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Stellar debut for Polycab as shares list at 18% premium; should you buy, sell or hold?

Polycab shares listed at Rs 633, implying a premium of 18% from its issue price of Rs 538.

Shares of wires and cables major Polycab made a stellar debut on the exchanges on Tuesday, after its IPO had seen a massive response. Polycab shares listed at Rs 633, implying a premium of 18% from its issue price of Rs 538. Earlier, Polycab India’s IPO saw a stellar response on the last day of bidding, and closed on April 9 with a massive 51 times oversubscription, mainly due to heavy bidding by institutional investors and HNIs.

Taking stock of the stock’s prospects going forward, analysts say that investors would do well to hold on to the shares post listing. “This over-subscription is biggest since IPO of HDFC AMC. The investors can certainly look for listing gains. It is likely to give respectable  returns above its offer price of 533-538 band. However, Investors looking for some wealth creation beyond just listing gains will achieve it if they remain invested for next 3-4 years,” Milan Vaishnav, technical analyst told Financial Express Online. 

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“In terms of valuations, the pre-issue P/E works out to 16.7x its FY2019 annualized earnings (at the upper end of the issue price band), which is slightly lower compared to its peers like Finolex Cables (20.7x) & Kei Industries (20.x) Investors should hold this company as it is based on Indian consumption story where government’s endeavor towards rural electrification is remarkable which is a big catalyst for this Industry. Assuming the PE normalizes to the industry standards, we can expect 20%-24% upside to the IPO price in 6-9 months. Investors can hold with a target price of 650,” Amit Gupta, Co –Founder and CEO, Trading Bells said in a note to Financial Express Online. 

According to Umesh Mehta, Head of Research at SAMCO Securities, investors who have missed out on the issue, should definitely get put their hands on the company once the hysteria post listing fades and those who are lucky to get allotment should hold on to their holdings.

“Polycab is a frontrunner in the shift from the unorganized to organized cable industry with an 18% market share. It is attractively valued with strong financials, good brand, diverse network distribution and healthy business growth prospects. The IPO funds would be used partly for debt repayment and fulfilling the working capital needs. Due to these factors, the future of this Company looks extremely bright and hence we would advise our investors to hold the stock with long term horizon,” Umesh Mehta told Financial Express Online.

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Source: Financial Express