HPL Electric makes a muted debut
HPL Electric and Power is a new stock which got listed today. The IPO which closed on 26th Sept had priced its stock on the upper price band of Rs.202 and today, it got listed on the BSE almost 6% lower at Rs.190. It continues to remain around the same levels. At one point it went down to Rs.186.
We do not want to say, “I told you so” but this is what we had said in our New Issue Analysis of the IPO, “On a peer comparison, HPL Electric IPO is aggressively priced. Besides, its sub 4% net margins, low RoE and high working capital position do not bode well either. Moreover, the company operates in a highly competitive industry landscape, with many participants in the organized and unorganized sector as well as Chinese threat. Due to weak fundamentals coupled with expensive valuations, the issue is a clear avoid.”
HPL Electric and Power manufactures low voltage electric equipment such as metering solutions, switchgears, lighting equipment, wires and cables, through its 7 manufacturing facilities in Haryana and Himachal Pradesh. Marketing products under ‘HPL’ brand, company has a pan-India distribution network of 2,400 dealers catering to 15,000 retailers. About 50% of revenue is accounted by metering solutions, while lighting equipment makes up for 23%, with rest comprising of switchgears (14%) and wires and cables (13%).