Adani Wilmar Limited – Gains 15.30% on opening day

Shares of Adani Wilmar debuted on the bourses on Tuesday and caused many hearts to flutter when the discovered price was below the issue price. The fact that they recovered thereafter quite sharply is the other part of the story.

The company had tapped the capital markets with its fresh issue to raise Rs 3,600 crs in a price band of Rs 218-230. The issue was open from Thursday the 27th of January to Monday the 31st of January. The issue was subscribed 18.33 times overall with QIB portion subscribed 6.04 times, HNI portion subscribed 59.40 times and Retail portion subscribed 4.14 times. There were 24.22 lac applications in all.

The discovered price on BSE was Rs 221 at which price 3,18,533 shares were traded. On NSE, the discovered price was 227 at which price 2,20,35,044 shares were traded. Approximately 225 lac shares were traded at the discovered price on the two exchanges combined.

The high of the day on BSE was the upper circuit of Rs 265.20, the low was the open of Rs 221 and the close was the upper circuit at Rs 265.20. The gain was Rs 35.20 or 15.30%. On NSE, the high of the day was Rs 271.25, low was Rs 227 and the close was Rs 268.25 a gain of Rs 38.25 or 16.63%.

Exchange Open High Low Close Net Change % Gain/ Loss Wt.Avg Volume Delivery Del %age
BSE 221.00 265.20 221.00 265.20 35.20 15.30 253.91 7510055 3077792 40.98
NSE 227.00 271.25 227.00 268.25 38.25 16.63 250.63 135533461 60165246 44.39
Total 143043516 63243038 44.21

The traded volume on the two exchanges combined was 1430.43 lac shares which was 0.91 times the IPO size of 1569.81 lac shares and 1.23 times the non-anchor portion of 1161.24 lac shares. Delivery volume was 632.43 lac shares which was 44.21% of the traded volume. It was 40.28% of the issue size and 54.46% of the non-anchor portion. The weighted average of the day’s trade was Rs 253.91 on BSE and Rs 250.63 on NSE.

In terms of institutional or bulk trade, none were reported on either BSE or NSE. One however heard during the day that large quantities were purchased by the largest anchor investor in the company. As there were no bulk trades reported this continued to remain a rumour only.

The opening price shook many and one began wondering at what had happened and was in store. The slow and steady rise thereafter reassured investors and traders and all those who were on the long side in the counter made money. The mystery that remains unanswered however is why was the discovered price below the issue price?

Performance of Newly Listed Shares as on 4th February 2022

Name Date of Listing Issue Price Closing Price Closing Price % Gain Loss % Change Over
      40222 280122 Over Week lssue Price
One 97 Communications Limited 18th November 2150.00 953.25 903.25 5.54 -55.66
Sapphire Foods Limited 18th November 1180.00 1323.10 1317.40 0.43 12.13
Latent View Limited 23rd November 197.00 506.45 492.85 2.76 157.08
Tarsons Products Limited 26th November 662.00 683.10 656.15 4.11 3.19
Go Fashion (India) Limited 30th November 690.00 1015.30 969.35 4.74 47.14
Star Health and Allied Insurance 10th December 900.00 771.80 797.95 -3.28 -14.24
Tega Industries 13th December 453.00 510.30 514.50 -0.82 12.65
Anand Rathi Wealth Limited 14th December 550.00 586.95 592.70 -0.97 6.72
Rate gain Travel Technologies Limited 17th December 425.00 382.05 370.40 3.15 -10.11
Shriram Properties Limited 20th December 118.00 99.20 101.65 -2.41 -15.93
C.E.Info Systems Limited 21st December 1033.00 1505.90 1351.35 11.44 45.78
Metro Brands Limited 22nd December 500.00 582.55 614.35 -5.18 16.51
Medplus Health Services Limited 23rd December 796.00 1098.20 1219.65 -9.96 37.96
Data Patterns Limited 24th December 585.00 730.95 739.50 -1.16 24.95
H P Adhesives Limited 27th December 274.00 394.10 392.60 0.38 43.83
Supriya Life Science Limited 28th December 274.00 467.45 462.50 1.07 70.60
CMS Info Sytem Limited 31st December 216.00 272.75 263.50 3.51 26.27
AGS Transact Technologies Limited 31st January 175.00 165.60 NA -5.37 -5.37

RBI policy meet and LIC IPO filing to be key events

Markets in the week gone by behaved as if there were two distinct halves. The first three days of the week saw markets gain and then correct themselves in the remaining two days. BSESENSEX gained 1,444.59 points or 2.53% to close at 58,644.82 points while NIFTY gained 414.35 points or 2.42% to close at 17,516.30 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.44%, 2.43% and 2.45% respectively. BSEMIDCAP was up 2.33% while BSESMALLCAP gained 2.63%.

Its important to note that markets hit key resistance levels on the way up, and reacted quite sharply from such levels. The range for the week was 56,400 – 59650 on BSESENSEX while it was 16825 – 17,800 on NIFTY. This would continue to be the range for the coming week as well with a couple of factors deciding the direction. However, volatility would be the norm and even though the net change may not be as much on a daily basis the swings would remain. Key factors would be the net sales by FII’s and global markets.

The Indian Rupee gained 34 paisa or 1.05% to close at Rs 74.70 to the US Dollar. Dow Jones gained on the first three days of the week and lost on the remaining two, similar to what happened in India. It gained 364.27 points or 1.05% to close at 35,089.74 points. Facebook or Meta had a disastrous outing post its results for the quarter and saw a massive fall of around 26%. While it fell marginally on Friday, the damage was done with the share down a massive 21.15% during the week. The closing price was USD 237.09, down 63.59 dollars for the week.

In primary markets news, we saw one issue list, one issue complete subscription and yet another issue opening for subscription. The issue to list was AGS Transact Technologies Limited which had issued shares at Rs 175. The share closed on debut day at Rs 161.20, a loss of Rs 13.80 or 7.83%. During the remaining part of the week, the share recovered some ground and closed at Rs 165.60, down Rs 9.40 or 5.37%.

The issue from Adani Wilmar Limited closed for subscription on Monday the 31st of January. The issue for Rs 3,600 crs was subscribed 18.33 times overall backed by strong response from HNI’s. The QIB portion was subscribed 6.04 times, HNI 59.40 times, Retail 4.14 times, Employee 0.54 times and Shareholder reservation 35.17 times. The price band was Rs 218-230. The issue would list on Tuesday the 8th of February with the allotment of shares done at the top end of the price band at Rs 230.

The issue from Vedant Fashions Limited is tapping the capital markets with its offer for sale of 3,63,64,838 shares in a price band of Rs 824-866. The issue has opened on Friday the 4th of February and would close on Tuesday the 8th of February. The issue would garner Rs 3,149.19 crs at the top end of the price band. The market capitalisation at the top end of the price band would be Rs 21,017 crs for Vedant Fashions Limited. For the record, the company reported revenues of Rs 564.81 crs for the year ended March 2021 and a net profit of Rs 132.90 crs.

The details given in the price band advertisement issued by the company state that the PE band for the company is 153.73-161.57 times based on the EPS of Rs 5.36 for the year ended March 2021. A new matrix mentioned as per the SEBI advertisement gives the market cap to revenue at 37.21 times based on revenues for the year ended March 2021. Further the advertisement mentions the average PE ratio for the NIFTY 50 to be at 23.47 times against the price band mentioned of the company at 161.57 times. The multiplier is a steep 6.88 times.

Let us come to the business of the company. It is a top end fashion retailer having its stores as EBO’s in malls, fashion streets across cities and towns. The company retails wedding and celebration wear, a new category created by the company to identify itself. The category includes men, women and children wear. The size of this industry is estimated at a massive 1.02 lac crs with the bulk of the same being women wear which is not the strongest segment for Vedant Fashions. For Vedant, the strongest segment is the men’s segment where their premium brand is ‘Manyavar’. Sales reported by Vedant Fashions in the year ended March 2021 were about Rs 565 crs which means a little under 0.6% of the category that the company has mentioned as wedding and celebration wear. They have not mentioned any competitors for them in the RHP either. When there is such a large category and no meaningful names to talk about, it makes the categorisation itself difficult to accept.

Some names which come to mind in this segment include TCNS Brands Limited a women’s fashion brand, Raymond’s Limited, a premium men’s brand and Reliance Trends. While all these brands put together would hardly total Rs 3000-3500 crs in top line, what is really intriguing is the size of the category and the players.

The issue from Vedant Fashions is a high profile and hyped issue coming with unheard of valuations. The company has created a new category for itself in which it operates. It is for the investor to decide whether he would like to invest in such an issue or take a measured call and then decide what should be his response to such an issue. I urge investors to do some homework as there are still two days left before the issue closes. At the end of day one, the issue overall is subscribed 0.14 times with the retail portion subscribed 22%.

The Union budget was announced on the 1st of February and it was better than expected. The markets were worried about populism with 5 states headed for polls from the 10th of February. On the contrary the sum and substance of the budget was to spend on infrastructure, give a boost to capex and keep things by and large the same. There was no tinkering, no changes in tax laws and incentives announced in extending the period by one year for new manufacturing units. Apart from the 14 sectors where PLI schemes have been already announced, the budget announced one more for the solar module and production sector with an outlay of Rs 22,500 crs. Surprisingly with talk of taxing the super-rich, nothing was done either on the tax front or the wealth tax front. Incentives have been given for GIFT city and I believe that with the UAE levying tax at 9%, the new scheme announced for GIFT City may see a shift of P-Notes to this place. More clarity on the same would be needed.

The week ahead sees RBI meet between the 7th and 9th of February for its monetary policy meeting. It is widely believed that key policy rates would be kept unchanged and signal the same message that the budget has given. While there could be a commentary which signals that inflation is a concern and that tightening of rates does happen going forward, things would remain at status quo currently.

Coming to the markets in the week ahead, the event of the week would be the filing of DRHP of LIC prospectus in the coming week. This would be a fast-track issue and would see the light of day in roughly four to five weeks. The issue would set a new record for receiving the largest number of applications ever, and it may be a good idea if the people connected with the issue look at keeping an extra day for just retail investors in the issue. Against the normal three days that an issue is open, this could remain open for an additional fourth day for just retail investors.

Markets would be volatile and trade in the broad band as mentioned earlier. They would be volatile and have no trend. Key factor would be FII trade who continue to be net sellers. Trade cautiously.

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