Analysts believe IKIO Lighting will list at a strong premium on June 16 given the premium at which it trades in the grey market, demand for the shares during book building and strong outlook of its business in the long term.
“Considering the overwhelming response the IKIO IPO received and its current grey market premium, we can expect an upside listing at around 30–35 percent, and the company's current performance and growth potential justify this gain,” said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart Ltd.
“Secondly, its strong focus on R&D and backward integration, its well-established relationship with clients, and its consistent financial performance are also some reasons why this IPO is attracting such demand.”
Incidentally, the grey market premium came down in the last few days, which hit a peak of Rs 125 or 44 percent over the issue price. It fell amid consolidation in the secondary market. However, analysts are unperturbed.
“We are expecting the company to list at 25-30 percent premium,” said Astha Jain, Senior Research Analyst at Hem Securities. “We recommend partial profit booking on the listing day if it trades at 30-35 percent premium.”
She advised investors, who got the allocation to hold partial allotment for the long-term as the company is well poised to capture growth of the LED market with a diverse product basket and focus on high-margin areas.
Among the key strengths of the company, analysts highlight, are long-term relationships with leading industry customers, a strong focus on R&D, established infrastructure with backward integration along with strong and consistent financial performance.
The maiden public issue of Noida-based IKIO was subscribed 66.30 times during June 6-8 with qualified institutional buyers' (QIBs) reserved portion being booked 163.58 times, high networth individuals (HNIs) 63.35 times and retail 13.86 times.
“IKIO Lighting has attracted strong interest from market participants and is expected to list at a significant premium to the issue price,” said Manish Chowdhury Head of Research Stoxbox. “We attribute this robust expectation to the company’s adoption of the ODM business model which aids it to maintain long-term relationships with customers and is margin accretive due to higher premiums charged for its designs.”
He added that the company’s focus to diversify into newer products along with the high growth potential of the Indian high-end home and decorative lighting market bodes well for the company’s future business prospects.
Its products are categorised as LED lighting, refrigeration lights, ABS (acrylonitrile butadiene styrene) piping and other products.
IKIO and its shareholders raised Rs 606.5 crore via public issue, at the upper end of the price band of Rs 270-285 per share, comprising a fresh issue of Rs 350 crore.
(With inputs from Sunil Shankar Matkar)
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