Will you buy Snowman listed at 70% premium to issue price?

One is that they would have got some cash and loose change from the Initial public offering (IPO) sale what they have sold and there is still leftover at 40 percent and we do the math you come to almost Rs 50 a share out of the 270 of Gateway. So I am not saying at these prices but if you had to and there are other logistics plays which are not upfront kind of thing. So this is your post Modi froth and all that stuff but yes, going ahead on a dip for sure this is a very interesting stock.

Anuj: The dip will take time because even as you speak right now it is buyers only and some 70 lakh shares are outstanding. So I am assuming tomorrow also the demand will continue and we should not be surprised if there is another circuit tomorrow?

Diwan: I agree with it. It is definitely over the top and the exuberance is because it is one of its kind. There is nothing else in its space and what has happened is the company has been very ambitious with the targets that they shared with the street. 50 percent compound annual growth rate (CAGR) will continue or probably be bettered. So these numbers are mouth-watering in these markets but at the 47 price band itself it was valued at the neighbourhood of 30x which is fine but if you look at FY16 and with that 1 lakh pallets capacity I would start rationalising and say, okay, maybe I am willing to pay about Rs 50-55 for this but beyond that it definitely gets to be a stretch. It is the shortage of supply that is creating this froth.

Anuj: It doesn’t have any identifiable peers in terms of cold chain and logistic company and we have seen in the past the market is willing to give a premium to these kind of stories, concept stocks and these also have continuously traded at big premiums. Whether it was Jubilant Foodworks or in the recent memory Justdial that continues to trade at a hefty valuation. So, in the past valuation alone hasn’t been in fact a factor in some of these stocks. So, do you think the same story could play out in Snowman?Malkani: I am not sure those examples are comparable. Those are completely Justdial and whatever. Here it logistics, it is not a big deal for a Gati or are there enough good al cargo. You name it there are all cargo there are lots of logistic stories out there which are the same but here of course they have timed it. They have had some clever merchant bankers for this kind of stuff. I am not taking away from the fact that it is a pedigree play but Mercedes and BMW are great cars but you have to pay the right price for them.Anuj: Same question to you because after a long time we have seen an IPO where we have seen big appetite. There are a lot of people talking about talking about the revival of IPO market. Do you think that factor is going to count and it is going to take the stock price further because as we speak there are so many shares still outstanding as far as the buyers only quantity is concerned?Diwan: One is of course it is in the trade to trade segment, so there is limited supply and more demand that will keep on taking time to get absorbed and getting fulfilled rather. The issue size itself was not so significant in today’s market. What has happened is we have seen some track record of a couple of IPOs earlier, Wonderla Holidays for instance. People have had a very stellar kind of track record not just on listing gains but even beyond that, so there is an expectation.So to answer this is probably the start of a fairly strong, smart IPO supply timeframe because by Diwali you will probably have lot of another 7-8 IPOs that are lined up. They will start hitting the market in good times and supply is always welcome provided it is from good players and just to add to what Jagdish said the entry barrier in this segment is not so significant.The cold value chain is not something which a lot of people have been talking about and with real estate investment trusts (REITs) coming into place this is an area they will find a lot of investments coming in because it is a very retable kind of an asset; warehousing and cold storages and stuff like that. So once that happens any of the logistics companies could actually venture out, take a couple of years to do and in the listed domain this becomes unique but as a business model it is fairly easy to replicate.