While the U.S. IPO market has been pretty hot and is set for a record year in 2021, things have been quite rosy globally also. For example, there has been a flurry of IPOs in India including fintech giant Paytm, which is backed by Warren Buffett. While Paytm had a dismal debut, Tarsons Products, which is a much smaller company, saw a good response. However, given the massive oversubscription, not many investors got the allotment in the IPO. Should you buy Tarsons stock now if you missed the IPO?
While tech companies’ IPOs get the most attention, Tarsons is into the healthcare industry. The company is the leading supplier of laboratory plasticware in India. The IPO was oversubscribed over 77 times, which meant that the chances of getting an allotment, especially as a retail investor, were low.
Tarsons IPO has a strong GMP
The GMP (grey market premium) for the Tarsons IPO has been moving between 150 rupees and 200 rupees. GMP is an unofficial indicator and shows what traders expect from the stock on the listing. IPOs that see massive oversubscription usually have a higher GMP. While it isn't a perfect indicator, it does tell markets what to expect from stock on the listing date.
Tarsons IPO was a mix of fresh issue and OFS
Tarsons raised a total of 1,024 crore rupees through the IPO. Of this, only 150 crore rupees was a fresh issue and the remaining was an OFS (offer for sale). As part of the OFS, promotors Sanjive Sehgal and Rohan Sehgal offered a total of 8 lakh shares, while Clear Vision Investment Holdings Pte tendered 1.25 crore shares.
Tarsons intends to use the funds to repay its borrowings and to fund the new plant at Panchla in the state of West Bengal. It intends to use the remaining money for general corporate purposes.
Indian brokerages are mostly bullish on Tarsons stock
Most of the Indian brokerages are bullish on Tarsons stock. Vikas Jain, a senior research analyst at Reliance Securities, finds the stock attractive at a fiscal 2022 PE multiple of 35.5x.
Jain added, “Given an increased health awareness among people post Covid-19, a 10.5 per cent CAGR expectation of the global plastic laboratory products market over FY20-FY25, high market share of plastic labware and expansion programmes, we believe TPL can potentially sustain healthy growth in the subsequent years.”
Tarsons will start trading on Nov. 26
Tarsons will start trading on Nov. 26. The allotment basis has been finalized and investors who have got the allotment will have the stock in their Demat account by then. If you missed out on the IPO, should you consider buying it in the secondary market when the stock starts trading?
Eventually, it will depend on the kind of listing gains that Tarsons stock sees. If the stock is available at a modest premium over the IPO price, it would make sense to buy the stock. The demand for lab products in India is expected to get a boost. People are more aware of preventive healthcare, which would mean higher sales for companies like Tarsons.