IPOs are subscribing multi-times since last year. A lot of IPOs have received more than 100 times subscription which seems that market is rewarding fundamentally strong and growth-oriented companies. The trend of bumper listings from IPOs is intact and expected to continue further as growth stocks are costlier now and providing no chance of dips. Therefore, investors are finding IPOs an attractive way of investing since the inception of listing.
On July 19, two IPOs were listed: G R Infraprojects and Clean Science & Technology. The IPOs received stellar response from the investors as the former one was subscribed a little over 100 times while the Clean Science IPO was subscribed 93.41 times. G R Infraprojects debut at the Indian bourses with more than 100% listing gains while the specialty-chemical manufacturer entered with 75% premium on listing day.
The percentage returns generated on the listing day by these IPOs is much more than majority of the investors generate in a year. A return of around 20% is sufficient to match the benchmark returns generated in a year but a whooping return of more than 70% satisfies the investment goals. This has put investors in dilemma whether to continue with the investment or book profits. Let’s take a look at the post-listing valuations.
G R Infraprojects Limited
Specialized in road construction business, G R Infraprojects has increased their revenues by 38.74%. The infrastructure player is generating 25% EBITDA margins due to higher efficiency. Company claims to deliver highest ROCE and ROE at 32.2% and 27.8% respectively among its listed peers. The firm has a debt of 3,543 crores on its balance sheet while it’s Interest Coverage Ratio is 9.1x. Pre-listing, the company was demanding a Price-Earnings multiple of 10.15x much lower than the Industry P/E of 34.20x. Listed peers KNR Constructions and PNC Infratech are trading at 30.31x and 21.97x respectively. Post-listing, the valuations of G R Infrastructure have spurt heavily. The stock is trading at a P/E multiple of 17.7x.
Growth prospects of the road construction industry are strong. The government has released a lot of helicopter money which is going to the worker segment of the country through heavy spending on infrastructure and construction. Despite, 100% listing gains, the company is far away from the Industry valuations. Investors should not book profits now and stay invested in the stock.
Clean Science and Technology Limited
Specialized in developing newer technologies using in-house catalytic processes for manufacturing specialty chemicals, Clean Science & Technology debut on Indian bourses with 75% listing gains. The company is largest manufacturer of MEHQ, BHA, Anisole and 4-MAP, in terms of installed manufacturing capacities globally. The firm has been able to increase their revenues by 15.3% in last two years. Company has been able to generate 53% EBITDA margins due to higher efficiency while profit after tax is increased by 42.52% in last two years. ROCE and ROE of the company stand at 73.89% and 36.76%. Pre-listing, the company was demanding a Price-Earnings multiple of 48.2x much lower than the Industry P/E of 60x. Post-listing, the valuations of Clean Science and Technology have spurt heavily. The stock is trading at a P/E multiple of 84.78x. Listed peers are trading in line with the current multiples.
Specialty chemicals industry has huge growth prospects as India is getting more export orders due to heavy restrictions in China to contain environmental degradation. Pricing of the company is line with peers on the basis of P/E parameter while dependency on green technology and high return ratios is expected to provide high premium to the stock. Investors can book profits on half of their holdings while half could be continued for more gains in future.