Divgi TorqTransfer stock listing with 5% premium; Should investors buy, sell or hold?

Last updated time: 14 Mar 2023 11:02 IST

Divgi TorqTransfer Systems

Pune-based Divgi TorqTransfer Systems is doing business as an automotive component.

Shares of Nandan Nilekani-backed Divgi TorqTransfer Systems traded at Rs 620 on the NSE, at a premium of more than 5 percent to their IPO price amid flat domestic market conditions. Similarly, the stock opened at Rs 600 on the BSE, just 2 percent above its issue price.

The IPO was oversubscribed 5.44 times, led by retail investors. About 75 percent of the offering is to qualified institutional buyers (QIBs), 15 percent to non-institutional investors and 10 percent to retail investors.

The fractional part of the issue was subscribed 4.31 times, and non-institutional investors (NIIs) made bids 1.4 times more than the reserve bit. The Qualified Institutional Buyers (QIBs) portion was oversubscribed 7.83 times the allotted portion.

On March 3, Divgi TorqTransfer Systems’ Rs 412 crore IPO was completed. The price band for the IPO has been fixed at Rs 560-590 per share. The price band for the IPO has been fixed at Rs 560-590 per share. Divgi TorqTransfer Systems IPO consists of fresh issue of 85.20 lakh shares and sale of 39.3 lakh shares from promoters and shareholders including Oman India Mutual Fund and Nandan Nilekani (Family Trust).

The listed Divgi Torq was preceded by a premium of Rs 10-15 in the gray market, indicating a listing at a soft premium over its issue price. Despite volatility in the broader markets, the listing was in a similar direction.

Pune-based Divgi TorqTransfer Systems is doing business as an automotive component. Established in 1964, the company is one of the very few automotive components in India with the capability to develop and supply system level transfer cases, torque converters and dual clutch automatic transmission solutions.

The automotive player mainly caters to the passenger and small commercial vehicle industry, but it is also involved in EV (electric vehicle) transmissions. The company has manufacturing facilities at Bhosari and Shivare in Pune and Sirsi in Karnataka.

What should investors do now?

Pravesh Gur, Senior Technical Analyst, Swastika Investmart Ltd said, “Divgi TorqTransfer Systems stock debuted as a flat-positive listing at Rs. 620 (+5%) to its issue price due to the stock market conditions. This issue has received a good response from both institutional and retail investors. It operates in a niche segment with high entry barriers. Divgi TTS has the advantage of an experienced management team. The company has also shown consistent financial performance over the years. However, most of its business depends on a few customers, and geopolitical risk and competition from global players are some concerns. The issue had a P/E of 35x, which was reasonably priced. The current market situation is not good either. Thus, lotteries applying for a listing premium IPO are advised to keep their stop loss at 610 and wait for further upside, while those with a medium to long-term perspective can hold the stock.

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