KSH International Lists at Discount, Tumbles 8% on Debut

A Disappointing Debut on Dalal Street

Shares of KSH International Ltd, a leading manufacturer of magnet winding wires, made a disappointing debut on the stock exchanges on Tuesday, December 23. The stock listed at ₹370 per share on both the BSE and NSE, marking a 3.65% discount to its upper issue price of ₹384. This weak opening reflected the subdued investor sentiment that was evident during its initial public offering (IPO) subscription period. The discounted listing meant that investors who were allotted shares in the IPO faced an immediate loss of ₹14 per share, translating to a loss of ₹546 for every lot of 39 shares.

Intraday Pressure Intensifies

Following the soft opening, selling pressure on the counter intensified throughout the trading session. The share price continued its downward trajectory, hitting an intraday low of ₹355.65 on the BSE and ₹356.15 on the NSE. This represented a significant decline of nearly 8% from the IPO price. The stock failed to recover, closing the day near its low point and cementing a negative first-day performance. The company's market capitalization post-listing stood at ₹2,506.96 crore, but the poor performance raised concerns among market participants about its near-term prospects.

Weak Subscription Signals Muted Interest

Investor demand for the KSH International IPO was tepid from the start. The public issue, which was open for bidding between December 16 and December 18, was subscribed only 0.87 times overall. This lackluster response was seen across investor categories. The retail investor portion was subscribed 0.91 times, while the Non-Institutional Investors (NII) segment saw the weakest response, with subscriptions at just 0.44 times. The Qualified Institutional Buyers (QIBs) portion, excluding anchor investors, was subscribed 1.12 times, barely crossing the full subscription mark. This overall weak appetite was a primary indicator of the challenges the stock would face upon listing.

IPO Size Revised to Meet Subscription Norms

The initial plan was for a ₹710 crore IPO. However, due to the poor subscription figures, KSH International had to revise its issue size downward to ₹644.4 crore to comply with SEBI's minimum 90% subscription threshold. The company opted to reduce the Offer for Sale (OFS) component from ₹290 crore to ₹224.45 crore, while the fresh issue size of ₹420 crore remained unchanged. This adjustment allowed the IPO to sail through but also highlighted the valuation concerns among potential investors.

Grey Market Premium Foreshadowed a Soft Opening

Leading up to the listing, the grey market premium (GMP) for KSH International had already signaled a weak debut. The shares were trading at a discount of ₹2 to ₹5 in the unofficial market. This negative GMP suggested that the stock was likely to list below its issue price, and the actual market performance aligned closely with these expectations. The absence of a premium in the grey market often deters listing day gains and reflects low speculative interest in an IPO.

Company at a Glance: A Key Industry Player

Incorporated in 1979, Pune-based KSH International is a significant player in its sector. It is the third-largest manufacturer and the largest exporter of magnet winding wires in India. The company operates under the 'KSH' brand and supplies its products to Original Equipment Manufacturers (OEMs) across critical sectors like power, renewables, railways, automotive, and industrials. Despite its strong market position and a history of robust financial growth, including an 82% jump in profit after tax in FY25, the company failed to attract strong investor interest for its public offering.

Utilization of Fresh Issue Proceeds

The company plans to use the net proceeds from the ₹420 crore fresh issue for strategic purposes. A significant portion, around ₹226 crore, is allocated for the repayment of debt. Approximately ₹87 crore will be used for capital expenditure, including the purchase and installation of new machinery for expansion at its Supa and Chakan facilities. Another ₹8.8 crore is earmarked for a rooftop solar power plant, with the remaining funds intended for general corporate purposes.

Analyst View: What Should Investors Do?

Brokerage firms had expressed mixed views on the IPO, with most suggesting it for long-term consideration rather than for listing gains. Following the weak debut, Shivani Nyati, Head of Wealth at Swastika Investmart Ltd., noted that the performance reflected the tepid public subscription and cautious analyst outlooks. She advised short-term investors and traders to exit their positions, while suggesting that long-term investors could hold the stock with a stop-loss of ₹350.

Market Impact and Forward Outlook

The poor listing of KSH International could dampen sentiment for upcoming IPOs, particularly in the manufacturing sector. For the company, the immediate challenge is to build investor confidence through consistent operational performance and by effectively utilizing the IPO funds to strengthen its balance sheet and drive growth. The successful execution of its expansion plans will be crucial for regaining investor trust and improving its stock performance in the long run.