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Why is Angel Broking trading at a discount in grey market ahead of listing?

Source - Moneycontrol.com

Experts feel the rising competition in the broking industry and muted response to the IPO with nearly 4 times subscription could be the reasons behind Angel Broking trading at a discount.

Retail broking house Angel Broking is the only IPO that slipped into discount ahead of its listing in the year 2020.

In fact, it had started on a strong note with a premium of around Rs 100 over IPO price of Rs 306 per share especially after the announcement of the price band. However, the increasing market volatility (which could one of the reasons),  it gradually started losing its tempo and around issue closing, the premium dropped to Rs 15-20.

The decline did not stop there. It further dipped and turned into discount around the announcement of the basis of allotment. So far, among the listed stocks in the year 2020, no one has reported this sort of weak performance though there has been a decline in premium.

Experts feel the rising competition in the broking industry and muted response to the IPO with nearly 4 times subscription could be the reasons behind Angel Broking trading at a discount.

Angel Broking, one of the largest retail broking houses on the basis of active clients on NSE, was the first broking company to come out with IPO plans in the last ten years. It is going to list its shares on bourses on October 5 and the issue price has been fixed at Rs 306 per share.



"Reason might lie in fundamentals as full-service brokers have tough competition faced by discount brokers. Apart from this, the response was on the muted side compared to recent IPOs," Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.

Manali Bhatia, Head-Research at Rudra Shares & Stock Brokers also said the broking industry has become highly competitive. "Besides, the entry of discount broking players could pose a threat in the growth story going ahead."

She further said Angel Broking is heavily litigated with issues and punched with notices. Earlier, SEBI had put a trading ban on one of its promoters Lalit T Thakkar for two years.

Considering the above-stated factors, she believes the stock could correct more going ahead.

Angel Broking raised Rs 600 crore via public issue which consisted of a fresh issue of Rs 300 crore and an offer for sale of Rs 300 crore by promoters and investors.

The company provides broking and allied services through online and digital platforms, and network of over 11,000 authorised persons as of June 2020. The company managed Rs 13,254 crore in client assets and over 21.5 lakh operational broking accounts as of June 2020.

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