How to sail the primary market

The IPO market has action all around as one company got listed and two companies are open for subscription.
Let’s start with a company that got listed — Blue Jet Healthcare. The company got listed on NSE at a premium of 9.82%. It opened on NSE at Rs 380 per share while its issue price is Rs 346 per share. The company is in the business of high-contrast intermediates, high-intensity sweeteners and API. It does not have a direct competitor and that gives the company 1st mover advantage. The company operates in industries where barriers to entry are prominent in the form of complex and steep learning curve, long-term relations with customers as well as reputation. So all that provides a competitive advantage to the company. Although there are few risks as a company has close to 80% business in Europe. High concentration of customers and that too very prominent companies. The market still felt that the valuation of the company was fine and that’s why it got a positive response.

Next company is Cello World. It is an established brand that has business in Consumer Houseware, Consumer Glassware and stationary writing. The company has capacity utilization between 70% to 90% across different divisions. Its profit and revenue increased at an impressive CAGR of 31% between FY21 to FY23. Its return ratios like ROE and ROCE are also great at 53% and 35%, respectively. This indicates a good competitive advantage. The IPO was open till Wednesday. The company is looking to raise 1,900 but all of it is offer for sale. By the time of writing this story, the IPO has been subscribed 5.27 times. It’s GMP is Rs 133 per share.

A final company that is open for subscription is a highly talked about company. Yes, we are talking about Honasa Consumer which is known for Mamaearth. The company sells baby care, body care and various other beauty and personal care products. It has a name for natural products which cater to premium segment of customers. The company has strong brand value and follows an asset-light model. The company has an omnichannel presence meaning it sells both offline as well as online. Since it is a growing company there is a huge focus on advertising for growth. Although the company is not profitable and given that there is high competition, volatility in commodity prices brings questions about valuation. It’s P/E is extremely high. The IPO will remain open from 31st October to 2nd November. The price band for IPO is from Rs 308 to Rs 324 per share. The IPO size is Rs 1701 crore but only Rs 365 crore out of it is a fresh issue. By the time of writing this story, the IPO was subscribed 30%. Its GMP is just Rs 6 per share.