Gopal Snacks had a forgettable market debut on March 14, with the snack manufacturer listing at 13 percent discount to the issue price. Analysts said expensive valuations, selloff in mid and smallcaps and stiff competition were main reasons for the negative sentiment.
"This negative listing performance falls short of pre-listing expectations and raises concerns about investor sentiment, valuation, and the company's growth prospects in the competitive snack food market,” Shivani Nyati, head of wealth at Swastika Investmart, said.
The issue price may have been perceived to be too high, considering the company's growth trajectory and the competitive landscape. She advised investors to consider risk tolerance and long-term investment goals before holding on to the stock.
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Prashanth Tapse, senior vice president and research analyst at Mehta Equities, said the listing was along expected lines, as the IPO was entirely of an offer for sale with no funds coming the company’s way.
Investors who have been allotted shares should "hold" them, while those who missed out can consider accumulating them on dips, he said.
Also read: Gopal Snacks makes a quiet market debut, lists at 13% discount to offer price
Amit Goel, co-founder and chief global strategist at Pace 360, said fundamentals appear weak due to the company’s reliance on a narrower set of products and regions.
Operating in a fragmented market with tight margins, the firm faces strong competition from major players. "Considering the equity markets' overvaluation, we recommend that investors avoid this company until a substantial correction occurs,” he said.
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Parth Shah from StoxBox, however, is positive on the stock and assigned a "hold" rating for a medium to long-term period. The company is focused on providing consumers with value products that meet their expectations through quality ingredients, he said. Its advanced manufacturing techniques, the perfect mix of macroeconomic opportunities and a well-established brand image point to a robust growth story, Shah said.
In the afternoon, the share price gained slightly, trading 3 percent higher than the listing price but still lower than the issue price of Rs 401.
The Rs 650-crore issue, a pure offer for sale, was subscribed 9.02 times.
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