Likhitha Infrastructure IPO Extended: Should You Still Bid?

Hyderabad-based Likhitha Infrastructure IPO is still open till October 7, which was to earlier close on October 1. As per the data available with the NSE, the price band for the issue has also been revised lower to Rs. 116-120 per share. Earlier the price band was decided at Rs. 117-120.

As per the data, as against 51 lakh shares, the issue was bid for 4.29 crore equity shares, translating to 8.43 times subscription. Here is a low down with an extension allowed, can you still bid for the issue.

Of late the recent issues such as the first Rossari Biotech then Happiest Minds and the latest Chemcon Speciality whopping high subscription as well as huge listing gains may have aroused your interest too in the primary market. So, here is a low down on the issue offering and whether or not considering the given volatility in the equity market, you should burn your fingers in this oil and gas pipeline company anticipating future gains or at the most listing gains.

1. Issue details:

The Rs. 61.2 crore IPO is a complete issuance of fresh shares which shall be in partial used for working capital requirement i.e. for up to Rs. 47 crore, while the rest of the amount will be used for other corporate purpose.

2. Company details:

The oil and gas pipeline company lays gas pipeline network and also engages in construction of other associated facilities as well as provides operations and maintenance services to city gas distribution projects. The company has its association with carrying out the first-ever Trans National Cross-Country Pipeline of South-East Asia connecting India to Nepal in 2019.

3. Should You Subscribe to Likhitha Infrastructure IPO?

Now the initial luster in the IPO market is waning which is imminent from the decline in premium price that these IPOs command in the grey market which is mostly targeted by high net worth individuals. And as per a report the only stock that is commanding a premium is Mazagon Dock Shipbuilders, i.e. though still it is commanding a premium more than the price band.

Now for the Likhitha Infrastructure IPO,

Brokerages recommendation on the Likitha Infrastructure IPO

There is a divided view while some prescribe a 'Subscribe' rating, some have an avoid call on the IPO issue.

1. Choice Broking:

This brokerage has given an 'avoid call' on the issue. And is of the view that there are no listed peers whose line of business is comparable to Likitha. It is demanding a P/E valuation of 11.9x (to its restated FY20 EPS of Rs. 10.1). And the call made is despite the company seeing reasonable growth for the sector in medium to long term.

2. KR Choksey:

This research company however has given a 'Subscribe' rating to the issue and has listed its key strength as diversified presence, growth in O&M, scalability of operations. Also, at a price band issue is priced at a PE of 8.83x FY20EPS and P/BV of 2.51X based on its NAV INR 47.8/share in FY20. For the last three years, Company has posted an average EPS of INR 11.7 and Return on Net worth of 35.1%. Also, the research company view that the recent Government initiatives have provided profitable opportunities for work execution.