After muted IPO response, what’s in store for Five Star Business Finance on listing day?

New Delhi: After a disappointing response during the three-day bidding process, Five Star Business Finance is set to make its debut at Dalal Street on Monday on a muted note. However, a few analysts see things differently.

The company, whose issue barely managed to sail through, is commanding negligible premium in the grey markets, compared to its issue price of Rs 474 apiece.

Analysts tracking grey market activities said that the issue was richly priced and the issue was completely offer-for-sale (OFS), which means that the company would get nothing. Low subscription was the last nail in the coffin.

Abhay Doshi, co-founder, UnlistedArena said that despite being a fundamentally sound player, investors did not take much interest in the issue as it left nothing on the table for investors.

The valuations were rich for an OFS and the sector has been underperforming since the pandemic, he said. "However, there is no discount in the grey market and one can expect flattish listings.

Incorporated in 1984, Chennai-headquartered Five Star Business Finance is a non-banking finance company (NBFC) which provides secured business loans to micro-entrepreneurs and self-employed individuals

"If rumours turn out to be true, it may surprise investors in a positive sense," Doshi added with a suggestion that investors should not have high hopes from the company just on the basis of grey market buzz.

The company's Rs 1,960 crore IPO was sold in the range of Rs 450-474 per share per share, and received a muted investor response, just sailing through between November 9-11 as retailers and HNI investors kept off the issue and it barely sailed through.

Allocation reserved for non-institutional investors (NIIs) and retailers was subscribed 61% and merely 11%, respectively. The quota reserved for qualified institutional buyers (QIBs) was subscribed 1.77 times.

Parth Nyati, Founder, Tradingo said, "We had an 'avoid' rating to this issue and there is not much activity in the grey market. High competition and rising interest rates are big threats to the company, he said.

"A few peers are available at a better price in the secondary market. We are expected to have a muted to negative listing because of unsubscription numbers and the nature of the issue being OFS," he added.

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