Italian Edibles IPO Lists -19.12% lower, then hits upper circuit

Italian Edibles IPO lists at discount, then hits upper circuit

Italian Edibles IPO had a weak listing on 12th February 2024, listing at a discount of -19.12%. After a weak opening, the stock closed the day at the 5% upper circuit over the listing price. For the day, the stock closed above the IPO listing price but was still well below the IPO price due to the discount listing on 12th February 2024. What also stood out about the stock was the bounce after listing and that was in spite of a weak listing and additionally weakness in the stock markets too. In fact, on the day, the Nifty had shown a sharp correction by -166 point and the Sensex was lower by -523 points. In the last few days, the Nifty has been volatile but has managed to hold the 21,500 mark during the week although it must be said that the geopolitical risk is piling up for now.

There are several challenges that the market is facing at this juncture. Firstly, the geopolitical risk is rising with the situation in the Middle East and West Asia worsening and its impact on global trade. Secondly, valuations are a concern and the rising VIX is making the markets a lot more vulnerable at this juncture. Thirdly, the latest quarter was one of the weakest quarters in terms of sales and profit growth and there was visible pressure in terms of weak rural demand and pressure on operating margins. All these contributed to the weakness in the market and Monday was just an example of the pressure in the market.

Subscription and price performance of Italian Edibles IPO on listing day

Let us now turn to the subscription story of Italian Edibles IPO. With robust subscription of 120.62X for the retail portion, and 177.37X for the HNI / NII portion; the overall subscription was extremely healthy at 154.43X. The IPO was a fixed price IPO issue with the IPO price set at ₹68 per share. However, despite the strong subscription, the stock listed at a substantial discount to the issue price and that can be attributed to the pricing and also to the fact that the market was under a lot of stress on Monday.

However, subsequently, despite the stock opening weak and seeing some volatility in the early parts of the day, it went on to close at the upper circuit of 5% over the listing price. This was reflective of some recovery in the stock amidst the volatile market sentiments. The subscription normally impacts in 2 ways. Firstly, it impacts the listing price and then it also impacts the post-listing performance of the stock on listing day. On 12th February 2024, the stock listed at a steep discount to the issue price, but did show some resilience to bounce back to hit the upper circuit. However, being a fixed price issue, there was no question of impacting the price discovery process.

Stock closes Day-1 at upper circuit, after a discount listing

Here is the pre-open price discovery for the SME IPO of Italian Edibles Ltd on the NSE.

Data Source: NSE

The SME IPO of Italian Edibles Ltd was a fixed price IPO and priced at ₹68 per share. On 12th February 2024, the stock of Italian Edibles Ltd listed on the NSE at a price of ₹55 per share, a discount of -19.12% on the IPO issue price of ₹68 per share. However, despite a volatile day post listing on 12th February 2024, the stock of Italian Edibles Ltd closed exactly at the upper circuit price of ₹57.75 per share on the NSE SME segment. The stock had an upper circuit limit of ₹57.75 for the day and a lower circuit limit of ₹52.25 per share for the day. In the midst of the volatility in trading during the day, the stock hit the upper circuit and also the lower circuit of the day, before closing for the day at the upper circuit price.

The stock opened at ₹55 per share and touched the upper circuit and also the lower circuit. The start was weak, but picked up traction in the second half of the day. The stock did touch the lower circuit for the day but ended up at the upper circuit for the day. The stock showed a smart bounce from lower levels as it spent better part of the second half of the day locked in upper circuit only. The closing price reflects a strong bounce in trading, because it closed at the upper circuit and this is after it opened at a discount and even briefly touched the lower circuit price of the day. Also, the upper circuit comes on top of a -19.12% discount to the issue price of the stock, which is all the more appreciable, considering that the Nifty and the Sensex had actively been negative on the day of listing of Italian Edibles Ltd. The Nifty had lost 166 points while Sensex was down 523 points on the day. Overall, the closing price of the stock of Italian Edibles Ltd was a full 5% above the listing price of the day, but eventually it was still -15.07% below the issue price of the day.

Listed in the ST segment for trade in T2T

Being an SME IPO on the NSE, the stock of Italian Edibles Ltd was subjected to 5% circuit filter on listing day and was also in the ST (trade to trade) segment. That means, only delivery trades are permitted on the stock. Like the upper circuit price, even the lower circuit price on listing day is calculated on the listing price and not on the IPO price. The opening price of the day was exactly at the mid-point of the day, as the stock touched the lower circuit and the upper circuit during the day before closing the day locked in the upper circuit price level.

During the day, the stock hit the upper circuit but stayed well above the lower circuit (despite hitting the lower circuit) but the close was exactly at the upper circuit price. In fact, the stock went below the listing price and even touched the lower circuit price briefly during the day before bouncing back. On the NSE, the stock of Italian Edibles Ltd has been admitted to trade in the ST category. The ST category is specifically for the SME Emerge segment of the NSE with compulsory trade to trade settlement. On such stocks, netting of positions is not permitted and every trade has to be settled by delivery only.

How prices traversed for Italian Edibles IPO on listing day

On Day-1 of listing i.e., on 12th February 2024, Italian Edibles Ltd touched a high of ₹57.75 per share on the NSE and a low of ₹52.25 per share. The high price of the day was exactly the upper circuit limit price of the stock while the stock low price of the day was exactly at the lower circuit limit of the day. Between these two extreme prices, the stock was highly volatile and eventually closed at the upper circuit price of the day. In fact, the stock can be said to have enjoyed a weak listing but a strong bounce on a day when the Nifty corrected by -166 points and the Sensex corrected by -523 points during the day. The stock of Italian Edibles Ltd closed at 5% upper circuit despite the discounted listing on the NSE.

During the trading day, the stock really went below the listing price of ₹55 per share to briefly touch the lower circuit price of ₹52.25 per share. The stock quickly bounced and got locked into the upper circuit price of the day. In terms of the circuit filter limits, the stock of Italian Edibles Ltd had an upper circuit filter limit of ₹57.75 and a lower circuit band limit of ₹52.25. The stock closed the day -15.07% below the IPO issue price of ₹68 per share but it closed 5% above the listing price of the day at ₹57.75 per share. During the day, the stock of Italian Edibles Ltd hit the upper circuit and stayed locked in the upper circuit for most part of the day. However, it also dipped below the listing price and even briefly touched the lower circuit price of the day. The stock closed strong at the upper circuit at the close of the day with buy quantity of 1,08,000 shares and no sellers in the counter. For the SME IPOs, it may be recollected, that 5% is the upper limit and also the lower circuit on the listing price on the day of listing.

Robust volumes for Italian Edibles IPO on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Italian Edibles Ltd stock traded a total of 9.14 lakh shares on NSE SME segment amounting to trading value (turnover) of ₹504.89 lakhs on the first day. The order book during the day showed a lot of buying with the buy orders consistently exceeding the sell orders in the second half of the day. That also led the stock to close with pending buy orders of 1,08,000 shares at the end of the trading session, although the price was very volatile during the day. It must be noted here that Italian Edibles Ltd is in the trade to trade (T2T) segment so only delivery trades are possible on the stock. Hence the entire volume for the day purely represents the delivery volumes.

At the close of Day-1 of listing, Italian Edibles Ltd had a market capitalization of ₹85.34 crore with free-float market cap of ₹22.64 crore. It has a total of 147.77 lakh shares as the issued capital of the company with a face value of ₹10 per share. As stated earlier, since the trading is on the T2T segment, the entire volume of 9.14 lakh shares during the day is accounted by delivery trades only, barring some market trade exceptions in the market. The stock trades on the NSE SME segment under the trading code (ITALIANE) and will be available in the demat account under ISIN code (INE0R7R01018).

IPO size to Market cap contribution ratio

One way to assess the significance of the IPO on the market cap of the segment is the ratio of market overall to the IPO size. Italian Edibles Ltd had a market cap of ₹85.34 crore and the issue size was ₹26.66 crore. Therefore, the Market cap contribution ratio of the IPO works out to 3.20 times; which is significantly at par with the median. Remember, this is not the ratio of the market cap to original book value, but the ratio of the market cap created to the size of the IPO. That shows the significance of the IPO to the overall market cap accretion of the stock exchange.