Amber Enterprises makes good debut; ends 44% premium over issue price

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Amber Enterprises India has made a good debut on the bourses by listing at Rs 1,180, a 37% premium over its issue price of Rs 859 on BSE. On the National Stock Exchange (NSE), the stock opened at Rs 1,175.

Amber Enterprises ended at Rs 1,135 on NSE, after hitting a low of Rs 1,115 so far. Combined shares of around 1.13 million changed hands on the counter on BSE and NSE.

The company's initial public offer (IPO) of  Rs 6,000 million had got a strong response from the all category of investors. The issue was subscribed 165 times with the offer receiving bids for 815 million shares as against 4.93 million offered by the company, data available with stock exchanges showed.

Non institutional investors category was subscribed 519.26 times, qualified institutional buyers (QIBs) category of the IPO was subscribed 174.99 times, retail individual investors (RIIs) category was subscribed 11.65 times and employees category was subscribed 2.27 times.

The issue was a combination of fresh and offer for sale. Majority of the net proceeds from the fresh issue (around Rs 4,000 million) will be utilized to prepayment or repayment of all or a portion of certain borrowings availed by the company.

Amber Enterprises is the leading room air conditioner (RAC) original equipment manufacturer (OEM) and original design manufacturer (ODM) in India, with market share of 55.4% by volumes in the fiscal year ended March 2017 (FY 2017). Nine of the top 10 RAC brands including Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool are customers. They commanded nearly three-fourth share of the Indian RAC market in FY 2017.

“On valuation front, Amber is demanding a P/E valuation of 96.8x as compared to peer average of 62.3x. Moreover, with respect to FY18E EPS of Rs 17, it is demanding a P/E valuation of 50.5x as compared to average FY18E average of 48.2x. Thus we feel that the issue is fully priced,” analyst at Choice Broking said in IPO update.

However, considering the growth outlook in the RAC industry and its positioning in the market, we strongly feel that it would create value in long run. Also this is validated from the no divestment from various prominent investors, added note.

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