ESDS Software Solution shares made a huge debut on the stock exchanges on Friday, September 4 and investors who got an allocation in the company’s initial public offering saw big gains. It was up by 76.46% from the IPO price of Rs 429 at 757 per share on the NSE.
And the stock didn’t stop at its strong start. ESDS Software Solution shares rose after the listing and did not stop at the upper circuit of Rs 908.40. At that level, the stock had climbed 111.75% against the price of the IPO issue. In other words, investors who bought shares at Rs 429 made more than double on the day of the listing day.
ESDS Software Solution shares were launched on the Bombay Stock Exchange (BSE) at Rs 746.30 per share. With the high value of stock price, shares of the company gained about Rs 10,496.83 crore market capitalisation.
The strong listing performance came despite relatively conservative expectations from the grey market ahead of the debut. The latest grey market premium (GMP) indications before listing had suggested an estimated listing price of around Rs 676, much below the actual NSE debut price of Rs 757.
ESDS IPO Receives Massive Investor Response
The impressive market debut on top of the strong response of ESDS Software Solution’s IPO on August 28 followed a huge IPO market. The company posted its Rs 720-crore IPO on August 28 and September 1.
The issue was subscribed 135.88 times, illustrating the high level of investor interest for the company. The IPO was a fresh issue of 1.68 crore shares and the price band was set as between Rs 408 and 429 per share. For investors, the upper end of the price band eventually became the issue price.
The huge subscription levels indicated strong demand ahead of the listing and set the stage for the stock’s strong debut. But the listing-day gains have far exceeded even the more optimistic expectations on the issue.
Should investors buy, sell or hold ESDS shares?
While ESDS Software Solution has gained more than 111% over the issue price, the key question for investors is whether ESDS Software Solution still looks attractive at this price point or whether it is time to book profits?
Shivani Nyati, Head of Wealth at Swastika Investmart Ltd., said the company’s Rs 757 NSE listing represents a 76% premium to the issue price of Rs 429. We think the debut was better than what we had thought at the start of the day,” she said.
The outlook for ESDS is favourable as there are a number of structural factors supporting the growth of cloud computing, data-centre infrastructure, cybersecurity and digitalisation in India. With the acceleration in enterprise technology adoption and the expansion of digital infrastructure, these sectors will benefit.
The company’s financial performance and customer stickiness were also factors supporting the positive view on the IPO. Strong margin expansion and significant growth in profit after tax had contributed to investor interest in the issue.
But the recent post-listing rally also raises questions about the valuation in the near future. The stock is already up more than 70 percent from its IPO price in a single trading session, and in the short run, the company’s fundamentals may have been priced too high.
Existing Allottees Could Consider Partial Profit Booking
For ESDS holders who acquired shares from the IPO, the big listing day gains allow for partial profit booking. Nyati said that current allottees are able to take some profit at present level while holding the rest of the shares at a stop-loss of about Rs 650–Rs 680.
Such a strategy might allow investors to lock in a portion of their gains while keeping them in the company’s long-term growth picture. But a prudent investment will depend on risk appetite and how long and short of a long-term investment horizon and portfolio allocation one should be willing to make.
For the investors who did not receive an allotment, chasing the stock after such a steep debut may come with more short-term risk. Nyati said that investors who did not receive an allotment might wait for a potential correction to the Rs 600-Rs 650 range before making a fresh entry.
ESDS shares deliver massive Debut-Day Gain
From the IPO issue price of Rs 429 to the top-circuit level of Rs 908.40, ESDS Software Solution has gained Rs 479.40 per share. This is a remarkable 111.75% return for IPO investors on the debut day.
The performance made ESDS Software Solution one of the most closely watched newly listed stocks in the market. The company is operating in industries that have a good long-term future growth potential but the company’s performance will now be closely watched by investors who will look at whether its earnings growth can support a much higher post-listing valuation.
So for existing shareholders, the decision is whether to take profit-booking opportunities right now or not with the company’s long-term growth story. Investors who missed the IPO may be more likely to put in place patience rather than invest on the basis of the share’s debut day momentum.
The information I give is based on the information provided and is for the purpose of the above article is only for the information and is not investment advice. It can’t be viewed as investment advice. Investors should do their own research and consult a financial adviser before making a decision.
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