Soon after their debut on the bourses, shares of Spencer’s Retail and CESC Ventures, the two entities carved out of CESC, fell 5 per cent.
After the opening, shares of Spencer’s Retail opened at Rs 224 a share on its listing date, declined to Rs 212.80 per share by noon and remained stagnant till the end of the day’s trade.
CESC Ventures’ shares also saw a similar trend. The shares of this demerged entity opened at Rs 548 per share at the commencement of trading, and by 10:00 am declined to Rs 545 per share. At noon, the company’s shares dipped 5 per cent to hover around Rs 520.60 and continued to remain at that level till the close of trading hours.
Rupesh Sankhe, analyst with Reliance Securities, said Spencer’s Retail is a loss-making entity and its geographical spread across the east and south are the key factors investors need to watch out for. On the other hand, at least 55 per cent of CESC Ventures’ revenues are dependent on FirstSource Solutions — the RP-Sanjiv Goenka Group’s IT/ITeS wing.
“These factors have been a cause of worry for investors who had pulled down the stock prices,” Sankhe said.
East India, where Spencer’s has 42 stores, accounts for 38 per cent of the firm’s earnings followed by south, which contributes 37 per cent of the total revenue with 64 stores. The north, comprising limited presence in the UP-Delhi-NCR belt, accounts for 25 per cent of the total turnover, with 40 stores.
Also, an analyst estimated that around 65-80 per cent of Spencer’s revenues come from the food and grocery division where margins have been somewhat flat.
During the fiscal year ended 2015, the foods division in Spencer’s had a margin of 17.7 per cent, which increased to 17.9 per cent by March 31, 2018.
On the contrary, its margins from apparel increased from 29.5 per cent to 35.1 per cent in the same time frame and from 24.4 per cent to 27.3 per cent for general merchandise.
Both stocks have been categorised as T-Group Securities on the BSE, implying they are settled on a trade-to-trade basis as a surveillance measure. On the contrary, shares of CESC opened at Rs 682.40 but rose marginally to close at Rs 686.55.
According to the demerger plan, for every 10 shares held by existing shareholders of CESC, they are getting an additional six shares of Rs 5 each in Spencer’s Retail and an additional two shares of Rs 10 each in CESC Ventures.
An analyst at Motilal Oswal said on account of lack of clarity on the full financial position of Spencer’s and CESC Ventures, investor confidence had weakened a bit on the opening day but may be restored in the coming days as more clarity on the financial position of these two companies emerge.
Vineeta Sharma, head of research at Narnolia Financial Advisors, said while the listing price of Spencer’s was lower than expectation, the same for CESC Ventures scrip was above expectations.
“Currently, mid-cap scrips are under some stress and I think some people wanted to book some profit on the opening day which resulted in the share prices coming down. However, I think the situation will improve when the quarterly results for these two companies come out,” Sharma said.