Why is Angel Broking Trading at a Discount in Grey Market Ahead of Listing?
According to Sunil Shankar Matkar, due to the rise in competition in the broking industry and muted response to the IPO with nearly 4 times subscription Angel Broking is trading at a discount.
Retail broking house Angel Broking being the IPO that slipped into discount ahead of its listing in the year 2020. Despite being started on a strong note with a premium of around Rs 100 over IPO price of Rs 306 per share especially after the announcement of the price band still the increasing market volatility (which could one of the reasons), it gradually started losing its tempo and around issue closing, the premium dropped to Rs 15-20. It further declined into discount around the announcement of the basis of allotment. So far, among the listed stocks in the year 2020, no one has reported this sort of weak performance though there has been a decline in premium.
Angel Broking being one of the largest retail broking houses on the basis of active clients on NSE, was the first broking company to come out with IPO plans in the last ten years which enlisted its shares on bourses on October 5 and the issue price has been fixed at Rs 306 per share.
Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol stated, "Reason might lie in fundamentals as full-service brokers have tough competition faced by discount brokers. Apart from this, the response was on the muted side compared to recent IPO's."
Manali Bhatia, Head-Research at Rudra Shares & Stock Brokers also said the broking industry has become highly competitive. "Besides, the entry of discount broking players could pose a threat to the growth story going ahead." She further added that Angel Broking is heavily litigated with issues and punched with notices. Earlier, SEBI had put a trading ban on one of its promoters Lalit T Thakkar for two years. She intuited that the stock could correct more going ahead.
Angel Broking raised Rs 600 crore via public issue which consisted of a fresh issue of Rs 300 crore and an offer for sale of Rs 300 crore by promoters and investors.
The company provides not only broking and allied services through online and digital platforms but also has a network of over 11,000 authorised persons as of June 2020. It also manages Rs 13,254 crore in client assets and over 21.5 lakh operational broking accounts as of June 2020.