At such a torrid time, investors and traders on Dalal Street would be wondering of what to expect from the counter of SPL on listing day?
Fine dining restaurant chain operator Speciality Restaurants (SPL) is all set to list its equity shares on Thursday, May 30, 2012. After receiving an initial lukewarm response, the issue finally managed to attract some response from the HNI and institutional investors with it getting over-subscribed by 2.54 times. This helped the company to raise around Rs 175 crore at an issue price of Rs 150 per share.
One must note that this decent response to the offer of SPL has come at a time when the primary markets have either seen companies like Samvardhana and Plastene pulling out their IPO’s or the rest like MCX and NBCC trading well below their offer prices. The IPO market, which usually intends to provide investors with champagne stock opportunities, has unfortunately turned out to be the foremost wealth guzzler, stripping unaware investors of their hard-earned money.
At such a torrid time, investors and traders on Dalal Street would be wondering of what to expect from the counter of SPL on listing day? We as always in the best interest of our readers and the investor fraternity at large would try to ease the concerns and present some clarity on the listing day trading pattern for SPL’s shares.
As per the new SEBI guidelines, investors must note that the shares of SPL would initially go through a pre-open session period which will last for an hour between 9 am and 10 am. During this period, investors would be allowed to punch in orders, modify them and/or cancel them during the first 45 minutes. The rationale behind such a move is aimed at protecting the interest of the retail shareholders from artificial price-rigging on the bourses.
However, the real deal of the new norms introduced by SEBI state that all the IPO listings on the bourses would be controlled by circuit limits right from day one. As per SEBI norms, for a company’s issue size of below Rs 250 crore, in case the equilibrium price (price at which the bid rate matches with the ask rate) is discovered during the pre-open session, the price band for normal trading session shall be 5 per cent of the equilibrium price and if the equilibrium price is not discovered, then the 5 per cent circuit limit would be applicable on the issue price.
Therefore, as SPL falls in the bracket of less than Rs 250 crore, its shares would trade within the range of 5 per cent either on the equilibrium price or on the issue price. If in case the equilibrium price is not met during the pre-open session and the issue price becomes the trade open price during the normal hours, then we expect today’s trading range to be between Rs 142.5 to Rs 157.5 per share.
In conclusion, we at DSIJ, despite the favorable prospects of the food services’ industry in India, the strong foothold of SPL in the fine dining industry and the strong cash flows depicting the strength of its brand value, feel that the aggressive pricing logic applied by the merchant bankers and promoters would fail to receive a fair response from the market. We expect the counter to list itself at a discount to the issue price and advise our readers and the investor community at large to stay away from this counter at the time of its listing. Nonetheless, we shall review this counter in our post issue analysis, and update our readers about the same.