Lumino Industries Shares List at 34% Premium: Buy or Hold?

Lumino Industries shares made a strong debut after its IPO was subscribed 118.12 times by investors

The shares of Lumino Industries made a great start on the stock markets on September 3, Thursday. The stock was listed with a premium of 34 percent over its issue price. The strong listing followed the huge response by the investors to the IPO of the company valued at ₹700 crore. The shares of Lumino Industries were listed at ₹110 per share on the NSE with a premium of 34.15 percent over the IPO price of ₹82. The BSE saw the stocks opening at ₹109 per share which resulted in a premium of 32.93 percent. The company had set the price range for Lumino Industries IPO at ₹78-82 per share. The issue had been offered for subscription from August 27 to August 31 which was subscribed 118.12 times. After the listing of shares, the market cap of the company had reached to about ₹3,319.64 crore.

Gain from Lumino Industries Listing Below Grey Market Expectations

While the stock market listing has been impressive, it seems to have done relatively below the expectations set out by the grey market. According to pre-listing grey market trends, there were expectations that the listing would generate gains worth 49 percent. The actual listing on the NSE at ₹110 provided a premium gain of 34.15 percent, but still underperformed compared to the grey market expectations. As such, those who subscribed for the shares through the IPO process were presented with the opportunity to make money right away while those who did not subscribe for the shares have to consider whether to buy the stock.

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What Should Investors Do With Their Lumino Industries Shares - Buy, Sell, or Hold?

According to Shivani Nyati, Head of Wealth at Swastika Investmart, the outlook for Lumino Industries looks bright due to low valuations relative to those of its rivals in the EPC and cables industry. Moreover, the company announced an EBITDA margin of 11.71 percent and one of the best returns on net worth compared to key competitors. All this may justify investing in the company in the long run. Moreover, there is another important point which relates to the usage of the company's IPO money for repaying the existing debt. This may lead to the decrease of the financing cost. Nevertheless, investors also have to keep in mind the risks of the business.

Exposure of Lumino Industries to Government/PSUs Remains an Important Risk

Lumino Industries derives a major share of its income from government and PSU clients. According to the information available from the brokerage's commentary, they form about 53-86% of their revenue. This high exposure leaves the company vulnerable to business cycles driven by tenders and even uncertain cash flows. The government and PSU business could also be impacted by the change in project schedules or tenders. Thus, the investor should not base his/her decision only on the good listing performance of the stock.

Exposure of Lumino Industries to Government/PSUs Remains an Important Risk

Lumino Industries derives a major share of its income from government and PSU clients. According to the information available from the brokerage's commentary, they form about 53-86% of their revenue. This high exposure leaves the company vulnerable to business cycles driven by tenders and even uncertain cash flows. The government and PSU business could also be impacted by the change in project schedules or tenders. Thus, the investor should not base his/her decision only on the good listing performance of the stock.

How Will the IPO Funds Be Utilized?

As discussed above, there is a new share issuance in the IPO of Lumino Industries, and a significant part of the funds will be invested in paying off the debt of the company. Approximately ₹337 crores will be utilized to pay off the debt of the company. Further, ₹15 crores will be used by the company for the purpose of capital expenditure and that too for the purchase of equipment and machinery, and the civil construction and internal developments in the current manufacturing unit of the company. The rest of the funds will be invested in general corporate requirements. In all, the shares of Lumino Industries have had a great initial performance in the market, but then due to its good performance, the investors will have to analyze the value of the risk involved.