Subam Papers IPO Lists at ₹142 Below Issue Price

Subam Papers Limited, a manufacturer of Kraft Paper and paper products, made a disappointing debut on the Indian stock market on Tuesday, 8th October 2024, with its shares listing at a discount to the issue price on the Bombay Stock Exchange (BSE) SME platform.

Listing Details

• Listing Price: Subam Papers shares were listed at ₹142 per share on the BSE SME platform, marking a weak start to its journey as a publicly traded company.
• Comparison to Issue Price: The listing price represents a substantial discount to the IPO issue price. Subam Papers had set its IPO price band from ₹144 to ₹152 per share, with the final issue price being fixed at the upper end of ₹152.
• Percentage Change: The listing price of ₹142 on the BSE SME translates to a discount of 6.58% below the issue price of ₹152.

First-Day Trading Performance

• Opening vs. Latest Price: Following its weak opening, Subam Papers' share price continued to decline. By 10:34 AM, the stock was trading at ₹138, down 2.82% from its opening price and 9.21% below the issue price.
• Market Capitalisation: As of 10:34 AM, the company's market capitalisation stood at ₹320.78 crore.
• Trading Volume: The traded volume was 12.94 lakh shares with a traded value of ₹18 crore, indicating moderate investor interest on the first day of listing.

Market Sentiment and Analysis

• Market Reaction: The market reacted negatively to Subam Papers' listing. The significant discount to the issue price indicates weak demand and investor caution regarding the company's prospects.
• Subscription Rate: Despite the weak listing, the IPO was oversubscribed by 92.93 times, with NIIs leading at 243.16 times subscription, followed by QIBs at 57.18 times, and retail investors at 48.97 times.
• Grey Market Premium: Prior to listing, shares were trading at a premium of ₹12 in the grey market, which was not realised at listing.

Growth Drivers and Challenges

Expected drivers of future performance:

• Focus on sustainable packaging solutions and paper waste recycling
• Strategic location near water source (Thamirabarani River)
• Fully automated manufacturing process enhancing productivity
• Growing demand in various industries for packaging materials

Potential challenges:

• Highly competitive and fragmented paper manufacturing sector
• Potential volatility in raw material (waste paper) prices
• Inconsistent financial performance in recent years

Utilisation of IPO Proceeds

Subam Papers plans to use the funds for:

• Investment in a subsidiary for financing its capital expenditure requirements
• General corporate purposes

Financial Performance

The company has demonstrated inconsistent financial results:

• Revenue decreased by 3% to ₹49,697.31 lakh in FY2024 from ₹51,062.36 lakh in FY2023
• Profit After Tax (PAT) rose significantly to ₹3,341.8 lakh in FY2024 from a loss of ₹26.79 lakh in FY2023

As Subam Papers begins its journey as a listed entity, market participants will closely monitor its ability to leverage its manufacturing capabilities and capitalise on the growing packaging industry to drive future growth and improve shareholder value. The weak listing and subsequent price decline suggest cautious market sentiment towards the company's competitive paper manufacturing sector prospects. Investors should watch for signs of consistent financial performance and successful company growth strategies implementation.