Service Care IPO lists at 5.82% premium, tapers later

Service Care Ltd had a moderately positive listing on 26th July 2023, listing at a rather small premium of 5.82% on the NSE, but subsequently tapering and closing above the issue price but below the listing price for the day. In a sense, the tepid listing was rather surprising since the Nifty was up 98 points during the day. However, the stock met with a lot of selling pressure at the higher levels. Also, the tepid subscription data for the stock did no help the listing performance beyond a point. There was a degree of uncertainty in the markets ahead of the all-important Fed meet scheduled late on July 26, 2023. That is when the Fed statement in the aftermath of the FOMC meeting is expected to be announced. The ambivalence did keep the stock under a bit of pressure on listing day.

How subscription levels influenced stock listing

The stock of Service Care Ltd did show strength during the day on opening but later the bias shifted in favour of the sellers as they outnumbered the buyers. However, while the stock listed around 5.82% above the IPO price, it closed below the listing price, although it was still above the IPO price on listing day. Being an NSE SME IPO, it is only traded on the SME segment of NSE. Service Care Ltd opened 5.82% higher and the opening price turned out to be the high price for the day as the stock faced resistance at that particular level pushing it down. With subscription of 10.54X for the retail portion, 2.64X for the HNI / NII portion and 5.10X for the QIB portion; the overall subscription was relatively tepid at 6.44X. The subscription numbers were relatively moderate. Hence, while the stock did list at a premium to the issue price, it failed to sustain the momentum after that. This ensured that the opening early gains could not be sustained post listing.

Opened strong, but could not sustain

The SME IPO of Service Care IPO was priced at ₹67 per share, which is the upper band of the range of ₹63 to ₹67 at which the IPO band was set for the book built issue. On 26th July 2023, the stock of Service Care Ltd listed on the NSE at a price of ₹70.90, a premium of 5.82% on the IPO issue price of ₹67. However, the stock faced pressure at higher levels and eventually it closed the day at a price of ₹69 per share, which is 2.99% above the IPO price but -2.68% below the listing price of the stock on the first day of listing. In a nutshell, the stock of Service Care Ltd had closed the day between the IPO price and the opening price of the day with the opening price becoming the high price of the day. The upper circuit price on listing day is calculated on the listing price and not on the IPO price. The opening price actually turned out to be the high price of the day.

On Day-1 of listing i.e., on 26th July 2023, Service Care Ltd touched a high of ₹70.90 on the NSE and a low of ₹67.35 per share. The opening price turned out to be the high point while the stock closed at the low point in closing terms although the adjusted price was higher. It may be recollected that SME stocks are limited by 5% upper and lower circuit on the opening price of the stock for the day, which is the maximum that the SME IPO stock is allowed to move in the day. The table below captures the price discovery of the IPO stock of Service Care Ltd in the pre-open session.

Data Source: NSE

Stock volumes were quite strong on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Service Care Ltd stock traded a total of 13.86 lakh shares on NSE SME segment amounting to value of ₹966.87 lakhs on the first day.  The order book during the day showed a lot of buying in the first half but in the second half the situation reversed with the sell orders consistently exceeding the buy orders at any point of time. That led to the stock to close below the opening price, albeit above the IPO issue price. It must be noted here that Service Care 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, Service Care Ltd had a market capitalization of ₹79.34 crore with free-float market cap of ₹20.97 crore. It has a total of 114.99 lakh shares as the issued capital of the company. As stated earlier, since the trading is on the T2T segment, the entire volume of 13.86 lakh shares during the day is accounted for only by delivery trades.

Business model of Service Care Ltd

Service Care Ltd, is an SME IPO on the NSE which had opened for subscription on 14th July 2023 and closed on 18th July 2023. The company was incorporated in 2011, and it is engaged in offering support services such as workspace administration services and workforce administration services across a wide range of business domains. Essentially, the workspace administration service delivers professional services towards facility management; which is into managing administration and logistics flow of routine activities in any organization. The workforce management services segment offers end-to-end HRMS & HROS services.

Service Care Ltd has developed deep insights into this side of the business and has overall market presence for over 23 years in this particular field. The company has established its creditability with its customers and partners over the last few years. Service Care Ltd currently operates through a team of 5,800 associates (which includes contractual employees). Its clients are spread across various verticals like engineering, education, manufacturing, infrastructure, banking, IT, healthcare, FMCG etc. it also caters to the government sector for its administration and human resource needs. The company will be using the proceeds from the fresh issue to help meet its working capital expenses.