Orient Cables lists at ₹450, 65% above IPO price
What's the story
Orient Cables made a strong debut on the National Stock Exchange(NSE) today, with its shares listing at ₹450 each. This is a 65.44% premium over its initial public offering (IPO) price of ₹272 per share. The robust listing reflects investor confidence in the company's growth prospects and has pushed its market capitalization to ₹5,121 crore.
Subscription details
Strong IPO demand paves the way for robust listing
The IPO of Orient Cables had received an overwhelming response from investors. Qualified institutional buyers (QIBs) subscribed 182.762 times, non-institutional investors (NIIs) subscribed 115.63 times, and retail investors subscribed 30.548 times.
This broad-based demand explains the strong debut of the stock on its listing day.
However, it's important to note that subscription demand alone doesn't determine a stock's post-listing value.
Valuation analysis
High valuation on standalone basis
At its listing price of ₹450, Orient Cables is trading at a price-to-earnings (P/E) ratio of 95.61 times. This is much higher than the 57.79 times P/E ratio at its IPO price.
Investors are now paying around ₹96 for every ₹1 of current earnings from the company, as per an INDmoney analysis.
While this may seem expensive, it's important to remember that the stock has become more reliant on future earnings growth to justify its high valuation.
Peer comparison
Valuation looks expensive against larger peers
Orient Cables is already trading above bigger players such as Polycab at 46.69 times P/E, KEI at 48.99 times, and RR Kabel at 54.85 times.
This makes the current valuation look expensive despite being below the broader peer average of 128.11 times P/E ratio.
However, it's worth noting that Orient has outpaced its larger peers with a revenue growth rate of 33.46% CAGR between FY24-FY26 and a return on equity (ROE) of 25.84%.
Future prospects
Capacity expansion and debt repayment are key to growth
Orient Cables is still much smaller than its peers. According to INDmoney, it has an EBITDA margin of 8.23%, which is lower than Polycab's 13.87% and KEI's 11.81%.
The company also has a high debt burden and customer concentration risk.
However, it plans to repay debt and expand capacity, which could be potential catalysts for future growth if execution remains strong.
Market monitoring
Monitor quarterly earnings closely for sustained growth
Investors should keep an eye on quarterly earnings to see if revenue growth can sustain a 95.61 times P/E ratio.
Slower earnings growth could make the current valuation difficult to justify.
They should also closely monitor EBITDA margins as revenue growth alone isn't enough if profitability lags behind larger peers.
Improving margins would indicate that growth is creating economic value for the company.