Auto ancillary company Sansera Engineering is expected to list on the stock exchanges on September 24 with a moderate premium, given the headwinds in the auto sector and lower-than-expected subscription to its initial public offering.
The Rs 1,283 crore public issue during September 14-16 was subscribed 11.47 times and garnered Rs 10,329.62 crore. Qualified institutional buyers bid for 26.47 times the portion reserved for them. The part set aside for non-institutional investors was subscribed 11.37 times and that for retail investors was subscribed 3.15 times.
The public issue was a complete offer for sale of shares by existing investors. The company will not receive any funds.
“We expect a soft 5-7 percent listing gain if market sentiments remain optimistic,” said Prashanth Tapse, VP research, at Mehta Equities. “We assume that the lower-than-expected subscription demand was on the back of 100 percent OFS (offer for sale) and such papers usually don’t attract more investor interest in the short term, especially from retail investors who have 35 percent issue allocation.”
Tapse said the fall in the stock’s grey market premium could be on the back of short-term headwinds in the auto sector and concerns over dilution of the promoter’s stake, which will decline to 36.5 percent from 43.91 percent before the IPO. The public shareholding will increase to 63.4 percent from 56 percent.
Sansera Engineering shares traded at Rs 784-789 in the grey market, a 5.4-6 percent premium over the issue price of Rs 744 per share, according to IPO Watch and IPO Central data. The premium was about Rs 125 a couple of weeks ago.
“Sansera Engineering’s grey market premium is around Rs 40, which is not impressive in this bull run where we have seen robust listings from many IPOs over the past year or so. The auto sector has been under pressure and has not provided impressive returns post-Covid,” said Gaurav Garg, head of research at CapitalVia Global Research.
After subdued demand following the Covid-19 outbreak, the auto sector has faced a chip shortage. Auto company shares have been major underperformers in FY22, although there has been some recovery in the past few weeks after the government announced production-linked incentives of about Rs 26,000 crore for the manufacture of electric and hydrogen fuel vehicles and components.
Astha Jain, a senior research analyst at Hem Securities, expects Sansera to list at a 6-7 percent premium.
Incorporated in 1981, Sansera manufactures complex and critical precision-engineered components and caters to companies across automotive and non-automotive sectors.
It is one of the top 10 global suppliers of connecting rods for light vehicles and commercial vehicles. It is the sole supplier of certain components to select manufacturing companies in India and globally.
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