Grey market signals premium listing for Mazagon Dock, discount for UTI AMC; check listing day strategy

The recently concluded IPOs of UTI AMC and Mazagon Dock Shipbuilders are scheduled to list on stock exchanges on Monday, October 12, 2020. The basis of initial public offer (IPO) allotment has been finalised in both UTI AMC and Mazagon Dock Shipbuilders. Ahead of stock market debut on Monday, Mazagon Dock Shipbuilders shares were trading at a premium of about Rs 106 over IPO price in the unlisted market today. The state-owned company had fixed the price band of the issue at Rs 135-145 per share. “Grey market is volatile from the last few days, Mazagon Dock’s premium which was at Rs 115 a few days back, is now trading at 106 level after share allotment,” said Manan Doshi, an independent dealer in unlisted shares.

While UTI AMC shares have been quoting at a discount in the unlisted market. According to Doshi, UTI AMC was trading with a discount of Rs 26-30 in the grey market today. When the UTI AMC IPO was declared, the premium in the grey market was around Rs 100. So far since September, Happiest Minds Technologies, Route Mobiles and Chemcon Speciality Chemicals have more than doubled the investors’ wealth on listing day.

The Rs 2,160-crore UTI AMC IPO received 2.31 times applications. While the Rs 444-crore Mazagon Dock Shipbuilders IPO was subscribed 157.41 times, becoming the most subscribed public issue this year after Chemcon Speciality Chemicals saw 149 times applications and Happiest Minds Technologies 151 times.

What should be listing day strategy for UTI AMC, Mazagon Dock Shipbuilders

On the UTI AMC and Mazagon Dock Shipbuilders listing day, analysts suggest to book listing gains to reduce the risk. “The strategy should be a book listing gains for short term traders. For long term traders should book 40 per cent profit if one gets good listings with sizeable gains of more than 40 per cent. So the risk will be reduced,” Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online.

According to Dipin Kwatra, Director at New Vertical Vera Advisory Pvt Ltd, UTI AMC is expected to list either at a very nominal premium or flat to issue price. For Mazagon Dock Shipbuilders Kwatra expects the listing with strong gains of around 30-50% i.e Rs 75-90.

While Manan Doshi says that looking at the trend in the market, Mazagon Dock may be listed with 70-80% gain on Monday. For UTI AMC, he sees listing at Rs 520-530. UTI AMC fixed the price band for the issue at Rs 552-554 per share.

Analysts say even after considering the overall valuation, the pricing of the Mazagon dock seems on the higher side. “However, given the overwhelming response to the IPO, we expect opening at a premium anywhere between 40 to 70 per cent gains to the cutoff price,” Ravi Singh, Head of Research, Karvy Stock Broking told Financial Express Online. On the other hand, given the low growth rate for the UTI AMC, the IPO had witnessed a lacklustre response. Singh expects a discount opening of anywhere between 10 to 20 per cent.