Listing gains fizzle out as Suryoday, Kalyan Jewellers make tepid debut
Shares of Suryoday Small Finance Bank ended at ₹277.80, 8.9% lower from its issue price of ₹305
Mumbai: Shares of Suryoday Small Finance Bank and Kalyan Jewellers India made weak stock markets debut on Friday indicating that the trend of listing pop or gain may be fizzling out as markets are getting increasingly worried about a potential second wave of covid in India.
Shares of Suryoday Small Finance Bank ended at ₹277.80, 8.9% lower from its issue price of ₹305. The stock listed at ₹292, a discount of 4.2%. The ₹582-crore initial public offering (IPO) was subscribed 2.4 times. The price band for the offer was ₹303-305 per share.
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Proceeds of the issue will be used to augment the bank’s tier – 1 capital base to meet its future capital requirements and general corporate purposes.
“We feel the bank would continue to face challenges in the near term however its medium to long term outlook remains bright. Going ahead, the bank focus remains on growing secured portfolio in non-MFI such as commercial vehicles and housing loans, also expanding distribution channel as well as increase geographical presence will remain their top priorities," said Religare Broking.
The bank has been able to diversify its product portfolio into segments such as commercial vehicles, home loans and other loans but its large chuck still depends on microfinance business (MFI) (70%). Due to covid its large exposure to MFI business deteriorated the bank’s assets quality however it is expected to get normalized once collections efficiency improves.
In terms of region business presence, major business (75-80% of revenue) comes from three states such as Maharashtra, Tamil Nadu and Odisha and these states were severely impacted by the pandemic.
“The IPO pricing at 2.1 times current price to adjusted book value (P/ABV) is at par with listed larger peers. However, considering the gaps in the franchise and execution capabilities, we believe that IPO valuation is relatively unattractive. It does not face any regulatory overhang," said Yes Securities in a note ahead of the issue.
As of December 31, 2020, the Bank’s gross non performing NPAs were ₹29.91 crore, 0.78 % of gross advances, and net NPAs were ₹12.81 crore or 0.33 % of net advances.
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“Additionally, we also expect operating parameter to improve further at a healthy rate owing to improvement in net interest margin (NIM), asset quality. On comparative basis, the company is placed at a little bit higher valuation as compared to its peers. However it is expected that the company is going to get benefited from the overall growth in demand of commercial vehicle loans and affordable housing finance which results in improvement in overall return ratios," said Anand Rathi.
Meanwhile, shares of Kalyan Jewellers India Ltd also made a tepid stock market debut on Friday, with shares ending at 13.5% discount to its issue price of ₹87. The stock was listed at 15% lower from its issue price in morning.
“Kalyan Jewellers has faced headwinds in the past couple of years. For instance, in FY19, revenues were impacted owing to severe floods in south India (60% of revenues) while revenue in FY20 was adversely impacted in Q4 owing to covid led lockdowns," said ICICI Direct in a note.
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