Fineotex, Sudar Garments: Small but expensive play

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Fineotex, Sudar Garments: Small but expensive play

"I am surprised that they got subscribed in the first place" says Udayan Mukherjee, CNBC-TV18's managing editor.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » Sudar Garments BSE | NSE 23/05/12 Are Mutual Funds betting on Sudar Garments? Other Stocks in this news Fineotex Chemical | Acropetal Technologies |

Two really small stocks Sudar Garments and Fineotex Chemical listed today.

The shares of garment manufacturer Sudar Garments' saw good buying interest on listing day - surged 15.6% to a high of Rs 89 in early trade on the National Stock Exchange as against issue price of Rs 77 a share. On the Bombay Stock Exchange, it was trading at Rs 88.8, after hitting a high of Rs 89.90 and low of Rs 74.

The shares of Specialty chemical manufacturer Fineotex Chemical (FCL) jumped over 14% in opening trade to Rs 80 as against issue price of Rs 70 on the Bombay Stock Exchange.  At 9:51 hours IST, a share was trading at Rs 98.30, with volumes of more than 42 lakh equity shares. It has touched a high of Rs 103.70 a share.

"I am surprised that they got subscribed in the first place" says Udayan Mukherjee, CNBC-TV18's managing editor.

"Both Fineotex Chemicals and Sudar Garments don't look like the kind of companies which would generate anything for the investors at the IPO price, "he adds.

According to him, Fineotex particularly, is quite expensive since it is a tiny chemicals and enzymes company. "The company is looking at market cap of Rs 80 crore to buy Rs 4 crore of PAT this year which is almost at 180-20 PE multiples. Stocks in that sector should not be trading at this kind of PE multiples," he said.

"The fair value for Fineotex is probably Rs 40 or close to that. I don't know what it will do today but eventually it should gravitate to those kind of levels."

"Even Sudar Garments is not a great story. It is again small play and expensive. Rs 140 crore is the market cap at which they issue. They will probably be lucky to do Rs 10 crore of PAT this year having done above Rs 4 crore in the first half of the year. So, Rs 10 crore of profit, Rs 144 market cap and 14 PE you can buy for cheaper. It is far more of a branded retail play."

"The fair value of both these companies is probably whole lot lower than the current market price. The grey market is suggesting positive listing which might happen. You saw what happened with Acropetal yesterday; they were at Rs 130 and back then by Rs 95."