Allied Blenders and Distillers shares debut on D-Street with decent listing gains of 14%; should you buy, hold or sell?

Shares of Allied Blenders and Distillers amid strong market momentum listed with decent listing gains on Tuesday. On the BSE, shares debuted at a price of Rs 318.10, a premium of 13.2 per cent as against the IPO price of Rs 281, while it started trade at Rs 320, up 13.88 per cent on the NSE.

Shivani Nyati, Head of Wealth, Swastika Investmart said that Allied Blenders listing fell short of pre-listing expectations that likely anticipated a higher premium due to the good investor response (subscribed 24.85 times). The stock price has further declined since the listing, adding to the cautious investor sentiment. 

She added that the listing price fell short of pre-listing expectations, possibly due to the high IPO valuation or concerns about the company's financial health and competitive industry landscape. Allied Blenders' history of volatile financial performance with low margins and high debt levels remains a cause for concern.

Allied Blenders' listing, while positive, doesn't quite match the pre-listing hype. Investors who want to hold their position may keep a stop loss at the issue price, she advised.

At the close, the issue was subscribed 23.55 times, led by strong response from Qualified Institutional Buyers (QIBs). The QIB category's subscription rate was 50.37 times the available quota, while the NII or non-institutional investors baded for 32.4 times the shares on offer and the retail subscription rate was 4.51 times in the retail segment.

Allied Blenders and Distillers issue comprised a mix of fresh equity sale of Rs 1,000 crore and an offer for sale (OFS) of 1.77 crore shares. The issue opened for public subscription on June 25 and concluded on June 27.

The proceeds from the fresh issue will be deployed towards prepayment or scheduled repayment of a portion of certain outstanding borrowings and balance for general corporate purposes.

ICICI Securities, Nuvama Wealth Management, and ITI Capital acted as the book running lead managers (BRLM) to the issue.

Zee Business Managing Editor Anil Singhvi suggested risk-taking investors to apply for the issue with a long-term view minimum of two years. The market guru highlighted the following key points:

Positives

Experienced promoters & professionally managed company
Strong leadership in IMFL business with strong brands
Proceeds will fund debt repayment
Premiumization may drive improved margins

Negatives:

96% reveneue comes from Wiskey segement
Financial standards are not very impressive; EBITA and PAT are lower than industry standards
Uncertainty due to different policies and taxes of states
Valuation expensive

Allied Blenders and Distillers, incorporated in 2008, is the largest Indian-owned Indian-made foreign liquor (IMFL) company and the third largest IMFL company in India in terms of annual sales volumes.