BackS Chand shares pare early gains, close 0.87% up on stock market debut
S Chand shares opened at Rs707, up 5.52% from the issue price of Rs670 but closed at Rs675.85, 0.87% higher , on its stock market debut
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Mumbai: Shares of academic book publisher S Chand & Co. Ltd made a tepid stock market debut on Tuesday, and fell further to close marginally above its issue price.
On the BSE, S Chand shares opened 5.5% above the issue price of Rs670 at Rs707, and 4.4% higher at Rs700 on the NSE. The shares slipped further during the day, finally closing at Rs675.85 and Rs676 on the BSE and NSE respectively. Benchmark stock indices BSE Sensex and NSE Nifty closed nearly unchanged on Tuesday.
S Chand, the first text book publisher to go public in last 10 years, had set a price band of Rs660-670 apiece. The IPO comprised of new shares worth Rs325 crore and an offer for sale of 6.02 million shares by existing shareholders.
After CL Educate, S Chand is the second initial share sale from the education sector in 2017 which did not perform well on listing day. CL Educate had fallen nearly 17% on the first day of trading.
Yashas Bhat, an analyst at LKP Securities Ltd said education stocks have never been wealth creators in the markets and investors avoid them. Most investors had subscribed to S Chand issue only for the “greed of listing gains" even though there were concerns about its business model, he added. S Chand’s Rs728.5-crore initial public offer (IPO) received nearly 60 times subscription when it closed last month.
Bhat said, “The company’s business proposition is risky and its problems are here to stay." Analysts had said earlier that there is limited scope of improvement for its return on equity in the medium term.
Siddhartha Khemka, head-equity research (wealth) at Centrum Broking Ltd said, “The IPO valuations appeared mature given the current state of financials. The company has low return on equity (RoE) of 9.5% in FY16 and inconsistent cash flows in the past, negative cash from operation. Most of the growth in the past has been largely driven by acquisitions which helped in gaining market share and were margin accretive which led to increase in debt."
S Chand’s revenues and earnings have seen a compounded annual growth rate of 33% over the fiscal year 2012-2016 period. It has a market share of 13% in education content. Closest peers Oxford Publication and Orient Black Swan have a share of 6% each. In the listed space, Navneet Education Ltd is its closest peer.
Ahead of the IPO, the company allotted over 3.2 million equity shares at Rs670 each totaling to around Rs219 crore to 15 anchor investors, including Nomura Trust and Banking Co. Ltd, HDFC Co. Trustee Ltd, HSBC Global Investment Fund, BNP Paribas Arbitrage and SBI Life Insurance Co.
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