After a bumper initial public offering, the market expected a strong listing of Indian Railway Catering and Tourism Corporation (IRCTC) and it did not disappoint.
On October 14, the stock was listed at Rs 644 on the BSE, a 101.25 percent premium over its issue price of Rs 320 per share.
The opening price was much higher than what the street had expected and the grey market had predicted. Analysts who spoke to Moneycontrol expected it to list at around Rs 500-530 per share and the grey market premium was around 65 percent over the IPO price.
After a dazzling debut, the road ahead for the Indian Railways’ catering and tourism arm will not be free from obstacles. The stock will be judged against the company's quarterly performances. Besides, a change in the government's policies, which virtually give IRCTC a monopoly in its space, will pose a risk for the stock.
It is too early to say how IRCTC will fare but data shows that a majority of stocks listed in the last 10 years failed to hold such stellar listing gains.
As many as 8 out of the 10 stocks, which witnessed the best debuts in the last 10 years, are trading below their listing price. The two exceptions are Avenue Supermarts, trading 205 percent higher against its listing open price of Rs 604, and Rushil Decor, trading 44 percent higher against its listing open of Rs 81.25.
The above chart does not include Birla Pacific and Shri Aster Silicates, which saw the listing gains of 153.5 percent and 68.73 percent, respectively, as they are not traded now.
Also Read: IRCTC Listing: Stellar debut as stock ends day with 128% gains at Rs 728.60
IRCTC’s strong listing has raised concerns over its valuations.
"IRCTC does have a bright future, as it has a monopoly kind of business. But the valuations seem to have spiked and it will see ups and downs in the coming future. I would recommend a 'reduce' recommendation in the stock if it goes down," said Sameer Kalra, founder of Target Investing.
G Chokkalingam, founder and Managing Director of Equinomics Research & Advisory, said the listing gains of IRCTC were more speculative than fundamental.
He is also of the view that the stock may fail to give the expected gains in the near-term because of its valuations.
Also Read: IRCTC Listing: What investors should do after the stronger-than-expected debut?
Higher trade price may also mean there is little room left for further upside, it is better to book partial profits now and keep the rest for the long term, analysts say.
Analysts who Moneycontrol spoke to had expected the stock to return 80-90 percent in the long term but it was done on Day 1 itself. Some of them, however, feel the stock will give consistent returns in the long run.
"If investors got allotment in IPO, they can opt for 'add more' strategy. Otherwise, new investors can buy from the open market up to the level of Rs 500-525, as we expect it will give a consistent return in the long run and well as could be a multibagger," Manali Bhatia of Rudra Shares and Stock Brokers said.
Astha Jain, Senior Research Analyst at Hem Securities, also recommended investors to hold stock partially and to book profit in the remaining quantity, if the stock is available for Rs 500 or more per share.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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