Don’t expect Mazagon to do an IRCTC on debut; grey market premium shrinks

NEW DELHI: After a series of stellar debuts on Dalal Street, PSU mini-ratna Mazagon Dock shipbuilders was being projected as the next stock waiting to deliver eye-popping listing gains.

Investors are keenly awaiting for the debut as the initial public offer (IPO) saw highest-ever subscription among all PSUs that have hit the primary market thus far.

But, unlisted shares of Mazagon are fast losing steam in the grey market, the unofficial market for such shares. As the listing day drew closer, the stock’s trading premium to the issue price shrank. The stock commanded a premium of Rs 90, or over 60 per cent, over the issue price of Rs 145 on Thursday.

Dealers of the grey market said as the broader market turned volatile, the grey market premium has started fizzling out. There were hardly any trades at the higher levels.

Shares of Mazagon Dock will be listed on the bourses on October 12 along with those of UTI Asset Management Company. Unlisted shares of the second stock are trading at a hefty discount of Rs 35 to the issue price in the grey market.

Abhay Doshi, a Gujarat based dealer of unlisted shares, said investors have turned wary, as very few deals are taking place in the grey market. “They are doubting any astral listing coming ahead,” he said.

He said it is very unlikely that Mazagon will see a 100 per cent listing pop like IRCTC. As per the current market scenario, off-market dealers expect Mazagon to list at around Rs 250, and UTI around Rs 515-520.

Mazagon is one of the small-size issues that saw heavy subscription. The issue was subscribed 157.41 times, and did better that Happiest Minds (150.98 times), Chemcon Speciality Chemicals (149.30 times) and Route Mobiles (73.30 times). All the other four issues doubled investors' wealth on listing.

“Mazagon has a strong order book, which gives it strong earnings visibility. There is a difference between Garden Reach and Mazagon, as the latter has a near-monopoly in the business it is in," said Narottam Dharawat of Dharawat Securities.

Mazagon Dock's order book stood at Rs 54,700 crore as of March 31, which included work for building eight warships and four submarines. It is the only domestic yard that has the capability to build complex platforms such as destroyers, frigates, corvettes and conventional submarines, Phillip Capital said in a note.