DMart: Stock has doubled in a day; should you buy it now?

DMart's shares doubled on its listing day on Tuesday March 21, 2017 after attracting bids for nearly 106 times during the initial public offering (IPO) in March.

On its first day of trading, Avenue Supermart (parent company of DMart) listed at Rs 604.40 per piece – a whopping 102% premium from its IPO issue price of Rs 299 per piece. On Wednesday, at 9.44 am, shares of ASL is trading at Rs 653 per share, up Rs 12 or 1.91%.

The company raised Rs 1,870 crore from the IPO and became the first company in twelve years to get listed at a premium of over 100%.

Also Read: DMart listing: First time in 12 years an IPO saw over 100% listing gains on day 1

Since the shares of DMart were oversubscribed by over 105 times, many retail investors were left with little shares than what they had originally applied for. 

This is the reason why shares of the company have more than doubled in less than two days of trading. 

So, is there still an opportunity to invest in the company or have the valuations now look stretched? 

Jimeet Modi, CEO, SAMCO securities said, “Though, medium and short term investors/traders should at least book partial profits as in medium term D-Mart stock can under-perform given its stretched valuations and also the market is consolidating after making a fresh high. Long term portfolio investors are advised to held on to their positions.”

Analysts at Motilal Oswal said, “The shares surged as high as Rs 648.80 per share versus the sale price of 299 rupees, the best performance by a debutante in four years. The premium valued the department store chain at Rs 399 billion ($6.1 billion), more than the combined value of its three immediate publicly traded rivals -- Future Retail Ltd., Aditya Birla Fashion Ltd. and Trent Ltd.”

Market cap of Aditya Birla Fashion and Retail is at Rs 11,688.49 crore, Future Retail at Rs 11,637.10 crore and Trent at Rs 8,095.24 crore while ASL is currently at over Rs 40,000 crore.