What's Happening?
The initial public offering (IPO) of Waterways Leisure Tourism Ltd, an ocean cruise operator, is currently in its second day of the bidding process. The IPO, which opened on June 23 and will close on June 25, aims to raise ₹585 crore through a fresh issue
of 72.40 lakh equity shares. The price band for the IPO is set between ₹769 and ₹808 per share. As of June 24, the IPO has been subscribed 35%, with significant interest from retail individual investors, who have booked 1.66 times their category. However, non-institutional investors have shown less interest, with only 16% subscription, and qualified institutional buyers have yet to participate. The shares are expected to be listed on both the BSE and NSE on July 1.
Why It's Important?
The IPO of Waterways Leisure Tourism is significant as it reflects the growing interest in cruise tourism within India, a market that the company has capitalized on through its Cordelia Cruises brand. Despite the potential for growth in this sector, the IPO's muted demand highlights investor concerns over the company's valuation and profitability. Analysts have noted that while the company has turned profitable, its EBITDA margins have recently declined, and it remains vulnerable to fluctuations in fuel costs and occupancy rates. The IPO's pricing at approximately 101 times its price-to-earnings ratio is considered aggressive, offering limited safety margins for investors. This situation underscores the challenges faced by companies in niche markets when seeking public investment.
What's Next?
The IPO's outcome will depend on the participation of qualified institutional buyers, who have yet to bid. Their involvement could significantly impact the overall subscription levels and investor confidence. If the IPO achieves full subscription, it could bolster Waterways Leisure Tourism's financial position, enabling further expansion and investment in the cruise tourism sector. However, if demand remains low, the company may need to reassess its pricing strategy or explore alternative funding options. The listing on July 1 will be a critical moment, potentially influencing future IPOs in the tourism and leisure industry.
