Shares of Prince Pipes and Fittings, the last listing of the year 2019, had a subdued start on December 30 on expected lines due to corporate governance and debt concerns.
The stock opened at Rs 160 and fell as much as 14.3 percent in morning to hit a day's low of Rs 152.60, but the management clarification over litigation and debts helped it recover more than half of losses.
After management cleared the air on the Montana case, the stock went up to Rs 177.95, which is near to its issue price of Rs 178 per share, though finally settled 6.4 percent lower at Rs 166.60 on the BSE.
On the National Stock Exchange, it closed at Rs 166.90, down 6.24 percent from IPO price.
In terms of volumes, Prince Pipes traded with 20.37 lakh shares on the BSE and more than 2.11 crore shares on the National Stock Exchange.
Should investors buy, sell or hold Prince Pipes?
The polymer pipes and fittings manufacturer raised Rs 500 crore through public issue which comprised a fresh issue and offer for sale (by promoters) of Rs 250 crore each. The offer was opened for subscription during December 18-20.
Nihar Chheda, Associate VP-Corporate Strategy at Prince Pipes told CNBC-TV18 that promoters would release all their pledging of shares (currently 35 percent to zero) by December 31, 2019, and also, the money received via fresh issue proceeds would be utilized to repay the debt.
He also said, "I don't see any liability to company in Montana Developers case, but in a worst case, the impact could be Rs 100 crore on Aditya Developers.
The company is also confident enough to pay debts taken against personal guarantees, he added.
Promoters have given personal guarantees of Rs 610 crore for a working capital and term loan of company, and guarantee of Rs 550 crore for forward booking of foreign exchange of company.
"As a result, going ahead, PAT margins would increase due to reduction in interest cost. The stock is fairly priced & is available at a discounted P/E ratio in comparison to peers. Also, provided the management promise to do as stated, we believe the stock could go to the levels of Rs 230-250 in next one year," Manali Bhatia of Rudra Shares and Stock Brokers said.
Montana Developers initiated arbitration proceedings against Aditya Developers which is a joint venture and claimed damages of Rs 904.64 crore along with applicable interest from Aditya Developers.
Company's promoters CMD Jayant Shamji Chedda and Heena Parag Cheda hold a 10 percent share each of profit and losses as partners of Aditya Developers.
In terms of valuations on the basis of FY21 expected earnings, the company is available at discount to its peers. Its price-to-earnings ratio stood at 23.5 against peers Astral Poly (71.4) and Supreme Industries (31.6).Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.