The Lovable Lingerie dream continues as retailers soak it up

It has gained a third in about a week. But its small float and shipping volumes warn some against betting on it, fearing it may have risen above its fundamentals when many other newly listed companies are trading below their asking price.

“The rally at Lovable Lingerie is more of an impulse game with little real interest,” said Sharad Rathi, associate director at Almondz Global Securities.

“Valuations seem a bit out of whack.” Lovable, which was selling shares at Rs 205 a share, is up 109% to Rs 428.5 on Friday after peaking at Rs 462.50. Some of the top shareholders include HDFC Mutual Fund, SBI Funds, UTI Asset Management and Fidelity, according to the filing.

The company’s total outstanding shares are 1.68 billion and the public holding is approximately 50,000 shares. The Sensex lost 2.6% over the period and the BSE IPO index rose 1.6%. Fineotex Chemical and C Mahendra Exports are the two companies that made a more than adorable return from this year’s IPOs.

The stock trades at 31 times forward earnings for fiscal 2012, compared to 27 times earnings for Page Industries. Although the stock has been among the top trading venues over the past few days and has climbed to the limit on some days, the number of stock changes has remained insignificant. The amount of shares actually changing hands was in the single digits for many days.

The delivery rate ranged from 2% to 9% between June 10 and June 17, when the stock rose 33% on BSE, stock market data show. That follows the performance of Page Industries, which is up 396% since its IPO in March 2007. Shares which sold at Rs 396 apiece are trading at Rs 1,784. “Increasing disposable incomes and a growing awareness of personal hygiene are fueling the growth of the innerwear market in India,” said Anand Rathi Secutities in a recent report. “This growth will also be bolstered by the burgeoning modern commercial centers, shopping complexes, etc.,” said the brokerage, which has a price target of Rs.430.

The Mumbai-based company’s IPO, valued at Rs 93 crore, was well received as it received 21.8 times the institutional share, 98.5 times the wealthy individual share and 20.5 times the retail share drew. Rising commodity prices and intensifying competition are the two risks to earnings growth, the report said.