Mumbai: Shares of Future Capital Holdings Ltd, the financial services arm of the Future Group, made a strong debut on Friday, closing at Rs908, on the Bombay Stock Exchange (BSE), 18.69% above the offer price of Rs765.
Future Capital’s Rs490 crore issue, which closed on 15 January, was subscribed 133 times. It was followed by the Rs11,700 crore issue of Reliance Power Ltd, which was subscribed 73 times.
Strong debut: Kishore Biyani, CEO of Future group. Analysts said the company’s shares had been priced high, but they have gained since listing. (Photo: Madhu Kapparath/Mint)
The grey market—or unofficial market for shares—expected both issues to list at a premium of 50% to the issue price when the two opened for subscription. Since then, however, there has been some uncertainty in the minds of analysts and investors as to how the two stocks will list—BSE’s benchmark index Sensex has been on a losing streak since 10 January after it hit its lifetime high and crossed the 21,000 mark. On Friday, the Sensex closed at 18,233.42. Despite a 3.31% gain on Friday, it is still down 10.18% since the beginning of the year. It rose 45.51% in 2007.
One analyst said Future Capital benefited from the market’s behaviour on Friday. “Future Capital’s good listing mirrored market movement. Overall, the market closed up and so did Future’s share,” said Nitin Khandkar, senior vice-president of research at Keynote Capitals Ltd, a Mumbai-based brokerage.
Several analysts had said Future Capital was expensive at its issue price, but Friday’s listing suggests investors think the company’s earnings justify the higher price.
ICICI Direct, an online brokerage, had recomended that investors should subscribe for listing gains on a short-term basis and they would have to hold the stock for 18-20 months for any higher returns. That is because Future Capital’s issue comes a few months before the company opens its first mall. Future Capital has a $425 million (Rs1,675 crore) Indivision fund, which buys stakes in consumer businesses; a $350 million Horizon fund, which is setting up mixed-use developments; and a Rs350 crore Kshitij fund, which is setting up 11 malls in tier-II cities. Future Capital has also said it will have a $200 million fund to set up hotels. It also has a consumer finance division, called Future Money, which gives small-ticket loans to consumers to buy products such as consumer durables—most of these consumer loans are given out at stores of group company, Pantaloon Retail India Ltd.
“This stock was expensive at the issue price too and now it is even more expensive,” said Deven Choksey, managing director of KR Choksey Shares and Securities Pvt. Ltd, a Mumbai-based brokerage. “It remains to be seen if it will sustain this price.”
The Sensex rose on Friday and brokers say the outlook is not as grim as it had been in the past fortnight. “Sentiment is improving in the market,” Amitabh Chakraborty, equities head at Religare Securities Ltd, said. “Liquidity is coming back into the system because refunds from the Future Capital and Reliance Power issues are getting returned now.”
All of this could pave the way for a successful listing of Reliance Power next week. With the market crash, the grey market premium for Reliance Power had fallen to Rs135 from Rs400, on an issue price of Rs405-450, according to greymarket.co.in, a website that lists grey market rates. It had a premium of Rs140-145 on Friday.