Despite a decent response to the IPO, Epack Durables shares debuted at a discount on Tuesday. The listing was in line with expectations given the downward slide of GMP since the close of the subscription.

Analysts attribute the weak listing to aggressive pricing of the IPO relative to a modest growth outlook in the near future.

“The stock will likely underperform in the near future. However, the business model may work in the long term and investors who have received allotment can hold the shares instead of booking losses at current levels. The financial performance in the next two to three quarters will drive the rerating for the stock,” Avinash Gorakshakar of Profitmart Securities.

The company proposes to use the fresh proceeds to fund capital expansion plans and repay part of its outstanding debt.

“Epack Durables growth outlook is clouded by the highly competitive nature of the industry in which the company is operating in. Investors can hold the stock with a long-term view,” said Astha Jain of Hem Securities.

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Epack Durable is the second largest room air conditioner original design manufacturer (ODM) in India in terms of the number of units in FY23. Its current product portfolio comprises room air conditioners where it designs and manufactures complete RACs, small domestic appliances, and components.The company has expanded its business into the small domestic appliance (SDA) market, particularly given the seasonal demand for RACs, and is currently developing and producing induction hobs, blenders, and water dispensers.

It has a 24% market share in terms of domestically manufactured units by ODM in FY23. The plants are vertically integrated and automated would improve the margins going forward.

Epack Durables’ strengths include its long-standing relationships with top customers, advanced vertically integrated manufacturing, and robust product development capabilities.

The company’s revenue, EBITDA, and PAT grew at a CAGR of 44.6%, 56.2%, and 102.5%, respectively during the FY21-23 period.

For the six months ended September 2023, the company reported revenue of Rs 615 crore, while net profit stood at Rs 2.6 crore. In FY23, the company’s revenue from operations rose 66% YoY to Rs 1,539 crore and profit jumped 88% to Rs 32 crore.

Axis Capital, DAM Capital Advisors, and ICICI Securities acted as the book-running lead managers to the issue.

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