Photo: Hemant Mishra/Mint
Photo: Hemant Mishra/Mint

Advanced Enzyme shares rise 31.51% on market debut

Advanced Enzyme scrip closes 31.51% higher at `1,178.30, compared with the issue price of `896

Shares of Advanced Enzyme Technologies Ltd jumped 31.51% on debut on Monday, after its 412 crore initial public offer (IPO) received a stunning subscription of more than 116 times when it closed last month.

Advanced Enzyme shares opened 35.04% higher on the BSE at 1,210, compared to the issue price of 896.

The scrip closed 31.51% higher at 1,178.30, while the benchmark Sensex closed 0.17% lower at 28,003.12 points. Earlier in the day, the shares touched a high of 1,242.75 and a low of 1,168.55, respectively.

The shares of the country’s largest enzyme producer were priced at the upper end of the 880-896 price band.

While the quality of the recent IPOs were good, concerns remain over the huge listing premium in most stocks that started trading recently.

“The quality of issues has undoubtedly been good. However, there is a lot of money chasing too few issues, on relative basis," said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt. Ltd.

Choksey pointed that most IPOs are funded by non-banking financial institutions, and their cost of funding finds the reflection in the premium enjoyed after listing.

“The issues are hugely oversubscribed, creating a lot of artificial demand at listing. There is a chase for grabbing the shares at listing," added Choksey.

The Advanced Enzyme issue was subscribed 116.02 times. While the portion reserved for qualified institutional buyers (QIBs) saw a subscription of 94.02 times, the non-institutional investors’ category, which sees subscription from high net worth individuals (HNIs), was subscribed 393.10 times.

Also Read: Advanced Enzyme IPO: Company forced to clarify ‘non-veg’ rumours

“We believe that supported by strong entry barriers, high level of customer stickiness, strong margins, healthy return ratios and high process and knowledge-dependency, it should enjoy a valuation premium over other specialty chemical companies," Emkay Global Financial Services Ltd said in a note on 20 July.

“In our view, the issue is attractively priced with significant return opportunity," the brokerage firm had said, recommending investors to subscribe for the IPO.

Thane-based Advanced Enzymes Technologies was incorporated in 1989.

The company’s public offering was a mix of primary fund-raising and a secondary share sale by existing investors. It was looking at raising 50 crore in primary capital through the IPO which will go to its US subsidiary to repay loans.

In 2015-16, its profit stood at 78.4 crore, up from 50.1 crore in the previous fiscal year.

Also Read: RBL Bank aims to launch IPO in third week of August

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