It gained a third in almost a week. But the small float and low delivery volume are a warning against betting on it for some who fear it may have risen beyond its fundamentals when many other newly listed companies are trading below their sales price.
“Rally in fancy lingerie is a very fast-paced game with no real interest whatsoever,” says Sharad Rathi, associate director at Almonds Global Securities.
“The values seem a bit off.” Lovable, which traded at Rs 205 a share, rose 109 percent to Rs 428.5 after hitting a high of Rs 462.50 on Friday. Some of the top shareholders include HDFC Mutual Fund, SBI Funds, UTI Asset Management and Fidelity, filings show.
Total outstanding shares of the company are at 1.68 million and public ownership is about 50 lakh shares. The Sensex was down 2.6% and the BSE IPO index was up 1.6% during the period. Fineotex Chemicals and C Mahendra Exports are the two companies that have returned more than Lovable among these years’ IPOs.
The stock trades at 31 times estimated earnings for fiscal 2012, compared to Page Industries’ 27 times its earnings. Although the stock has been trading higher for the past few days, reaching the limit on some days, the number of shares that changed hands remained significant. The amount of shares actually changing hands – was in the single digits for many days.
The delivery ratio ranged from 2% to 9% from June 10 to 17 when the stock rose 33% on the BSE, exchange data showed. This follows the performance of Page Industries which has risen 396% since its IPO in March 2007. The shares, which were sold at Rs 396, were trading at Rs 1,784. “Rising disposable incomes and growing awareness about personal hygiene are driving the growth of the underwear market in India,” Anand Rathi Securities said in a recent report. “Boosting this growth is also the development of modern malls, shopping complexes, etc.,” said the brokerage, which has a target price of Rs 430.
The Mumbai-based company’s Rs 93-crore IPO drew a good response with 21.8 times the institutional segment, 98.5 times among the affluent and 20.5 times in the retail category. Rising raw material prices and intensifying competition are two risks to earnings growth, the report said.
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