Mahindra Hoilidays lists above Issue Price of Rs 300 on NSE today….stays and closes above too….but will it continue to stay above ? I continue to say ‘No’

Mahindra Holidays and Resorts India Ltd (MHRIL) was listed on NSE today….It was issued at Rs 300 and the Issue was comfortably oversubscribed

A freak trade saw a High of Rs 374.50 and a low was registered of Rs 311.35…but it closed at Rs 313,towards the Day’s Low

12.74 Million shares were traded and the average price was Rs 325.21 creating a turnover of Rs 414.42 crs

I yet hold a view that this price of Rs 300+ will not hold…my reasons have been spelled out when I reviewed in great detail the IPO on this blog on June 22,2009

So it was with some amusement that I viewed Tarun Kataria of HSBC,the IPO’s Underwriter, spelling out on UTVi this morning,his four reasons why MHRIL has done well on listing and is quoting at Rs 325 ,8% to 9% higher than IPO Price of Rs 300 levels…He was justifying the HSBC philosophy of Leaving something on the table for the Investors

Tarun,this margin has already reduced on the first day itself to below 5% if you take closing price of Rs 313 and I fear that we shall soon get MHRIL below issue Price of Rs 300…..in a sense the price will fall off the table !

Let’s take Tarun’s four reasons why he views MHRIL as a success…His view is in Black while my view on his view is in Red if I disagree and in Green if I tend to Agree

  • MHRIL epitomises Emerging Markets….It’s just a ‘feel good’ perception
  • MHRIL practices financial discipline and good corporate governance….I tend to agree
  • Embedded in MHRIL are the Value Systems of the Mahindra Group….I tend to agree
  • Pricing of MHRIL IPO at Rs 300 was to leave something on the table for the Investors.There was good interest at even top end bookbuilding range of  Rs 325I strongly disagree…even Rs 300 is high…you’ve priced it at 30 times earnings multiples…even with a high Promoter holding of 83 % it will be difficult to hold the Share Price above Rs 300

So should One sell off MHRIL allotments?…Retail Investors have got very insignificant holdings…It would really not make much of a difference if they sell or not…might as well hold and hope price moves towards Rs 500 + inside two to three years…QIBs and HNWIs are ‘well informed Investors’ Profiles….they have strong holding capacity…I shall not try to influence them…but they would do well to read my June 22,2009 IPO Blog Review on MHRIL as linked above

I would not advocate buying MHRIL as I see the Price dropping below Issue Price of Rs 300… towards Rs 200 

 

One thought on “Mahindra Hoilidays lists above Issue Price of Rs 300 on NSE today….stays and closes above too….but will it continue to stay above ? I continue to say ‘No’

  1. http://2.bp.blogspot.com/_mDI0NK9Gvkc/SmGNToE0lNI/AAAAAAAAARs/YhK_R9xv-to/s400/MahindraHolidayTopLine2010.GIF

    This table shows estimated revenue guideline for current year for CM at lower end. I yet to calculate Cost part. On a rough estimate I believe operating profit margin may increase by 100 basis point .

    If you look 2008 and 2009 membership addition it is stuck at 20k members so the membership price (you make take it as MRP, they were able to increase MPR at rate of 13+% in previous years).

    Their EPS decreased because of higher “Sales promotion expenses”, (they had to give
    lot of discount to new customers, offers like: free air tickets etc). Unless economy picks up and pressure on membership price/offers ease and incremental membership addition improve beyond 20k numbers Mahindra Holidays is not going to repeat 2005,2006 and 2007′ performance.

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