Route Mobile makes a strong debut on a weak trading day

The stock ended at Rs 651, almost 86 per cent above its issue price of Rs 350 after listing at an over 100 per cent premium to the issue price.

At the issue price, the stock was quoting at 29 times FY20 earnings per share, on a fully diluted basis.
Mumbai: Route Mobile, a cloud communications service provider, made a strong debut on the bourses bucking the weak trend in the broader market on Monday.

The stock ended at Rs 651, almost 86 per cent above its issue price of Rs 350 after listing at an over 100 per cent premium to the issue price. Route joins the list of star stock market debutants such as Happiest Minds, IRCTC and Avenue Supermarts that listed at a significant premium.

Analysts said the stock could extend gains but valuations are stretched. “There is exuberance in the primary market now and retail investors are getting attracted by the high grey market premiums,” said Geetanjali Kedia, senior research analyst at SPTulsian Investment Advisers. “Route Mobile is over-valued at current level with PE multiple of 36 times on current year estimate and 32 times on FY22 estimates, given 7-8 per cent net margin and falling return on equity (RoE),” said Kedia.


The strong listing comes after its IPO was subscribed over 70 times and is the second-best listing in recent times after Happiest Minds Technologies which got listed at a record 111 per cent premium to its issue price.
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At the issue price, the stock was quoting at 29 times FY20 earnings per share, on a fully diluted basis. The 600-crore issue was sold in the price band of 345-350 from September 9 to September 11. The IPO had attracted 73.29 times subscription, with bids from non-institutional investors attracting 101 times bids, qualified institutional buyers at 53 times and retail at 12 times.

Motilal Oswal said in a pre-IPO note that the company has a lean balance sheet with negligible debt and healthy return ratios. “Its working capital is also negligible as it has a large pre-paid client base that pays upfront,” the brokerage said.
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