The week gone up and the week ahead are profoundly frantic for the initial public offerings (IPOs). Monday will the last day of subscription for ICICI Securities IPO and also the first day of subscription for Lemon Tree Hotels IPO. Two weeks ago, the Indian stock markets witnessed the opening of a massive Rs 4,500 crore Bandhan Bank IPO on March 15, followed by Rs 4,200 crore Hindustan Aeronautics IPO a day later. The following week that ended on March 23 saw a public issue of ICICI Securities amounting to over Rs 4,000 crore. Although Bandhan Bank IPO drew a good response since the issue was oversubscribed nearly 15 times by the last day of public issue, the defence equipment maker Hindustan Aeronautics (HAL) barely scaped through with 99% of the subscription done on the last day of IPO. If you are a long term investor, following are the things you should watch out for as the IPO season progresses.
ICICI Securities IPO Vs Bandhan Bank IPO Vs Hindustan Aeronautics IPO Vs Lemon Tree Hotels IPO
1. ICICI Securities IPO opened on Wednesday with a price band of Rs 519- Rs 520 per share for the initial public offering. The company posted net profits after tax (PAT) to the tune of Rs 337 crore in 2017 against Rs 235.7 crore a year ago. The company had total assets to the tune of Rs 2040 crore at the end of March 2017 against Rs 1,392 crore a year ago.
2. Among the risk factors, ICICI highlights the fact that its business is grossly dependent on information technology (IT) and hence, subject to risks arising from any failure of, or inadequacies in, our IT systems. The company also admits its weakness in facing intense competition in business, which may even limit its growth and prospects. “We face significant competition from companies seeking to attract our customers financial assets. In particular, we compete with other Indian and foreign brokerage houses, discount brokerage companies, investment banks, asset managers, among others. They may have advantages over us that include their ability to charge lower commission.”
3. Lemon Tree hotels IPO will open on Monday and close on March 28. The Lemon Tree Hotels IPO price band is between Rs 54 and Rs 56 per equity share of face value of Rs 10 each. The P/E ratio based on EPS for the fiscal 2017 is 771 (floor price) and 800 (cap price)
4. Bandhan Bank IPO closed on Monday (March 19). With nearly 15 times subscription taken place on the last day of IPO, the public issue of this small financial institution-turned bank received bids for over 122 crore shares against the total available 8.34 crore shares. Bandhan Bank IPO’s price band seems relatively cheaper since the price band is between Rs 370 and Rs 375. Despite the seemingly lower valuation, Bandhan Bank’s P/E (price/earnings) ratio lies between 36.45 and 36.95. If you juxtapose it with the corresponding ratios of its peers, Axis Bank, HDFC Bank, IndusInd Bank and ICICI Bank, the valuation doesn’t seem cheap in relation to the P/E ratios of 35.88, 33.47, 36.5 and 20.16, respectively.
5. Hindustan Aeronautics IPO was subscribed 99% of the shares on the last day. The Hindustan Aeronautics IPO closed on March 20. The poor response to the IPO can be attributed to seemingly higher valuation of Rs 1,215-Rs 1,240. Though the Hindustan Aeronautics Ltd (HAL) valuation seemed somewhat high, but it doesn’t appear exorbitant in relation to the earnings it posted. The HAL earnings per share (EPS) of fiscal 2017 and fiscal 2016 are Rs 73 and Rs 42. Hindustan Aeronautics (HAL) P/E ratio at the lower end of IPO price band is 16.64 while the ratio at the upper end of price band is 16.99.