The week gone by was eventful and choppy. The dream run by NIFTY in logging 14 straight sessions came to an end and the correction picked up steam on Friday. What the week ahead holds in store would be discussed later on. With BSESENSEX losing on four of the five sessions and NIFTY losing on three, markets ended in a sea of red on Friday. The week ahead has plenty of IPOs opening on the main board and whether that would be impacted by this weakness is something to be watched out for. BSESENSEX lost 1,181.84 points or 1.43% to close at 81,183.93 points while NIFTY lost 383.75 points or 1.52% to close at 24,852.15 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.31%, 1.32% and 1.08% respectively. BSEMIDCAP was down 1.14% while BSESMALLCAP was down a mere 0.08%.
The Indian Rupee lost 9 paisa or 0.11% to close at Rs 83.95. Dow Jones had a terrible week, losing on three of the four sessions and managing gains on just one. It lost a massive 1,217.67 points or 2.93% to close at 40,345.41 points. What is worrisome is that the S&P and NASDAQ were weak as well. With a US FED rate cut expected sooner than later, the market seems to be getting confused with how to react to the cut and the quantum of cut when it happens.
In terms of primary markets, it was full of action. We had three listings and one issue closing for subscription in the week gone by. The week ahead has as many as four issues opening and closing for subscription, with three of them opening on Monday and closing on Wednesday. The fourth would open on Tuesday and close on Thursday. We would also have two listings in the week ahead.
The first share to list on Tuesday the 3rd of September was Premier Energies Limited which had issued shares at Rs 450. The discovered price was Rs 991 which was a massive gain of Rs 541 or 119.95%. The share was unable to sustain itself and lost ground and closed at Rs 839.65, a gain of Rs 389.65 or 86.58%. The share lost some ground on the following day and then rose sharply to close at Rs 1,095.40, a gain of Rs 645.40 or 143.42%.
The second share to list was ECOS Mobility and Hospitality Limited which did so on Wednesday the 4th of September. The discovered price was Rs 391.30 against the issue price of Rs 334. The share closed day one at Rs 442.80. It lost some ground and closed the week at Rs 438.60 a gain of Rs 104.60 or 31.32%.
The third share to list was Bazaar Style Retail Limited which had issued shares at Rs 389. The share listed on Friday at the identical price of Rs 389 and went on to hit the high at Rs 430.95. Profit taking saw the share come down sharply and close at Rs 399.65, a gain of Rs 10.65 or 2.74%.
The first of the three IPOs slated to open on Monday the 9th of September is from Bajaj Housing Limited. The issue consists of a fresh issue of Rs 3,560 crores and an offer for sale of Rs 3,000 crores in a price band of Rs 66-70. The company is promoted by Bajaj Finance and Bajaj Finserv. The company has been into the business of mortgage lending since 2018. It has the full basket of products and caters to home loans, loans against property, lease rental discounting and developer finance.
The company reported an EPS of Rs 2.6 for the year ended March 24. Based on these numbers the PE multiple is 25.4-26.9 for the company. A better way to look at a finance company is the price to book. This in the case of the company who has an NAV of Rs 18.81 as of 30th June 24 is at 3.72. One does understand that post the fund raising this would improve significantly but so also the EPS would get diluted in the short term due to the fresh fund raise. While the company has size, scale and has everything going in its favor, it has competition and one should look at valuations of its peers such as PNB Housing as well.
One other point which needs to be mentioned is that this is an issue from the group after 30 years and one expected that shareholders would be rewarded. While the DRHP mentioned it, the same was significantly altered in the RHP. One did not expect this from just a respectable group. The hue and cry caused sanity to prevail and the status quo to be restored. The sore point which remained at the end of it all was why the drama in the first place and did someone benefit from it.
The second issue to open on the same dates is from Tolin Tyres Limited which is tapping the capital markets to raise Rs 230 crores. Of this, Rs 200 crores is through a fresh issue and Rs 30 crores is through an offer for sale in a price band of Rs 215-226.
The company is into the manufacture of tyres and tread rubber with the latter being the dominant share being of tread rubber. The company earned an EPS of Rs 9.52 for the year ended March 24. At this EPS the PE band is 22.59-23.75. The company compares favorably with its competitors and has an advantage in the fact that it is the only entity making tread rubber in the UAE.
The third and final issue to open on Monday is Kross Limited which is raising Rs 250 crores through a fresh issue and Rs 250 crores through an offer for sale in a price band of Rs 228-240. The company is into the manufacture of trailer axle and suspensions and Truck components. It reported an EPS of Rs 8.30 for the year ended March 24. Based on this EPS, the PE multiple is 27.47-28.02 for the issue.
The present revenue is fairly divided between the two broad segments and exports is a very insignificant portion. Going forward, exports would pick up and marh=gins in exports are higher than domestic. The company has developed a range of products for export and received validation for many of them. This is a time-consuming process and ramping up would happen and the product stream continues to receive validation. With Europe and America outsourcing to India happening this would be a great opportunity for Kross to stand up and deliver.
The line of activity, its comparison with peers in the group offer investors with a medium-term outlook to make returns.
The final issue for the week ahead is from P N Gadgil Jewellers Limited which is tapping the capital markets with its fresh issue of Rs 850 crores and an offer for sale of Rs 250 crores in a price band of Rs 456-480. The company as the name suggests is a jeweller selling gold, diamonds, platinum and silver jewellery. The company is a dominant player in Maharashtra and has all its stores in the state. It began operations in its flagship store in Pune and has grown in the state since then.
The company is known for its quality and is well appreciated by its customers for its customer centric approach to doing business. It enjoys decent margins and has been growing over the years. With the IPO proceeds it would be able to convert its working capital loans and switch to more efficient gold metal loans which are a natural hedge as well.
The company reported an EPS of Rs 12.59 for the year ended March 24 which reduced to Rs 5.89 on a fully diluted basis. The PE multiple on basic EPS is 21.12-22.23 while on a fully diluted basis is 34.86-36.70 times. This is comparable when compared with a regional player from Tamil Nadu, Thangamayil Jewellers and a large Eastern India player Senco Gold. It is significantly cheaper than Kalyan Jewellers. The share offers appreciation in the medium term for investors.
The correction last week was significant and also served as a reality check for market participants. With global cues and markets also under pressure, our markets will need a superhuman effort to come out of the present pressure being witnessed. The downgrade of SBI on Friday and yet another brokerage house commenting on Vodafone Idea, are trouble spots. Going forward many more such downgrades should be expected considering that the present rally is now mature, and needs to correct. Key support at 24,850 is where the NIFTY is presently and on Fridy it made a low at 24,801. If the low of Friday were to break there could be further weakness in the markets and levels of 24,500-24,600 would loom large. The active participation of the smaller investors who have made money but have no holding capacity could now bite the markets as weakness builds up.
Markets are in interesting times and pressure exists on the bulls with the bears having the upper hand. Trade cautiously.