It continues to rain IPOs at Dalal Street in the current monsoon season as the Indian primary markets remain robust with a strong demand.
The upcoming week will see as many as five mainboard primary offerings, raising Rs 3,585 crore from investors. Of the five issues, four shall open on Tuesday, August 19 and close on Thursday, August 21, mopping nearly Rs 3,185 crore.
4 IPO details
Among the four issues opening on August 19, Vikram Solar is the biggest issue, raising a total of Rs 2,079.37 crore via IPO, including a fresh share sale of Rs 1,500 crore and offer-for-sale of up to Rs 1,74,50,882 equity shares by its promoters and shareholders. The company shall be offering its shares in the range of Rs 315-332 apiece with a lot size of 45 equity shares.
Gem Aromatics and Shreeji Shipping Global follow the next in terms of issue sizes. They will be raising Rs 451.25 crore and Rs 410.71 crores, respectively. Gem Aromatics is selling its shares in the range of Rs 309-325 apiece with a lot size of 46 shares, while Shreeji Shipping shall be offering shares in the range of Rs 240-252 in the multiples of 58 equity shares.
Patel Retail is the smallest issue opening on August 19. The company is raising a total of Rs 242.76 crore via primary route, offering its shares in the range of Rs 237-255 per shares with a lot size in the multiples of 58 equity shares. Ambarnath-based Patel Retail is a retail supermarket chain, incorporated in 2008, that operates primarily in tier-III cities and nearby suburban areas.
Incorporated in 2005, Kolkata-based Vikram Solar is a solar photo-voltaic modules manufacturer, while Jamnagar-based Shreeji Shipping is a shipping and logistics company focusing on dry-bulk cargo, incorporated in 1995. Gem Aromatics is a Mumbai-based manufacturer of specialty ingredients, including essential oils, aroma chemicals, and value-added derivatives since 1997.
Latest GMPs
Vikram Solar has seen a fall in its grey market premium (GMP), falling to Rs 60-62 apiece from Rs 69. Shreeji Shipping’s GMP has seen a mild decline to Rs 26 from Rs 30. GMP for Patel Retail has inched up firm at Rs 35 apiece. On the contrary, after an initial ignorance, Gem Aromatics has seen a grey market premium of Rs 41 apiece. All 4 IPOs are signaling 12-18 per cent listing gains.
However, some analysts remain skeptical of the ongoing IPO activity as they believe that the current primary market action is driven by euphoria, but less on fundamental strength. They believe that retailer’s see IPO as a scheme for a quick, giving an easy exit to promoters and existing investors at rich levels.
Brokerage views
View from Santosh Meena, Head of Research at Swastika Investmart believes that Vikram Solar’s valuation is exorbitantly priced, which making it a high-risk, long-term bet, but he favors Shreeji Shipping due to its niche business model focused on dry bulk cargo at non-major ports.
“Patel Retail is a fully priced issue, bit regional concentration, competition and high debt-to-equity ratio are key risks. Gem Aromatics deals with risks of single product category, declining return ratios and forex exposure” he said, adding thay the long-term outlook for IPO space stays positive, supported by India’s economic growth and a strong IPO pipeline.
Commenting on Vikram Solar, SBI Securities said that the valuation is in-line with peers on EV/Ebitda basis. Margin is set to improve as the solar cell capacity comes onstream in FY27. “We recommend investors to ‘subscribe’ to the issue,” it said. Similarly, Lakshmishree Investments also suggested a ‘subscribe rating’ for investors seeking exposure to India’s clean energy value chain.
Shreeji Shipping will use the proceeds from the issue to acquire Dry Bulk Carrier in the ssupramax’ category, further strengthening its fleet size. It does not have any listed like-to-like peers in India, said SBI Securities with a ‘subscribe’ rating. Canara Bank Securities also has a ‘subscribe’ for the IPO given its operational resilience, brand equity, and valuation comfort.
The processing division, though currently underutilized, is slated for investment to expand capacity utilization, as the promoters have indicated, said Choice Broking with a ‘subscribe’ rating for Patel Retail citing solid long-term visibility. However, SBI Securities assigned a ‘neutral’ rating to the IPO with likely marginal listing gains based on its cheaper valuation relative to the peers.
Gem Aromatics’ business is working capital heavy due to extended receivable days on exports; higher inventory of mint due to limited procurement period; and higher SKUs to cater to client’s requirements, said SBI Securities. The issue is valued at post issue capital FY25 PE of 31.8x which looks attractive than its peers. We recommend investors to ‘subscribe’ to the issue,” it added.