NLC OFS: Analysts cautious on NLC OFS over rich valuations

Mumbai: Market participants are recommending caution to retail investors who are mulling putting money in the government’s share sale of NLC India, one of the top stock performers in the past year, on Monday. Concerns over rich valuations of most state-owned companies may keep share gains under check in the near term, they said. Investors could, however, consider purchases of NLC shares on further declines.

On the first day of the offer for sale (OFS) on Thursday, the non-retail investor category was subscribed 2.92 times. The government is selling as much as 97 million shares (including the green shoe option) in the OFS and has set the floor price at ₹212 a share. The stock fell 3.3% to ₹219.10 on Thursday.

The second day of the OFS is reserved for retail investors.

“Retail investors should subscribe to the OFS only if they see a material difference in the share price compared to the floor price,” said Arun Kejriwal, founder, KRIS, a Mumbai-based investment consultancy firm. “We usually see a fall in share price on the first day, and the prices go up on the second day of the OFS. This has been seen across the board for the last 8-10 OFS issues.”

NLC shares have fallen 22% in the past month. The stock had hit a 52-week high of ₹293.60 on February 5, returning close to 170% returns in the past year, and crossing its 2008 highs. “Technically, the stock has seen some correction in the last one month but volumes are not high in the corrective phase,” said Ruchit Jain, lead research analyst at 5Paisa.com.

Analysts said since the OFS will result in the supply of shares in the market, it could weigh on the stock price.