Afcons Infrastructure makes weak stock market debut: sell or hold?

Shares of Shapoorji Pallonji Group’s Afcons Infrastructure Ltd made a poor debut on Dalal Street on Monday, listing on the National Stock Exchange at Rs 426, a discount of 7.99 per cent from its issue price of Rs 463. On the Bombay Stock Exchange (BSE), the stock opened at Rs 430.05, down 7.12 per cent from its issue price.

The subdued listing comes amid wider market volatility and ongoing selling pressure, particularly from foreign portfolio investors (FPIs).

Before the listing, Afcons shares had a gray market premium (GMP) of Rs 20-25 per share, hinting at a potential 5-6% gain from the listing, which did not materialize as expected. The lack of interest in IPOs can be attributed to the recent stock market downturn, with benchmark indices falling significantly due to rising global uncertainty and disappointing corporate earnings.

SELL NOW OR HOLD FOR LONG-TERM PROFIT?

Investors with a long-term view may consider holding onto their shares as the company’s fundamentals and strategic positioning could lead to gradual appreciation once market conditions stabilize.

Shivani Nyathi, Head of Wealth, Swastika Investmart Ltd. said, “Afcons Infrastructure Limited’s IPO was listed at Rs 426, marking a loss of about 8% from its issue price of Rs 463, which is in line with expectations given the current market sentiment.”

“The listing performance reflects a cautious market outlook, despite the company’s strong position as part of the Shapoorji Pallonji Group and a solid order book supporting future growth,” she said.

Nyathi said that while the discounted listing may disappoint short-term investors, the reasonable IPO price, as well as Afcons’ stable financials and project pipeline, offer potential long-term value.

“Investors with a long-term view may consider holding on to their shares as the company’s fundamentals could lead to gradual appreciation once market conditions stabilize,” she added.

IPO DETAILS AFCONS INFRA

Afcons Infrastructure IPOwhich ran from October 25 to 29, had a fixed price range of Rs 440-463 per share with a lot size of 32 shares. The company raised Rs 5,430 crore through IPO, of which Rs 1,250 crore came from fresh issue of shares and Rs 4,180 crore through offer for sale (OFS). Despite the disappointing debut, the IPO was 2.63 times subscribed, primarily driven by demand from qualified institutional buyers (QIBs), which were oversubscribed by 3.79 times.

The non-institutional investor (NII) share was 5.05 times booked while the retail segment was undersubscribed at 94%. The employee norm was exceeded by 1.67 times.

Founded in 1959, Afcons Infrastructure is headquartered in Mumbai and specializes in engineering and construction projects and has a history of six decades. The company operates in various segments, including maritime, land transport, urban infrastructure, hydro and oil and gas projects. The company has a strong portfolio of projects that provide stability to its earnings and potential for future growth.

Brokerages such as ICICI Securities, DAM Capital Advisors, Jefferies India, Nomura Financial Advisory and Securities (India), Nuvama Wealth Management and SBI Capital Markets acted as lead managers for the IPO, while Link Intime India acted as the registrar.

While the discounted listing may disappoint short-term investors, the reasonable IPO price, along with Afcons’ solid financials and strong pipeline, offers potential long-term value.

(Disclaimer: The views, opinions, recommendations and suggestions expressed by the experts/brokerages in this article are their own and do not reflect the views of India Today Group. It is advisable to consult a qualified broker or financial advisor before taking any actual action. investment or trading choice.)