IPO market heats up, but analysts urge investors to tread carefully

Synopsis

Several companies including Kalpataru Limited, Ellenbarrie Industrial Gases, HDB Financial Services, and Sambhv Steel Tubes are set to launch their IPOs this week. Analysts are suggesting investors consider Ellenbarrie and Sambhv for longer-term gains. HDB Financial is viewed as a long-term play, but its grey market premium has decreased. Experts advise caution on Kalpataru due to debt levels.

Mumbai: Kalpataru Ltd, Ellenbarrie Industrial Gases, HDB Financial Services and Sambhv Steel Tubes are set to launch their Initial Public Offerings (IPO) this week. The issues of Kalpataru and Ellenbarrie Industrial Gases will open for subscription on Tuesday, while HDB and Sambhv will be available from Wednesday. ET spoke to analysts on which IPO investors should bet on.

HDB Financial Services

The ₹12,500-crore issue - the largest IPO in India since Hyundai Motor India's offering in October last year - is the most widely watched. With HDB's grey market premium (GMP) - the additional price that investors are willing to pay over the IPO price in the grey market before the stock lists on the stock exchange - halving from ₹93 last week to ₹46 on Monday, expectations of a strong listing have diminished. Analysts said investors looking to hold the shares for three to five years could subscribe to the issue.

"The NBFC (non-banking financial company) has a lot of competition in the space that it operates in and commands a slight premium in its valuations due to its parent value," said Krishna Appala, fund manager at Capitalmind PMS.

Sunny Agrawal, head of fundamental research at SBI Securities, also said HDB Financial is a long-term investment opportunity since its not cheaply valued.

Geetanjali Kedia, IPO expert at SPTulsian Investment Adviser, advices against subscribing to HDB IPO either.

"Despite brand association with HDFC group, the company's asset quality is concerning and the IPO appears fully priced in relation to peers," she said.

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Kalpataru Ltd

Analysts are advising investors to skip the Kalpataru IPO.

"We recommend avoid Kalpataru IPO, given the company's high debt even post IPO and unattractive valuation for the low realisation on its projects," said Kedia.

Agrawal said SBI Securities is 'neutral' on the offering as the net debt level of Kalpataru will continue to be high despite utilising ₹1,193 crore of net IPO proceeds towards debt repayment.

Ellenbarrie Industrial Gases
Analysts are most bullish on the Ellenbarrie IPO among the four offerings this week.

"It is undervalued relative to peers like Linde India and is likely to benefit from reduced interest cost post debt repayment from IPO proceeds and capacity addition from October 2025 onwards will aid earnings growth," said Agrawal, who recommends subscribing for listing gains as well as for the long term investments.

Kedia of SPTulsian said investors may consider subscribing to the IPO with a one-year or longer investment horizon.

"The company has robust capex plans, healthy margins and is priced more attractively than its sole listed peer, besides being offered below the last transaction price (₹428)," she said.

Sambhv Steel Tubes
Analysts recommend subscribing to the IPO of the Chhattisgarh-based company for the longer period as the company's facility is entirely a backward-integrated one

Agrawal suggests investors subscribe to the ₹540-crore issue for a longer-term horizon of 2-3 years.

"Debt reduction from IPO proceeds will lower the finance costs and capacity expansion of high-margin value-added products is likely to be the earnings growth driver for FY26 and FY27," he said.

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