Epack Durable lists at 4% discount to IPO price: Should you sell, hold, or buy the stock?

Epack Durable IPO: The shares opened at Rs 221 on the National Stock Exchange and Rs 225 on the BSE

The stock of Epack Durable listed at a 3.9 percent discount to the IPO price on January 30, failing to the market expectation of a 2-10 percent premium gain. Despite a weak debut, analysts at Mehta Equities and Stoxbox put the 'hold' tag on the stock for the medium to long term, while Indsec Securities suggested a sell-off.

The shares opened at Rs 221 on the National Stock Exchange and Rs 225 on the BSE as against an issue price of Rs 230. Ahead of the listing, the shares were commanding a 2 percent premium in the grey market, an unofficial ecosystem where shares start trading before the allotment in the IPO and continue till the listing day. Most investors track the grey market premium (GMP) to get an idea of the listing price.

Also Read: Epack Durable makes a quiet start, lists at 3.9% discount to IPO price

The company's strong foothold in both RAC and SDA segments, coupled with its technological edge, positions it favourably to capitalise on the expected growth in the Indian manufacturing landscape.

“We recommend allotted investors to ‘hold’ with a long-term perspective only. For non-allottees, one can accumulate more in dips and look to hold for a long term like 3-5-year time horizon,” said Prashanth Tapse, senior vice-president of research and research analyst at Mehta Equities Ltd.

The issue had received a decent response from investors, getting subscribed 16.37 times and receiving bids for 32.7 crore shares against an issue size of 1.99 crore. The price band for the offer, which opened for subscription on January 19 and closed on January 24, was fixed at Rs 218-230 per share.

“We recommend exiting the stock as most of the industry growth is captured in the stock price. However, new investors can wait for a dip in the stock price to make fresh entries as the industry tailwind is enormous (RAC penetration of 8 percent) and is expected to drive the company’s performance,” said Saral Seth, vice-president of Indsec Securities.

Also Read: All you need to know about Epack Durable IPO

The Rs 640.05-crore offer comprised a fresh issue of 1.73 crore shares worth Rs 400 crore and an offer-for-sale of 1.04 crore shares worth Rs 240.05 crore. The company will use the net proceeds for setting up manufacturing capacities in Bhiwadi, Rajasthan, and Sri City in Andhra Pradesh. Funds will also be used to purchase equipment for the Bhiwadi facility and repaying or prepaying loans.

“With sectoral tailwinds such as increasing global temperatures, higher consumer purchasing power and spending, urbanisation and favourable government policies, the company looks set to perform in the medium to long-term duration. Hence, we advise investors who are allotted shares to hold the shares with a medium to long term horizon,” said Parth Shah, research analyst at StoxBox.

EPACK Durable is India’s second-largest original design manufacturer (ODM) of room air conditioners (RAC). The company also manufactures components such as sheet metal parts, injection moulded parts, cross-flow fans, and PCBA components that are actively used in the production of RACs.

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The company’s customer base includes Blue Star, Daikin Airconditioning India, Carrier Midea, Voltas Limited, Havells India, Haier Appliances (India), Panasonic Life Solutions India, Godrej and Boyce Manufacturing Company and Bajaj Electricals.

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