HPL Electric makes poor debut, lists at 5.9% discount over issue price

NEW DELHI: HPL Electric and Power on Tuesday made a poor debut on Dalal Street, with the scrip getting listed at Rs 190.05 on BSE, which was at a discount of 5.92 per cent over its issue price of Rs 202 apiece.

At the end of the listing day, the scrip was down 6.41 per cent at Rs 189.05. At this price, the market capitalisation of the firm stood roughly at Rs 1,215.60 crore.

The IPO was sold between September 22 and September 26 and 1.44 crore share issue was subscribed 8.06 times. The quota reserved for non-institutional investors was subscribed 22.20 times, that for qualified institutional buyers (QIBs) 5.77 times and the retail investor portion 3.31 times.

The price band for the IPO was fixed at Rs 175-202 per share.

At this issue price, the company was valued at 12.3 times EV/Ebitda and 35.5 times PE on FY16 (post dilution), compared with an average of 12.9 times EV/Ebidta and 32.5 times PE of peers.

“While one of its peers, Havells India, trades at premium valuations, it has far superior financials and return ratios. HPL has weak fundamentals with a stretched balance sheet, low growth and returns ratio. HPL’s valuation discount to peers is justified and the company may not command superior valuation post listing,” Centrum Broking said in a note.

The proceeds of the issue will be utilised for repayment of loans, funding working capital requirements and general corporate purposes.

“The IPO proceeds will help reduce leverage significantly. The company is focused on reducing working capital intensity by introducing measures like channel financing and C&F agent model for inventory management. Impact of UDAY should also help improve payment cycle from SEBs,” brokerage Prabhudas Lilladher said in a note.