HP Adhesives lists at 16% premium; should you invest?

Adhesives and sealants company HP Adhesives made a decent debut on bourses on Monday with a premium of 16.42 per cent on the BSE. The scrip listed at Rs 319 on the exchange against the issue price of Rs 274. Likewise, it listed at a premium of around 15 per cent at Rs 315 on the National Stock Exchange (NSE).

Earlier, the initial public offerings, which opened for subscription on December 15, got oversubscribed by 20.96 times on the last day of the bidding process on December 17.

Commenting on the listing, Likhita Chepa, senior research analyst, CapitalVia Global Research said, “Earlier, the listing gains expectations were ranging between 20 per cent-25 per cent. But, it looks like weaker global market sentiments have impacted the listing gains to a certain extent.”

She further added that the issue had witnessed a strong investor response and was oversubscribed majorly due to the size of the issue (being small comparatively) despite higher valuations. “We advise investors to book profits at current levels as we expect some correction in its prices in the coming weeks,” Chepa said.

In general, the consumer adhesives industry clocked in 8-10 per cent CAGR between FY15-20. In FY21, the market is valued at Rs 5,300 crore-5,500 crore and it de-grew by 1-2 per cent due to the pandemic-led reduced construction activity. However, it is expected to recover strongly in H2FY22 driven by a pickup in infrastructure and construction activity and rising demand from end-user industries such as packaging, electronics and woodworking.

Santosh Meena, head of research, Swastika Investmart said, “There is a potential for the company to grow exponentially in the upcoming years, and the capex will guide growth. Investors who got allotment are advised to keep the stop loss at Rs 300 while new investors can consider Pidilite which has a long operating history and is the market leader in its field.” Shares of Pidilite traded 0.26 per cent up at Rs 2,416 at around 11.10 am (IST), while the benchmark BSE Sensex was almost flat at 57,130 at around the same time.

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