Selling pressure sees gains reduce to about 22%

Lovable Lingerie Limited listed yesterday at the BSE and NSE. The opening price at the BSE was Rs 261.50 and at the NSE was Rs 240. The high of the day which was made in the first fifteen minutes of trade was Rs 278.95 on the BSE and an almost similar Rs 278.90 on the NSE. The low on the BSE was Rs 241.40 and was made late in the afternoon. The low on the NSE was the open of Rs 240 itself. The share closed for the day at Rs 249.20 on the BSE, a gain of Rs 44.20 or 21.56%. On the NSE the closing price was Rs 249.55, a gain of Rs 44.55 or 21.73%.

Lovable Lingerie had launched its IPO for 45.5 lac shares in a price band of Rs 195-205. The issue was very well received and was subscribed a staggering 35.21 times. The HNI portion was subscribed almost a hundred times at 99.87 times. This made the leveraged HNI cost of finance almost Rs 76. The issue was priced at the upper end of the price band of Rs 205, which meant the price and the cost of interest was not visible for the HNI investor.

The selling price of this issue was the substantial discount in valuations that this share was being offered at compared with Page Industries which is the manufacturer of the “Jockey” brand in India. There sales are expected to cross the Rs 500 cr mark while Lovable would in all likelihood finish March 2011 with sales of just about Rs 115 crs. One must also remember that the brand “Lovable” has been around for about 17 years. In any case with the price having risen roughly 22% on day one of listing, that attraction also disappears. The company is raising Rs 90 crs through this issue and in terms of capacity increase roughly one fourth of the amount raised would be used for the same.

The company had allocated shares to anchor investors and effectively the size of issue which could be delivered gets reduced by the same amount. The effective size of the IPO from 45.5 lakh shares becomes 38,67,500 shares.

There was BRISK trading witnessed in the share throughout the day. The total traded volume was 405.64 lakh shares which was 8.91 times the IPO size. In terms of delivery the number of shares marked for delivery was 27.47 lakh shares which were 6.77% of the trading volume and 60.37% of the IPO size. If one were to deduct the shares allotted to anchor investors which are locked in for one month and therefore not good for delivery, this percentage increases to 71.03%. Coming to the pattern of trading during the day there are two distinct phases where the share has fallen sharply with volume. The first phase was in the morning around 9.45 am when the share fell from its high of about Rs 280 to Rs 255. Over the next four hours the share price improved gradually to Rs 267 and then again there was a sharp fall which took the price down to the low of the day of Rs 241.40. The share then recovered to close at just about Rs 249-250.

The share has had a good beginning and now needs to start delivering on the financial performance for the market interest to sustain. These days’ small issues come with ‘outside support’ and that keeps the interest alive. It must be pointed out that though everybody and in particular the promoters like the share price to be high, it all comes at a cost which is borne by the company and nobody else. Investors should keep this in mind when trading in such shares. At the end of the day it is the investor who provides the fodder for the cannons.

In conclusion a good performance with the share gaining 21.5% at the end of the day and being under selling pressure in the latter half of the day.