HomeMarket NewsStocks NewsConfusion in Arvind Fashions listing price; here's what happened

Confusion in Arvind Fashions listing price; here's what happened

Arvind Fashions hit an upper circuit on the first day of its market listing. However, soon after initial trades, some analysts suspected there were some confusions in the calculation of Arvind Fashions base price.

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By CNBC-TV18 March 8, 2019, 2:51:16 PM IST (Published)

Confusion in Arvind Fashions listing price; here's what happened
Arvind Fashions hit an upper circuit on the first day of its market listing. The stock opened at Rs 590.95 per share on the NSE and was locked in a 5 percent upper circuit at Rs 620.45. However, soon after initial trades, some analysts suspected there were some confusions in the calculation of Arvind Fashions
base price.

Sunil Chandak of Equity Strategist at Gennext Investrade said, “The stock got listed through price discovery mechanism and the base price was calculated at Rs 311, which is the last trading price of Arvind Ltd."

He explained that If five shares of Arvind Ltd receives one share of Arvind Fashions then the ratio stands at 1:5, and therefore, it doesn’t make sense to keep the same base price as one would receive one-fifth shares of the earlier company.

He further added, “I have written to the company and to the exchanges about this. It is on them to take action now. It’s an unfortunate situation as the stock may be stuck in the circuit for the next few days.”

Arvind Ltd demerged its branded apparel and engineering businesses, where shareholders of Arvind would receive shares from both these entities (Arvind Fashions and Anup Engineering).

S P Tulsian, a veteran investor, said, “It will be futile to call on Arvind Fashions now because it will continuously hit upper circuit till March 20. We have a market holiday on March 21, and on that day the price will be derived at Rs 920 per share. Now, in this period for the next 8 trading days, if you have some shares then you are lucky because you are going to make a fortune. However, we must think about the people whose shares will get sold. The retail investors will be at a huge loss because the stock exchange is giving you a fair valuation right now to exit.”

Furthermore, he said, "The stock exchange must look to revise this mechanism of trade-to-trade (T2T) for two weeks of the newly listed companies. They must be very careful in setting the base price on the first day where the price gets discovered.”
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