Kronox Lab shares got listed at 21% premium. What should investors do?

Kronox Lab Sciences witnessed a decent listing at the bourses on Monday with a 21% premium over the issue price.

Even though it is a positive start, the debut fell short of pre-listing expectations, fuelled by the initially high grey market premium (GMP) that had declined steadily in the days leading up to the listing.

Analysts said the company enjoys a strong position within the specialty fine chemicals sector, with a diverse product portfolio and competitive advantages due to high entry and exit barriers.

But the current market volatility might have contributed to a more tempered listing performance compared to expectations.

“Kronox Lab Sciences’ listing, while not quite reaching the heights anticipated based on the initial GMP, signifies a decent debut with strong investor interest. However, the lower-than-expected premium and ongoing market volatility highlight the need for a cautious approach. Investors are suggested to hold their position with a stop-loss level of 150,” said Kronox Lab Sciences from Shivani Nyati, Head of Wealth, Swastika Investmart.Also Read: Ixigo IPO fully subscribed on strong retail demand. Check GMP and other details

Since the IPO is entirely an offer for sale (OFS), all the proceeds will go to the selling shareholders. The issue witnessed a substantial subscription of 117 times, driven by a strong demand from non-institutional and institutional investors.

Kronox Lab Sciences manufactures high purity speciality fine chemicals for diversified end-user industries. Its products are utilized in the production of pharmaceutical formulations, nutraceuticals, scientific research, agrochemical formulations, metal refineries, personal care products, and animal health products, among other uses.

Over the years, it has expanded their scale of operations and global footprint with customers in over 20 countries including US, Argentina, Mexico, Australia, Egypt among others. The revenue from exports has grown at a CAGR of 37.46% between FY21-23.

In the nine-month period ending December 2023, the company’s revenue from operations fell 9% to Rs 67.6 crore while net profit after tax increased 10% to Rs 15.4 crore.

Pantomath Capital is sole the book-running lead manager for the IPO and Kfin Technologies is the registrar.

This shift underscores the importance for multi-asset investors to rethink their diversification strategies. Relying solely on a traditional 60/40 portfolio (60% global equities and 40% global bonds) is no longer sufficient.

Neither is an assumption that what happened in the last 10-15 years is the norm or can be extrapolated in any market.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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