Esconet Technologies IPO Lists 245.24% higher, but closes at -5% lower circuit

Bumper listing for Esconet Technologies IPO, then lower circuit

Esconet Technologies IIPO had a bumper listing on the NSE, listing at ₹290 per share; an amazing premium of 245.24% to the issue price of ₹84 per share on 23rd February 2024. However, after a bumper opening, the stock struggled under the selling pressure and closed the day at the -5% lower circuit on the listing price. Despite the lower circuit on the stock during the day, the stock of Esconet Technologies Ltd still closed at ₹275.50 per share, a substantial premium of 227.98% over the IPO issue price of ₹84 per share, although it did close at a discount of -5% to the listing price of ₹290 per share. The closing price of the day was ₹275.50 per share.

Despite the strong listing, it was all about the marginal weakness in the Nifty and the Sensex on the trading day. As a result, the stock of Esconet Technologies IPO still closed at the -5% lower circuit at the close of 23rd February 2024. It must be noted here that the Nifty and Sensex were marginally in the negative on Friday; with the Nifty losing -5 points in the day and the Sensex losing about -15 points in the day. During the day, the Nifty and the Sensex were volatile with a sharp downward bias, and hence managed to close with marginal losses for the day. As a result, the stock of Esconet Technologies Ltd, after a bumper listing, ended up closing at the lower circuit of the day.

Why Nifty and Sensex struggled on 23rd February 2024

On 23rd February 2024, the Nifty closed -5 points lower while the Sensex closed -15 points lower as there was some element of caution and volatility in the markets after the aggressive FPI selling in the past couple of weeks. In the last two weeks, the Nifty and the Sensex had gone through a sharp corrective reaction after the sharp rally had taken the indices to life-time highs towards the end of calendar year 2023. However, in the recent week, the Nifty and Sensex have again scaled life time highs with the election fears still there ahead of the crucial general elections coming up in May this year.

Mega Subscription levels, and how it impacted listing of Esconet Technologies IPO

Let us now turn to the subscription story of Esconet Technologies Ltd. With mega subscription of 553.02X for the retail portion, 156.02X for the QIB portion and 553.02X for the non-retail HNI / NII portion; the overall subscription was extremely huge at 507.24X. The IPO was a book building issue with the IPO price band fixed in the range of ₹80 per share to ₹84 per share. Being a book built issue, it was hardly surprising that the price discovery happened at the upper end of the band at ₹84 per share, considering such robust subscription. The stock listed with bumper gains of 245.24% on the NSE. However, subsequently, due to the stock opening so much higher than the issue price and due to the general bearishness in the markets overall, the stock of Esconet Technologies Ltd went on to close at the lower circuit of -5% on the listing price on 23rd February 2024.

This was reflective of pressure on the stock at higher levels, on a day when overall market sentiments were moderately weak. The subscription normally impacts the price discovery in book building issues and the listing price. The strong subscription had a positive impact on the ability of the stock  in two ways. Firstly, it led to the stock price getting discovered at the upper end of the band; and that was the case here as the price got discovered at the upper band of ₹84 per share. On the day of listing, the stock managed to get a bumper opening of 245.24% over the IPO issue price of ₹84 per share. However, eventually, the stock went on to close the day at the -5% lower circuit on the listing price of ₹290 per share. The stock closed the day at ₹275.50 per share.

Stock closes Day-1 at lower circuit, after a bumper listing

Here is the pre-open price discovery for the Esconet Technologies IPO on the NSE.

Data Source: NSE

The SME IPO of Esconet Technologies Ltd was a book built issue priced at the upper band of ₹84 per share. On 23rd February 2024, the stock of Esconet Technologies Ltd listed on the NSE at a price of ₹290 per share, which is a whopping premium of 245.24% over the IPO price. However, amidst a volatile day post listing on 23rd February 2024, the stock of Esconet Technologies Ltd closed exactly at the lower circuit price of ₹275.50 per share. The stock had an upper circuit limit of ₹304.50 per share for the day and a lower circuit limit of ₹275.50 per share for the day of listing i.e., 23rd February 2024.

In the midst of the volatility in trading during the day, the stock price did manage to go above the listing price, although it did fall short of the upper circuit for the day. Through the better part of the trading day on 23rd February 2024 the stock traded under the listing price; in fact, being locked in the lower circuit for most part of the day. The closing price reflects a mixed day of trading, because it closed at the lower circuit after a bumper opening for the day and after staying below the listing price during most of the trading session. However, this lower circuit comes after a very strong listing on a day when the Nifty and the Sensex closed with losses of -5 points and -15 points respectively; amidst a lot of market volatility and FPI selling.

Trade to Trade (ST) category SME listing

Being an SME IPO on the NSE, the stock of Esconet Technologies Ltd was subjected to 5% circuit filter either side on listing day and was also placed in the ST (trade to trade) segment, specifically for SME stocks. That means, only delivery trades are permitted on the stock. Like the upper circuit price, even the lower circuit price on listing day is calculated on the listing price and not on the IPO price. The opening price of the day was at a substantial premium of 245.24% over the issue price of ₹84 per share. During the day, the stock was volatile at opening but never really seriously got to stay above the listing price and remained under that price, eventually closing at the lower circuit price. In fact, the stock was locked in lower circuit for most part of the day on 23rd February 2024. On the NSE, the stock of Esconet Technologies Ltd has been admitted to trade in the ST category. The ST category is specifically for the SME Emerge segment of the NSE with compulsory trade to trade settlement. On such stocks, netting of positions is not permitted and every trade has to be settled by delivery only.

How prices traversed for Esconet Technologies IPO on listing day

On Day-1 of listing i.e., on 23rd February 2024, Esconet Technologies Ltd touched a high of ₹294.95 per share on the NSE and a low of ₹275.50 per share. The high price of the day was above the listing price of ₹290 per share but for most part of the day the stock stayed below the listing price. The high price was well short of the upper circuit price of ₹304.50 per share. However,  the stock closed at the lower circuit price of ₹275.50 per share. Between these two extreme prices, the stock was relatively less volatile and eventually closed at the lower circuit price of the day. However, it is rather uncommon for a stock to close at the lower circuit after getting such a robust listing in the morning.

In terms of the circuit filter limits, the stock of Esconet Technologies Ltd had an upper circuit filter limit of ₹304.50 and a lower circuit band limit of ₹275.50. The stock closed the day 227.98% above the IPO issue price of ₹84 per share but the stock also closed -5% below the listing price of the day of ₹290 per share. However, the stock touched the lower circuit price of the day and spent most part of the day locked at lower circuit. The stock closed under pressure at the lower circuit at the close of the day with sell quantity of 8,000  shares and no buyers in the counter on the NSE. For the SME IPOs, it may be recollected, that 5% is the upper limit and also the lower circuit limit on the listing price on the day of listing. This circuit is not contingent on the issue price in any way.

Robust volumes for Esconet Technologies IPO on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Esconet Technologies Ltd stock traded a total of 12.48 lakh shares on NSE SME segment amounting to trading value (turnover) of ₹3,587.50 lakhs on the first day. The order book during the day showed a lot of volatility with the sell orders consistently exceeding the buy orders at any point of time post the bumper listing. That also led the stock to close at the lower circuit of the day with pending sell orders of 8,000 shares at the end of the trading session, although the price was hardly volatile during the day. It must be noted here that Esconet Technologies Ltd is in the trade to trade (T2T) segment so only delivery trades are possible on the stock. Hence the entire volume for the day purely represents the delivery volumes.

At the close of Day-1 of listing, Esconet Technologies Ltd had a market capitalization of ₹340.52 crore with free-float market cap of ₹119.39 crore. It has a total of 123.60 lakh shares as the issued capital of the company and a face value of ₹10 per share. As stated earlier, since the trading is on the T2T segment, the entire volume of 12.48 lakh shares during the day is accounted by delivery trades only, barring some market trade exceptions in the market. The stock trades on the NSE SME segment under the trading code (ESCONET) and will be available in the demat account under ISIN code (INE0RQZ01017).

IPO size to Market cap contribution ratio

One way to assess the significance of the IPO on the market cap of the segment is the ratio of market overall to the IPO size. Esconet Technologies Ltd had a market cap of ₹340.52 crore and the issue size was ₹28.22 crore. Therefore, the Market cap contribution ratio of the IPO works out to a healthy 12.07 times, which is sharply higher than the median. Remember, this is not the ratio of the market cap to original book value, but the ratio of the market cap created to the size of the IPO. That shows the significance of the IPO to the overall market cap accretion of the stock exchange.