Western Carriers Limited made a subdued entrance into the stock market on September 24, 2024. Despite high expectations, the stock is listed at Rs. 170 per share on the BSE, a 1.2% discount from its IPO price of Rs. 172. This fell short of the grey market premium (GMP), where shares had been trading at around 10% higher.
The muted debut has drawn attention from investors, especially those who regularly invest in IPOs, signalling that market sentiment may not always align with pre-listing predictions.
IPO’s performance
Western Carriers' Rs. 493-crore IPO saw healthy demand during its subscription phase. The offer, which combined both a fresh issue and an offer for sale, garnered a subscription of 30.46 times. Among non-institutional investors, it fetched a subscription rate of 44.67 times, while qualified institutional buyers (QIBs) subscribed 27.99 times.
Retail individual investors (RIIs) also showed significant interest, with a subscription rate of 25.77 times. However, the stock's debut below its issue price was unexpected for those hoping to invest in IPO shares and capitalise on an immediate listing gain.
Factors influencing the listing
Several reasons could have contributed to the lacklustre start. While the IPO received significant attention and a robust subscription rate, broader market conditions, investor sentiment, and volatility may have played a role in the stock listing slightly below expectations.
Additionally, although the grey market premium suggested an initial jump, the actual performance may not always reflect such indicators. It highlights the inherent risks for those who invest in IPO shares based solely on grey market activity.
Western Carriers' business model
Western Carriers is one of India’s largest private, multimodal logistics companies with a strong focus on rail transport. The company operates on an asset-light model, serving 1,647 clients across diverse sectors, including metals, FMCG, pharmaceuticals, and oil and gas. Their client portfolio includes leading names such as Tata Steel, Hindalco Industries, and Vedanta.
The funds raised from the fresh issue (Rs. 163.5 crore) will primarily be used for debt repayment, while Rs. 152 crore will be allocated to capital expenditure, including purchasing commercial vehicles and shipping containers.
Should you invest in IPOs?
For those considering whether to invest in IPO offerings, Western Carriers' performance reminds them of the unpredictable nature of stock market debuts. Despite robust demand during subscription, not all IPOs translate into immediate profits post-listing. Investors should focus on long-term fundamentals and the company’s growth potential rather than relying solely on grey market premiums or listing day hype.
In conclusion, Western Carriers’ debut might have fallen short of initial expectations, but the company’s long-term prospects in the logistics sector remain strong. For seasoned investors who invest in IPO stocks regularly, this listing serves as a timely reminder to assess both pre-IPO performance and post-listing strategies carefully.
For android only