D-Mart's stellar debut: Should you hold or book profits?

Avenue Supermarts (ASL), the operator of supermarket retail chain D-Mart, made a stellar debut on the bourses by listing at Rs 604.40 on the BSE, 102% premium against its initial public offer (IPO) price of Rs 299. LINK

On the National Stock Exchange (NSE), the stock opened at Rs 600, a 101% premium against issue price.

It hit a high of Rs 650 post its listing and settled 114% higher at Rs 342 on the BSE. On NSE, the stock settled at Rs 648.

Independent market analyst Ambareesh Baliga advised investors to book profits because the listing gains have been better than expected and the valuations are also not too cheap. 

AK Prabhakar of IDBI Capital also suggested to take profits at the current prices as the chances of more upside are limited, while the risk of downside has grown.   

“Valuations have become expensive at the listing price of over Rs 600. One can hold the stock for the long-term but traders should book profits and re-enter only if the stock falls below Rs 500,” said Prabhakar, adding the fresh investors should wait for the earnings of at least two quarters to come in before deciding to buy the stock.

The Rs 1,870-crore offering saw 105 times more demand than the shares on offer. The issue generated bids worth Rs 1.38 lakh crore — the most since Coal India’s IPO in 2010. The fund will be used to retire outstanding debt and Rs 367 crore will go towards setting up of new stores.

The qualified institutional buyer (QIB) portion of the IPO was subscribed 145 times, high-networth individual (HNI) segment was subscribed 278 times and retail investor portion saw 7.51 times more demand than the shares on offer.

ASL is an emerging national supermarket chain, with a focus on value retailing. It offers a wide range of products with a focus on the foods, non-foods (FMCG) and general merchandise & apparel product categories. The company is promoted by Radhakishan Damani, a well known personality in the investing community.

“ASL has reported a steady performance over the past five years. With continual store addition, coupled with improving margins, stable cash flows and control of usage of debt for expansion, the company’s performance has been sturdy. Margin improvement has been a result of operating leverage, as employee costs and other expenses reduced as a percentage of sales over time,” Yes Securities, the brokerage firm said in an IPO note.

    Price in Rs      
Name Listing date Issue  Listing % chg LTP %
Sharda Cropchem 23/09/2014 156.00 254.10 62.9 468.00 200.0
Snowman Logiestics 12/09/2014 47.00 75.00 59.6 64.70 37.7
Quess Corp 12/07/2016 317.00 499.00 57.4 684.00 115.8
Thyrocare Technologies 09/05/2016 446.00 662.00 48.4 708.15 58.8
VRL Logistics 30/04/2015 205.00 288.00 40.5 300.00 46.3
LTP : Last traded price on BSE in Rs at 10:10 am


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