Rakesh Jhunjhunwala backed Metro Brands disappoints on listing day, closes 1.3% down

Metro Brands disappointed on its market debut on December 22, closing at 1.3 percent discount to the issue price despite the equity benchmarks clocking healthy gains for the second day.

Metro Brands opened at Rs 436 on the BSE, a discount of 12.8 percent over its issue price of Rs 500. It sank to the day's low of Rs 426.10 in the initial hour but recovered to hit a high of Rs 507.70. It, however, remained below the issue price for most of the session before closing at Rs 493.55, 1.2 percent lower than the issue price

On the National Stock Exchange, it ended the debut day at Rs 493.35, 1.33 percent lower from the issue price even as equity benchmarks the Sensex and the Nifty gained more than a percent each.

Experts blamed higher valuation, fear of Omicron and market volatility for the weak debut.

"On the listing day, Metro Brands stock is down mainly due to the company trading at higher valuation (TTM PE - 86x) and fear of new Covid variant omicron (will increase the possibility of lockdown)," said Amarjeet Maurya, AVP - Mid Caps at Angel One.

It is the second Jhunjhunwala-backed IPO to list below the offer price after Star Health and Allied Insurance listed at a discount of 6 percent over its issue price on December 10. Metro Brand is also the 19th company to close below its issue price in 2021, a year that has seen a rush of initial public offerings.

Metro Brands traded with a volume of 1.97 crore equity shares on the NSE, and 7.76 lakh shares on the BSE.

"We are positive on stock for the long term on the back of asset-light business, strong brands and wide range of products. We believe every dip in share prices provides buying opportunities to long-term investors," Maurya said.

Santosh Meena, Head of Research at Swastika Investmart, also advised long-term investors to hold the stock.

"With an asset-light model, Metro Brands derives most of its revenues from third parties. It has demonstrated decent growth, profitability, and financials in the past," he said.

One of the largest Indian footwear speciality retailers, Metro Brands has a pan-India presence through 598 stores (across Metro, Mochi and Walkway branded MBOs, Crocs branded EBOs, and Walkway franchisees and SIS) in 136 cities spread across 30 states and union territories in India.