CAGR rise in consolidated revenue to Rs 3,798.7 crore in FY21. Over FY19-21, the business from the specialty paste PVC, custom manufacturing operations and suspension PVC has increased by 16.1 percent, 38.3 percent and 10.6 percent CAGR, respectively.
Based on a quick estimate, “over FY21-24, we are forecasting an 8.7 percent CAGR growth in the consolidated topline to Rs 4,873.5 crore in FY24. The EBITDA margin is estimated to expand by 182bps, while PAT margin is estimated at 12 percent in FY24 as compared to an adjusted margin of -1.4 percent in FY21. The average return on invested capital (ROIC) and return on equity (RoE) over the forecasted period is estimated at 20 percent and 28.8 percent, respectively,” said Yadav.
Tapse said conservative investors should look to book or exit on the listing day and risk-seekers may consider holding the investment for the long term.
For those who were looking to buy on the listing day, it would be better to wait and watch to accumulate at a better pricing range, he said.
Garg, however, said investors who got the share could book listing gains instead of holding for the long term.
“In recent years, firms that were listed in the sector of specialty chemicals performed well in terms of listing gains, owing to the fact that they were listed with a high premium. However, market conditions have shifted, and recent debutants are not performing as expected,” he said.
Chemplast raised Rs 3,850 crore through its public issue comprising a fresh issue of Rs 1,300 crore. The net proceeds from the fresh issue will be used for early redemption of non-convertible debentures (Rs 1,238.25 crore).
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