Shares of Tata Technologies made a stellar debut on the bourses on Thursday, listing at ₹1,200 on the exchanges a premium of 140 per cent over the issue price of ₹500.
This makes it the seventh-best listing since 2003, and the best debut for an offering exceeding ₹1,000 crore. The stock touched a high of ₹1,400 on the BSE and ended the day at ₹1,314, with gains of 163 per cent.
Shares of Gandhar Oil Refinery also listed at a healthy premium of 76 per cent on Thursday and settled at ₹301.5 apiece on the BSE. Fedbank Financial Services, however, made a tepid debut with shares ending flat on the bourses.
The grey market had hinted at an 80-90 per cent premium for Tata Technologies, indicating an open price of ₹900-950 on Thursday. The counter opened much higher at ₹1,200, surprising market participants.
“A lot of short positions would have built up in the grey market and the short covering may have led to a much higher demand on listing,” said a senior analyst. “Either the promoters have undervalued the shares and left a lot of money on the table, or the market has got it wrong.”
Strong fundamentals, promising growth prospects and the legacy of the Tata group has spurred investor interest in the company, which is the first initial public offering from the Tata group in almost 20 years. The offering was subscribed over 69 times and got 73 lakh applications, a record.
TCS, which listed in 2004, had debut at a 27 per cent premium to its issue price of ₹850.
Tata Tech is now trading at a P/E multiple of about 75x, closer to the valuations quoted by KPIT and Tata Elxsi, which have slightly better margins, said experts. The Tata Tech issue was priced at a steep discount of 69 per cent and 53 per cent to these two peers on FY23 financials.
“We believe that these valuations are not sustainable, and recommend booking profits over the next couple of weeks. There could be better entry points in the next 5-6 months for long term investors at cheaper valuations,” said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360, a multi-asset PMS.
The outlook for the company, however, looked promising given its proven track-record, established capabilities in ER&D services and focus on adjacencies of Aerospace & TCHM (transport and construction heavy machinery), according to analysts.
“Strong optimism in the domestic market has fuelled the surge in IPO listings in the last 2-3 years. A large number of IPOs have been listed at a substantial premium making IPOs an attractive method to invest in good quality companies. We see the IPO frenzy fading after a couple of months as the global economy starts slowing down in CY24,” said Goel.