Indigo Paints joins the league of Burger King and Bector's — frenzied IPOs that fizzled out

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Indigo Paints joins the league of Burger King and Bector's — frenzied IPOs that fizzled out
BCCL
  • Indigo Paints shares are down nearly 17% in just 3 days despite the ecstatic mood in the market where Sensex broke new records.
  • The excitement around Indigo Paints also fizzled soon after the listing, just like in the case of Mrs’ Bector’s Food and Burger King.
  • Analysts say it is better to sell half the Indigo Paints stocks for profit booking, and hold the rest hoping for a surprise.
  • Check out the latest news and updates on Business Insider.
The Indian stock market has been enjoying the dream run — Sensex topped 51,000-mark this morning, and Nifty inched closer to 15,000. But the Indigo Paints investors who didn’t sell their stock on listing day, or ones who bought it on that day, have seen their investment fall nearly 17% in just 3 days.

The excitement around Indigo Paints also fizzled soon after the listing, just like in the case of Mrs’ Bector’s Food and Burger King.

StockPost listing peakCurrent priceFall from peak
Indigo Paints₹3232₹269317%
Mrs Bectors₹624₹41530%
Burger King India₹194₹14719%
* NSE data- as of February 5

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Samir Arora, the founder and fund manager at Helios Capital, in an exclusive chat with Business Insider, said that all three stocks are “still overvalued”, and by a lot, compared to their listed peers like Asian Paints, Britannia and Jubilant Foodworks respectively.

Business Insider reached out to a few more analysts and the verdict is similar. Keshav Lahoti, Equity Analyst, Angel Broking, said it is better to sell half the Indigo Paints stocks for profit booking, and hold back on the rest for any surprise movement.

IPO: Initial Public Offering or Instant Profit Opportunity?

Just like Burger King and Mrs Bector's Food, the Indigo Paints IPO was a hit. The IPO of India's fifth-largest paint maker clocked in a massive response from investors on the last day of subscription — the issue was subscribed 117 times the offer value.
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Indigo Paints is also the most subscribed IPO of 2021 followed by Home First Finance which was subscribed only 27 times. “See what happens is that when an IPO happens there are hundreds listed companies in the market, but the full attention of the retail, public and even institutional public goes towards the IPO. In fact, that's why in the US people take those companies private. That way every year they take 10 companies private and eight of them come back after not five years even in one or two years. It is because there is this concept that an IPO is a good way,” said Arora

If you want to profit from Indigo, wait!

Kranthi Bathini, equity strategist at Mumbai-based WealthMills Securities, expects “some more profit booking in the next few days." According to Lahoti, the company has a strong business model, experienced management and has done a great job gaining the market share in the industry from the last few years. "But currently the stock is a bit over valued," he told Business Insider.

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According to both the analysts, it is not the "right time" to enter into the stocks at these valuations. It is better to wait for a correction if someone wants to take a position. "I can say if the stock corrects 20-30% more from here, then investors can start buying it. If you have it in your portfolio you book profit in half of the stock and half they should wait," Lahoti said.

Angel Broking says Mrs Bector's stock is ‘reasonably’ valued now

Mrs Bector's shares opened in the green today but investors' anxiety over the upcoming earnings pushed the stock back into the red soon after. According to Lahoti, the stock has corrected nearly 30% and is now available at a reasonable valuation.

"Mrs. Bector Food Specialities are one of the leading companies in the premium and mid-premium biscuits segment and the premium bakery segment in North India. We think the company should be able to grow in line with the industry managed by the promoters having more than 25 years of sector knowledge. We advise investors to buy Mrs Bectors," he said.
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