MDSL Lists At 49% Premium, UTI At 11.5% Discount On First Listing Day

October saw two stellar Initial Public Offerings (IPO’s) - Mazgaon Dock Shipbuilders (MDSL) and UTI Asset Management Company - getting listed on Indian bourses. The price band of the offer by UTI was fixed at Rs 552 to Rs 554 per equity share. The IPO opened for subscription on September 29, 2020, and closed on October 1, 2020. Whereas for the MDSL the price band was fixed at Rs 135 to Rs 145 per equity share. The IPO opened for subscription on September 29, 2020, and closed on October 1, 2020.

The MDSL today on BSE exchange opened at Rs 216.25 per share at a 49 per cent premium from its issue price of Rs 145 per share. The stock ended at Rs 173 on its first listing day. When it comes to UTI AMC, the script opened at Rs 490 a 11.5 per cent discount from its issue price of Rs 554 per share. When it comes to MDSL stock the current market scenario, volatility, and any correction in the stock can be a good buying opportunity for long-term investors, say, market experts.

“Defence sector's outlook is positive mainly due to government initiative like the government has taken steps to ban 101 defence items, which indicates the government’s focus on indigenisation to promote and create big opportunities in the sector. Going ahead, it would be beneficial for companies like MDSL. However, any correction in the future would create buying opportunities in the stock,” says Amarjeet Maurya - AVP - Mid Caps, Angel Broking.

MDSL is a Public Sector Undertaking (PSU) that falls under the Department of Defence Production and one of the leading shipbuilding yards in India. The company is into construction, repairs, warships for the Ministry of Defence (MoD), for the Indian Navy, as well as for commercial clients. “Mazgaon Dock is trading at Rs 173/share, over its IPO price band of Rs.135-145/share. Strong order book position (10X of FY20 revenue) and visibility of strong order flow due to govt’s thrust to modernise Indian Navy are the reasons for bumper listing,” says Vinit Bolinjkar, Head of Research, Ventura Securities.

As per CRISIL, the UTI Asset Management (UTI) is the second-largest asset management company in India in terms of total Asset Under Management (AUM) as of June 30, 2020. UTI AMC has launched its IPO at discount compared to listed peers. With that, the UTI AMC would be the third AMC to get listed after Nippon Life India Asset Management in the year 2017 and HDFC AMC in 2018. The UTI AMC retail portion was subscribed to 2.32 times. Whereas the public issue subscribed in the retail category by Nippon Life was 5.65 times and for HDFC AMC the public issue subscribed was 6.57 times.

That said, Mazgaon docks got listed on a premium as it received strong investors’ participation. Whereas, UTI AMC witnessed a slower start as market participant response to IPO was mediocre, on the back of outflow in the mutual fund industry in the last few months as per the experts. “We have a positive view of both companies for the long term. We believe with the rising financialisation of savings and increasing investor base would revive the trend of the mutual fund industry, which would benefit UTI AMC. Further, the company has a strong product portfolio and high brand recall, extensive distribution network, and diverse client base. We would advise investors to buy the stock at current levels and hold for the long term for healthy gains,” explains Ajit Mishra, VP Research, Religare Broking.

That said no two companies listing on the same day would have had more chalk and cheese market debuts. “The past performance, revenue visibility, and industry dynamics have played out well in these two stock listings. Mazgaon’s bumper listing at ~50 per cent upside to its IPO price reflects the street’s optimism in the company’s ability to benefit from India’s defence growth story, healthy Return on Equity (ROEs), debt-free status, attractive dividend yields, and valuations amongst listed peers,” concurs Siji Philip, Senior Research Analyst, Axis securities.

“UTI AMC, on the other hand, struggled, as investors took note of its declining market share among peer set and muted operational performance, coupled with AMCs being out of favour in the current environment, as redemption pressure persists in the mutual fund industry,” adds Philip.