Mahindra Holidays & Resorts has fixed Rs 300 as the issue price for its public float, valuing the firm at Rs 2,525 crore ($525 million). At this price the hospitality firm will be able to raise Rs 278 crore. The shares are expected to start trading on the bourses in three weeks or second half of July.
The issue of 9.27 million shares, which included part selloff by its promoter Mahindra & Mahindra (M&M) was priced in the bracket of Rs 275-325/ share. At Rs 300/share it is valued 29.4 times its earnings per share for the financial year ended March 31, 2009. On a diluted basis the P/E multiple works out to a little over 30 at the issue price.
The pricing is being seen as aggressive for the firm which operates in a sector hit hard by the economic slowdown. Lower disposable income with consumers and poor consumer sentiments has affected travel and tour industry over the past one year.
For the pre IPO investors SBI and Jacob Ballas, the issue price would translate into a dip in value of their holdings by 37%. Both the investors had picked a small stake in January 2008 at a price of Rs 479/share.
But the issue which was oversubscribed more than 8 times on the last day of the IPO bodes well for the revival of the primary market. The market has already seen encouraging liquidity flows from institutional investors into the handful of QIPs which have been floated over the last three months.