Hero Motors lists below IPO price, then hits 20% upper circuit

Hero Motors shares saw sharp swings on their first day of trade. The stock listed at Rs 82, a discount of about 2 percent to its IPO price. After initial weakness, heavy buying pushed the share up 20 percent to hit the upper circuit at Rs 98.40.

Hero Motors had set an issue price of Rs 84 per share for its IPO. The stock debuted at Rs 82, about 2 percent below the issue price. Buying interest picked up after listing, and the share rose 20 percent to touch Rs 98.40, where it was locked in the upper circuit.

Hero Motors' Rs 1,000 crore IPO drew a strong response from investors. Over the three-day bidding process, the issue was subscribed about 7 times. The non-institutional investors (NII) category was subscribed 9.86 times, the retail portion was subscribed more than 8 times, while the qualified institutional buyers (QIB) portion was subscribed 1.5 times.

The IPO comprised a fresh issue of Rs 600 crore and an offer for sale (OFS) of Rs 400 crore. The price band for the IPO was set at Rs 79 to Rs 84 per share, with a lot size of 178 shares.

The post-listing rally has drawn investor attention, but market experts have struck a cautious note on the current valuation. Sunny Agrawal, head of fundamental research at SBI Securities, said Hero Motors' auto-ancillary business is strong, but the company's valuation at the time of listing was roughly in line with competitor companies, which could limit the scope for fresh investors to enter immediately.

Agrawal said investors should track the company's growth strategy and its financial performance in coming quarters. If the share price declines, the valuation picture could be reassessed.

Experts believe Hero Motors' business has growth potential, but given the current share valuation and the sharp rise after listing, new investors need to study the company's financial results, business growth, competitive position and share valuation on their own before investing.