The Hindu Business Line : Tech Mahindra lists at a premium

"The company will have to broaden its client base to reassure investors. Being a new venture, the company will have to prove that its fundamentals are strong."

PREMIUM DEBUT: Mr Keshub Mahindra (right), Chairman, Mahindra & Mahindra, and Mr Anand Mahindra, Chairman, Tech Mahindra Ltd, look at the screen at the listing of Tech Mahindra shares on the NSE in Mumbai on Monday. The stock opened on the NSE at Rs 521 against the issue price of Rs 365. — Paul Noronha

Mumbai , Aug. 28

Shares of Tech Mahindra made their debut on Monday with the stock opening on the BSE at Rs 525 - 43.83 per cent above the issue price of Rs 365. The stock opened on the NSE at Rs 521.

Tech Mahindra Ltd, an IT solutions joint venture between Mahindra & Mahindra and British Telecom, has floated 12.7 crore equity shares in the market. The company proposes to use the IPO proceeds (amounting to Rs 465 crore) for its project at Rajiv Gandhi Infotech Park in Hinjewadi, Pune.

Over-subscribed

The IPO of the company received a big response - getting subscribed 71.59 times. A total of 82.30 lakh shares were traded on the BSE . On the NSE, volume was put at 1.52 crore shares.

"Such an opening was expected due to the attractive valuations. This stock is definitely a good hold. We are expecting the scrip to reach a yearly high of Rs 690. If there is a `negative surprise', the stock may at the most slide to Rs 500," said Mr Manoj Shroff, Market Analyst, Parag Parekh Financial Services.

With Tech Mahindra drawing the highest over-subscription for any IPO this fiscal, the primary market could see an end to the long subdued phase, say analysts. The issue opened on August 1 and closed on August 4.

"A 50 per cent premium on listing is definitely a good bet, considering the failure of other IPOs around the same period," said a dealer at Edelweiss.

Narrow client base

However, there are worries over the narrow client base of the company in the capital market.

"The company will have to broaden its client base to reassure investors. Being a new venture, the company will have to prove that its fundamentals are strong. As of now, the scrip is good for profit-booking. We will have to see the performance of the company during the next two quarters before advising it to long-term investors," said Mr Gaurang Shah of Geojit Financial Services.

The stock closed at Rs 552.80 on the BSE and at Rs 553 on the NSE.