Metro Brands IPO: What should investors do with shares of Rakesh Jhunjhunwala-backed company post muted debut

Celebrity investor Rakesh Jhunjhunwala-backed Metro Brands' shares declined on the listing as the shares opened with a 13 per cent discount on the BSE. After Star Health, this is the second company backed by the ace investor to see a similar fate. Earlier, Star Health Shares had listed at 6 per cent discount on December 10.  

Around 9.30 am, shares of Metro Brands were trading with a discount of 39% to Rs 305 per share on the BSE, hinting at flat to a weak listing for the shares.  

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Making a weak debut on the BSE, shares of Metro Brands were listed at Rs 436 per share, a discount of 12.80% or Rs 64, on Wednesday. At the upper price band, Metro Brands has kept the issue price at Rs 500 per share.  

What should investors do?  

As the shares have opened negative, Santosh Meena, Head of Research, Swastika Investmart Ltd, has recommended long-term investors to hold the stock.  

"With an asset-light model, Metro Brands derives most of its revenues from third parties. It has demonstrated decent growth, profitability and financials in the past. However, as the company debuted discount to its issue price, long-term investors are advised to hold the stock. Short-term investors can keep their stop loss at Rs 380. If the price holds above Rs 380 on the closing basis, fresh positions can be taken and can be bought on dips."

Amarjeet Maurya, AVP, Mid-Caps, Angel One Ltd, was of the view that the share has opened at discounted rate due to its higher valuations.  

On the listing day, Metro Brands stock is down ~6% mainly as the company is trading at higher valuation (TTM PE -86x) and fear of new Covid variant omicron (will increase the possibility of lockdown), he said.  

"However, we are positive on stock for the long-term on the back of asset light business, strong brands and wide range of products. We believe every dip in share prices provides buying opportunities to long term investors," Maurya added. 

Earlier, Zee Business Managing Editor Anil Singhvi had also said that shares of the footwear brands may see a discounted listing on Wednesday. "Expected to list below the issue price of Rs 500. Long-Term Investors can buy in case of big fall," Singhvi had recommended in his IPO preview.

Aayush Agrawal, Senior Analyst at Swastika Investmart Ltd had also anticipated a similar listing. “We may see a discount listing of Metro Brands given that its GMP trades at a discount of 10-15 per cent” Aayush Agrawal, Senior Analyst at Swastika Investmart Ltd had said on Wednesday.  

Meanwhile, the market capitalisation of the footwear brand stood at Rs. 11,837.72 crore at the listing. 

Earlier, the Initial Public Offer was subscribed 3.64 times at 5pm on the final day of the offer. It received 6,96,12,480 bids against 1,91,45,070 shares on offer for this issue.  

Metro Brands had offered 2.735 - 2.753 crore shares (fresh issue: 0.590 - 0.608cr shares; OFS shares: 2.145cr shares). The offer represents around 10.07% of its post-issue paid-up equity shares of the company. Total IPO size is Rs 1,335.3 - 1,367.5 crore.  

The issue was a combination of fresh and OFS. The company will not receive any proceeds from the OFS part of the issue, while Rs 225 crore from the net fresh issue proceeds will be utilized to fund the expenditure for opening new stores of the company.

Metro Brands Limited (MBL) is among the top-5 footwear brands in India and is ranked fourth in the domestic footwear market (in terms of sales inFY21).

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)