EPACK Durable IPO booked 2.4 times day 2 so far; NIIs quota subscribed 4.5 times

The initial public offering (IPO) of EPACK Durable saw a strong buying response from the investors during the second day of the bidding process as retail and non-institutional investors' participation led the issue to sail through. The issue had kicked-off for bidding on Friday, January 19.

The Noida-based EPACK Durable is selling its shares in the price band of Rs 218-230 apiece with a lot size of 65 shares and its multiples thereafter. The company is looking to raise a total of Rs 640 crore via its primary offering, which includes a fresh share sale of Rs 400 crore and an offer-for-sale (OFS) of more than 1.04 crore equity shares.

According to the data, the investors made bids for 4,79,56,350 equity shares, or 2.40 times, compared to the 1,99,77,615 equity shares offered for the subscription by 1.40 pm on Tuesday, January 23. The three-day bidding for the issue will conclude on Wednesday, January 24.

The allocation for retail investors was subscribed 2.88 times, while the portion reserved for non-institutional investors saw a subscription of 4.49 times. However, the quota set aside for qualified institutional bidders (QIBs) was attracted merely 2 per cent bids for as of the same time.

Incorporated in 2019, EPACK Durable is an original design manufacturer (ODM) of room air conditioners (RAC). The company also manufactures components such as sheet metal parts, injection moulded parts, cross-flow fans, and PCBA components that are actively used in the production of RACs.

Brokerage firms are mixed on the issue. Some analysts suggest to subscribe to the issue citing its strong leadership and rising growth in the business. However, others suggest to avoid the issue on the basis of stiff competition and rich valuations of the issue.

The IPO is priced at an P/E of 65.7 times on FY23 EPS (post-issue), which is at premium of 32% to its peers average valuation (PE) of 49.8 times on FY23 basis. Over FY 21-23, the company’s Revenue, Ebitda and PAT have grown at a CAGR of 44.6 per cent, 56.2 per cent and 107.3 per cent respectively, said IndSec Research.

"As per F&S report, EPACK Durable holds a market share of 24 per in the ODM space for RAC. The company will be investing the IPO proceeds in expanding its manufacturing capabilities to be in position to meet the future anticipated demand. At this valuation we see limited potential for upside, hence we assign a 'subscribe for long term' rating on the company," it added.

Ahead of its IPO, EPACK Durable mobilised Rs 192.02 crore by allotting 83,48,504 shares at a price of Rs Rs 230 apiece from anchor investors. 50 per cent shares have been reserved for qualified institutional bidders (QIBs), while 15 per cent shares shall go to non-institutional investors (NIIs). Remaining 35 per cent of the net offer shall go to retail investors.

Mainly on the back of expanded capacities and improved demand post-Covid-19 pandemic (resulting from extended extreme heat waves across the country and easy availability of financing options), EPACK has reported a strong set of operating and financial performance, said Ashika Stock Broking.

"Due to better profitability, debt to-equity ratio improved to 2.3x in FY23, compared to 4 times in FY21," it added. "In terms of the valuations, on the higher price band, EDL demands P/E multiple of 68.9x based on post issue fully diluted annualized FY23 EPS and EV/EBITDA multiple of 24.9 times."

Dam Capital Advisors (formerly IFDC Securities), Axis Capital and ICICI Securities are the book running lead managers of the EPACK Durable IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed at the bourses on both BSE and NSE on Monday, January 29. 

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