Its not everyday, that you see a stock (not a Penny stock), that has doubled in value, and that too specifically on its IPO. Without further delay, lets look into the company, the reasons behind the D-Day and Is it worth it.
Shares of Avenue Supermarts Ltd, the parent of D-Mart, saw a stellar listing on Tuesday as it surged over 110% after its initial public offer (IPO) to raise Rs1,870 crore was subscribed more than 100 times earlier this month.
Avenue Supermarts’ shares opened 102.14% higher on the BSE at Rs 604.40 a piece , compared to the issue price of Rs299 per share,which was the upper end of the price band.
At 12.37pm, the shares were up 108% to trade at Rs620.50, while benchmark 30-share Sensex falls 0.35% to trade at 29,416 points.
The scrip continued the upward trajectory and closed up 115% at Rs 640.75 a piece on BSE.
Earlier in the day, the shares touched a high of Rs650 and a low of Rs558.75, respectively.
The company raised Rs 1,870 crore from the IPO and became the first company in twelve years to get listed at a premium of over 100%.
Since the shares of DMart were oversubscribed by over 105 times, many retail investors were left with little shares than what they had originally applied for.
This is the reason why shares of the company have more than doubled within a day of trading.
The supermarket chain, with a focus on value-retailing, opened its first store in Mumbai in 2002, and had expanded to 118 outlets as of 31 January, 2017.
For the nine months to December 2016, the company reported a total revenue of Rs8,803 crore. Its net profit grew at a CAGR (compounded annual growth rate) of 40.55% from fiscal 2014 to Rs318.76 crore in fiscal year 2016. For the nine months to December, its net profit was Rs387.47 crore.
The supermarket chain, with a focus on value-retailing, opened its first store in Mumbai in 2002, and had expanded to 118 stores as of 31 January.
Avenue Supermarts intends to use the proceeds from the D-Mart IPO to repay debt of Rs1,080 crore, fund the construction and purchase of fit-outs for new stores to the tune of Rs366.6 crore, and the rest for general corporate purposes.
So, is there still an opportunity to invest in the company or have the valuations now look stretched?
Medium and short term investors/traders should at least book partial profits as in medium term D-Mart stock can under-perform given its stretched valuations and also the market is consolidating after making a fresh high. Long term portfolio investors are advised to held on to their positions.
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