Popular Foundations Limited, a company specializing in engineering and construction services, experienced a turbulent stock market debut. After listing at ₹37 per share on September 24, 2024, its shares quickly hit the 5% lower circuit, dropping to ₹35.15 apiece.

IPO Performance

Popular Foundations raised ₹19.87 crore through its Fixed Price IPO, which opened for subscription from September 13 to September 19, 2024. Despite the moderate reception, the IPO was oversubscribed 9.26 times, with retail investors oversubscribing by 14.88 times. However, compared to other SME IPOs, which attracted 100x or more subscriptions, this performance was subdued.

The IPO saw a total issue of 53.7 lakh fresh shares priced at ₹37 each, with the minimum investment set at ₹111,000 for retail investors, or 3,000 shares per lot. High-Net-Worth Individuals (HNIs) had to invest in two lots (6,000 shares), amounting to ₹222,000.

Company Overview

Popular Foundations Limited, with over 25 years of experience, provides end-to-end construction solutions. The company's services span across industrial, educational, commercial, and residential projects, focusing on non-government construction activities in Chennai.

Financials and Valuation

The company has shown steady growth in recent years:

Revenue: ₹5,191 lakh (FY24), ₹4,866.89 lakh (FY23), ₹2,630.17 lakh (FY22).

EBITDA: ₹710.04 lakh (FY24), ₹323.46 lakh (FY23), ₹265.22 lakh (FY22).

Profit After Tax: ₹347.76 lakh (FY24), ₹119.61 lakh (FY23), ₹48.08 lakh (FY22).

With a pre-issue EPS of ₹2.41 and a pre-issue P/E ratio of 15.35x, the company was fairly priced in comparison to the industry P/E ratio of 36.05x. The post-issue P/E ratio stands at 21.76x. Popular Foundations’ ROCE for FY24 is 22.77%, and its ROAE is 23.17%, showing healthy returns on equity and capital.

Grey Market Premium and Subscription Outlook

The Grey Market Premium (GMP) for Popular Foundations was estimated between ₹5 and ₹10, indicating moderate demand. The IPO was not as heavily subscribed as other recent SME offerings, some of which saw over 100x bids. This lower demand could explain the share's initial struggles on the stock exchange, with the price falling 5% from its issue price.

Despite this, risk-oriented investors might still see potential, particularly for listing gains in the short term or long-term growth in the construction sector. The company’s strong financials and operational focus offer room for sustained performance.

Investment Recommendation

The IPO is suitable for investors willing to take on higher risk for potential listing gains or long-term growth. Given the lower-than-expected subscription rate and current market dynamics, this investment is recommended for those who have the risk appetite for SME stocks.

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