Despite uncertainty in the domestic equity markets, Harsha Engineers may list at a significant premium over its issue price of Rs 330 per share. The public offer, which opened for subscription on September 14, got oversubscribed by 74.70 times on the last day of the bidding process on September 16.
Considering the excellent response from the investor category, Prashanth Tapse, Research Analyst, Senior VP Research, Mehta Equities, believes that shares of the company may list around Rs 480-500, which translates to more than 45-51% premium over the upper end of the IPO price band. The company had fixed a price band of Rs 314-330 for the public offer.
The quota reserved for qualified institutional buyers got oversubscribed 178.26 times. Likewise, the portion reserved for non-institutional investors and retail individual investors also got oversubscribed by 71.72 times and 17.63 times, respectively.
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“High premium listing is justified on the back of a virtual monopolistic business model in its product segment which generated a stronger than expected investor demand. On valuation per se the ask price is fairly valued when compared to its industry peers. We are very optimistic on Harsha Engineers with its dominant position and well placed to tap the growth in specialised precision components and bearing cage demand across all the industries,” Tapse said, while adding that allotted investors should look at booking profits for such healthy listings in current market scenario.
Aayush Agrawal, Senior Research Analyst, Swastika Investmart, echoed similar views. He also believes that the company may surprise the markets and make a grand debut to list above its grey market premium.
“The company’s strong fundamentals, competitive advantages like high entry barriers and switching costs, experienced management team and robust growth outlook explain the healthy grey market premium. Further, the company is a proxy play on India becoming the global manufacturing hub. Our recommendation for the investors is to hold the allotted shares and long-term investors can accumulate the stock on dips,” Agrawal said.