Hindustan Copper OFS may not be a big draw for retail investors: Analysts

Mumbai: Cautious analysts are doubtful that retail investors will flock to Hindustan Copper's offer for sale (OFS), despite the 10% discount to the stock's closing price. Recent metal stock rallies and high valuations could constrain near-term gains. While institutional participation received more bids on the first day of the offer, analysts deem the discount alone insufficient to entice retail investors.

The stock plummeted 7.04% to ₹533.20 on Tuesday, trading at a 10% discount to Hindustan Copper's August 24 closing price of ₹574.15. Siddarth Bhamre, head of institutional research at Asit C Mehta, warns that investors should not rely solely on the discount to subscribe. Instead, the company's valuation must offer enough upside after accounting for metal stocks' recent rally.

The government announced an OFS for Hindustan Copper on August 24, with the non-retail portion opening for bids on Tuesday. Retail investors are advised to wait for better entry points in the secondary market rather than subscribing to the OFS for quick gains. With metal stocks soaring, investors might find more appealing valuations in the secondary market.

The stock trades at a hefty 40 times trailing earnings and 15 times book value, compared to most metal peers trading at lower valuations, according to Raj Gaikar, an Equity Research Analyst at SAMCO Securities. The stock has already slipped over 7%, leaving a minimal 3-4% gap between the current market price and the OFS floor price, suggesting limited upside. Limited allotment and potential copper price declines could quickly negate the small price gap.