Avalon Technologies IPO: Should you buy, sell or hold the stock after tepid debut

Shares of Avalon Technologies made a muted debut at Dalal Street on Tuesday. The stock was listed at Rs 431 on BSE, a marginal discount against its issue price of Rs 436 apiece. On National Stock Exchange (NSE), the stock was listed at par, that is, at Rs 436.

However, weakness in the stocks deepened as the session progressed and sentiments turned sour. The stock tested lows of Rs 387.75 on BSE, falling another 10 per cent and taking the entire weakness to 11 per cent, if compared to the issue price.

Analysts, on the other hand, remain positive on the counter as they suggest holding it for a long-term citing its strong business profit and entry barriers. However, a few experts said that investors with a high-risk appetite should consider this counter, considering the existing market conditions.

Avalon Technologies operates in a business with high entry barriers and has a global delivery footprint. Despite its strong and stable financial performance, Avalon experienced a decline in its PAT margin during the first eight months of FY22 and currently has a high debt ratio, said Pravesh Gour, Senior Technical Analyst at Swastika Investmart

"Investors with a high-risk tolerance may consider holding Avalon for long-term, with a recommended stop loss of around 415, which was the lower price band of the issue," he said.

The initial public offering (IPO) of Avalon Technologies was open for subscription between April 3 and April 6 as the company was looking to raise Rs 865 crore from the primary markets. It has fixed the issue price in the range of Rs 415-436 apiece with a lot size of 34 equity shares.

The jittery sentiments of the primary market have impacted the listing of Avalon Technologies, said Ravi Singh, Vice President and Head of Research, Share India. "Investors with high-risk appetite may hold the stock from the long-term perspective or wait for lower levels to re-enter after the sentiments stabilized," he said.

The issue was overall subscribed merely 2.34 times, thanks to qualified institutional buyers (QIBs), whose portion was booked 3.77 times. The quota for non-institutional investors (NIIs) and retail bidders failed to get complete subscription as their allocation was booked by 43 per cent and 88 per cent, respectively.

Ravi Singhal, CEO at GCL Broking said, "Avalon Technologies' IPO listing was on expected lines as the issue was aggressively priced. "The stock was expected to drop after listing and hence allottees are advised to maintain stop loss at around Rs 400 and breaching this, the stock may move to the Rs 370 level."

Incorporated in 1999, Avalon Technologies has end-to-end capabilities in delivering box-build solutions in India, focusing on high-value precision-engineered products. It has 12 manufacturing units located across the US and India offering a variety of solutions and services to its clients.

Although the overall outlook for Avalon Technologies is positive, investors should be cautious given the current market conditions, said Krishna Raghavan, Founder at Unlistedkart.

"The electronics manufacturing industry is known for its volatility, and raw material costs may adversely affect the business. Investors should carefully evaluate the company's performance, financial health, and growth prospects before investing in the counter," he said.

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