K Raheja Corp-promoted Chalet Hotels Ltd, which runs a chain of hotels and service apartments, reversed early gains on its stock-market debut on Thursday to close flat.
Shares of Chalet Hotels began trading on the BSE at Rs 291 apiece, up 4% from the initial public offering (IPO) price of Rs 280, stock-exchange data showed.
The shares reversed the gains in early trade and fell more than 10% to a low Rs 250.15 apiece. The shares eventually closed at Rs 290.40 apiece.
The BSE’s benchmark Sensex gave up all its gains to end flat on Thursday.
The muted start follows an IPO that was fully subscribed on the last day of the offering thanks to demand from institutions and wealthy investors. However, retail investors remained on the sidelines.
Chalet is the first mainboard issue and major listing of 2019 after a four-month break in primary markets. Market sentiment had weakened in recent months due to volatility.
A depreciation of the rupee, rising crude oil prices and fears that non-bank lenders and housing finance companies are facing a cash crunch kept investors on the sidelines.
The previous major company to list on the stock exchanges was state-run Garden Reach Shipbuilders & Engineers Ltd. It made a weak debut on the stock markets following an IPO that had to be extended after it became the first state-run company to fail to get enough bids.
The company now commands a market capitalization of Rs 5,954 crore, making it the third most-valued hotel company. Listed peer Indian Hotels Co. Ltd, which runs the chain of Taj hotels, is the most valued hotels group with a market capitalisation of Rs 16,614 crore. EIH Ltd, operator of the Oberoi hotels, has a market value of Rs 10,888 crore.
Chalet raised Rs 950 crore through a fresh issue of shares, besides a secondary market sale of 24.685 million shares by the promoter and promoter group.
The Rs 1,642-crore IPO was significantly lower compared to an estimated issue size of roughly Rs 1,800-2,000 crore it was looking to raise when the company filed its draft prospectus last July.
The markdown reflected the company’s quest to attract investors at a time secondary markets are volatile and uncertain owing to various economic and political factors, leaving issuers and investors cagey.
In the hospitality sector, Warburg Pincus-backed Lemon Tree Hotels Ltd went public in April 2018 through a Rs 1,038 crore ($160 million) public issue. The company commands a market value of Rs 5,545 crore, stock exchange data showed.
Chalet’s public issue is also the first after the Securities and Exchange Board of India (SEBI) tweaked norms for IPOs. Last June, the capital markets regulator cut the time for announcing the IPO price band to two days prior to opening of the issue compared with an earlier requirement of announcing five days prior.
Bridging the time gap between the price announcement and opening of an issue helps companies deal better in a volatile market, as per SEBI’s rationale when it announced the amendment at its board meeting.
In the subsequent board meeting in September, SEBI reduced the time to list shares on stock exchange after an IPO to three days from six days earlier to mitigate external risks such as market volatility and uncertainty at a time when world financial markets are inter-connected.
Chalet is part of a long and a growing list of companies that have been looking to go public and benefit from the boom in stock markets over the past couple of years.
In 2017, about three dozen companies had floated IPOs that raised nearly Rs 67,000 crore ($10.5 billion), more than double the 2016 level and four times compared with 2015.
Chalet was incorporated in January 1986 as Kenwood Hotels Pvt Ltd. The company owns, develops and manages high-end hotels in key metro cities in India. Its hotel platform comprises five operating hotels, including one with a co-located serviced residence, in the Mumbai Metropolitan Region, Hyderabad and Bengaluru, offering 2,328 rooms as of 30 September 2018.