KFC operator makes strong market debut; four stocks list on the same day

Wealthy investors who put in money in the recent initial public offering (IPO) of Devyani International would have made some gains after the leading franchisee for KFC, Pizza Hut and Costa Coffee in India made a strong debut at the bourses on Monday. Exxaro Tiles, too, provided some positive returns upon listing but high net-worth individuals (HNIs) lost money in Krsnaa Diagnostics and Windlas Biotech.
 
The Devyani stock listed at Rs 141 — a 56 per cent premium to the issue price of Rs 90. But it could not hold on to the sharp gains because of profit booking and ended the session at Rs 123.35, a 37 per cent premium to the issue price.
 
Devyani’s IPO was subscribed 116 times. The institutional portion was bought 85 times, the wealthy investor or HNI portion was subscribed 213 times, and the retail investor portion 39x. Because of the high oversubscription of the HNI portion and/or a spike in interest rates, the break-even price for the stock was Rs 123, assuming a 9 per cent financing rate, according to experts.
 
The  Rs 1,838-crore IPO comprised a Rs 440-crore fresh issue and Rs 1,398-crore offer for sale (OFS). The proceeds of the fresh issue would be used to pay off the company's debt. The company operated 696 stores across 166 cities in India as of June 30, 2021.
 
Among the three other stocks listed on Monday, only Exxaro's HNI investors would have made small gains as the stock ended the day at Rs 132.2 apiece on the BSE, against the issue price of Rs 120; it listed at a 5 per cent premium at Rs 126.
 
The break-even for Exxaro’s stock was Rs 121, according to experts. The non-institutional portion for Exxaro Tiles was oversubscribed just 5.36 times.

Meanwhile, shares of Krsnaa Diagnostics (subscribed 116.3 times by HNIs) opened at Rs 1,025, 7.4 per cent above their issue price of Rs 954, and ended the session at Rs 990.7. Yet, wealthy investors lost money as the break-even was supposed to be at Rs 1,145.
 
On the other hand, Windlas Biotech opened at Rs 439, a 5 per cent discount to its issue price and closed at Rs 406.7, an 11 per cent discount to its issue price.
 
The four IPOs cumulatively generated bids worth Rs 1.7 trillion and attracted over 10 million retail applications.
 
The huge demand from HNIs raised borrowing rates for NBFCs, according to experts. IPO loans are typically availed of by HNIs confident of a company listing at a significant premium, giving them the scope to exit the stock on the first day or in a few days of listing. Since shares list within 7-10 days of closure of the IPO, loans are typically given for a matching period.
 
These four IPOs were launched on the same day, for the first time since 2007. Investment bankers usually don’t bunch up so many IPOs but the strong momentum in the secondary market and ample liquidity from domestic investors gave them the confidence to go ahead.
 
The listing gains given by recent IPOs had made investors across categories exuberant to the point of overlooking company fundamentals. Before Glenmark Life, the four companies to list have seen gains of between 65 per cent and 113 per cent on the first day. Market players said the somewhat tepid listings on Monday, barring Devyani, suggest the excitement wearing off.
 
The public offerings of CarTrade Tech, Aptus Value, Nuvoco Vistas, and Chemplast Sanmar concluded last week. But they managed to garner only a third of retail applications compared to the IPOs launched a week before amid a paucity of funds.