Microfinance lender Spandana Sphoorty Financial had a weak debut on August 19 as the stock fell more than 19 percent intraday to Rs 691.10 on the National Stock Exchange.
It opened at Rs 825, a 3.6 percent discount to the issue price of Rs 856, which was on expected lines given the general concerns in the BFSI sector, relating to growth, liquidity and asset quality. It closed at Rs 847.80, down 1 percent on the NSE.
After such a weak listing when the Sensex rallied more than 300 points, what should investors do now?
Most analysts are betting on Spandana for a long term given strong fundamentals and its early exit from corporate debt restructuring mechanism.
Hence, they advise accumulating stock as they feel the company would witness healthy growth going forward which act as the main catalyst for long term investment.
Prashanth Tapse, AVP Research at Mehta Equities, said accumulating more should be investors' strategy.
"We believe in accumulating Spandana Sphoorty (SSF) that provides a scope of growth as well as a favourable investment opportunity in MFI space for the long term. Microfinance industry has exhibited impressive business growth over the past few years and SSF with a clear focus would witness healthy growth going forward," he said.
Payal Pandya, Assistant Vice President – Wealth Research at Centrum Broking is positive on the stock for a long term perspective, considering the strong fundamentals of the company and the turnaround in the business.
Given the low penetration of financial services in rural India, the ability of MFIs to reach out to the hinterlands and SSFL’s high operational efficiencies, she believes the company could have considerable scope for growth in the long term.
Successful exit from corporate debt restructuring (CDR) mechanism in Mar’17 (well ahead of the scheduled date of Mar’18), consistent profits along with a healthy asset book build confidence in the prospects, she added.
Shweta Daptardar, Analyst at Prabhudas Lilladher said as business concentration risks and moderation in growth should play out in medium term, she recommends the stock only for a long term. "The stock despite being at discount to its nearest peers should be bought for long term."
According to Astha Jain, Senior Research Analyst at Hem Securities, those investors who have got allotment can hold the stock keeping in view the long term horizon of one year or more, but one should avoid buying on listing day.
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