Vedant Fashions IPO: What GMP signals ahead of February 16 listing

Shares of Vedant Fashions, which owns the famous Manyavar brand, will make their market debut on February 16. The stock is likely to make a flat listing, its grey market premium (GMP) suggests a day ahead of opening.  GMP of the stock stood at minus Rs 2 today which signals that the share will likely make its debut at Rs 864 on BSE.

The price band was fixed at Rs 824 to Rs 866 during the IPO. The minor loss of Rs 2 translates into a discount of 0.23% over the issue price of the recently concluded IPO.

The cause of loss can be attributed to the market carnage during which Sensex and Nifty fell by 3% each yesterday, due to weak global sentiment.

The Indian market ended deep in the red on Monday as global indices sinked amid likely invasion of Ukraine by Russia. Sensex closed 1,747 points lower at 56,405 and Nifty fell 531 points to 16,842.

The share sale of Vedant Fashions Limited, the owner of ethnic wear brands such as 'Manyavar' and 'Mohey', was subscribed 2.56 times on its third and final day on February 8.

The IPO received bids for 6.52 crore equity shares against an offer size of 2.54 crore equity shares.

The retail portion was subscribed 39 per cent, while that for institutional and wealthy investor portions was subscribed 7.49 times the reserved portion.

Portion set aside for non-institutional investors was subscribed 1.07 times.

The IPO was subscribed 20% on its second day.

Here's a look at what analysts say a day ahead of listing.

Aayush Agrawal, Senior Analyst, Swastika Investmart said," Vedant Fashions is among the top companies in the Indian wedding and celebration wear segment with the brand name Manyavar Mohey. The company's financials suffered a setback due to the pandemic but returned to normal in the first half of FY22. The issue is valued at P/E 161(x) to its FY21 earnings and P/BV of 24.42(x) which seems to be overpriced. Also, the IPO proceeds are purely an offer for sale and the company will not get benefit from such proceeds. This is the reason the company received a tepid response from the investors getting subscriptions of 2.57 times whereas its retail portion was subscribed only 0.39 times.

The company's grey market share price is at par with the upper price band. The ongoing global scenarios will continue to impact the Indian market and hence the shares are expected to list below their issue price."

Prashanth Tapse, Vice President (Research), Mehta Equities said,"Considering lower-than-expected subscription demands (QIB: 7.49x/ NII: 1.07x/ Retail: 0.39x) to its initial public offering (IPO), we expect at par or discounted listing show in the volatile markets. We believe the reason behind low demand would be on investors' concern over 100%

OFS offer followed by denting selloff sentiments in the recently listed IPOs which failed to perform on the listing day. We also see a few more concerning points like expensive valuations leaving nothing on table for new investors and factors like Russia-Ukraine conflict, global inflationary concern and rising crude prices would impact primary as well as secondary markets in near term.

We recommend conservative investors to exit on listing day at whatever value they can make it and if non-allotted investors wish to buy on a listing day, it is better to wait and watch for better discounted pricing, while risk takers may consider holding it as high risk high return with a long term perspective."