Marketmen clueless about MindTree's phenomenal rise

After an impressive debut on the bourses, MindTree Consulting, an international IT and R&D Services Company, is up about 28 per cent in the first half-an-hour of trade.

After generating a demand of over Rs23,300 crore through its through IPO, the shares of the Mindtree Consulting made a dream debut at Rs662 with 56 per cent premium on Dalal Street.

Today, the stock has soared to the Rs900 levels. It is indeed one of the buzzing stocks this morning and is continuing to move up. What is the trigger for this sudden rise in the stock - is there some news on the anvil? Marketmen analyse.

Rajen Shah of Angel Broking feels that the valuations are getting absurd and that he would not want to pay so much for a stock like MindTree, which is not a frontliner vis-a-vis Infy, Wipro or Satyam. MindTree''s market cap does not even stand at one-fourth the size of any of the IT biggies like Infosys.

Comments Shah, "I think the stock has run up a lot and I think the valuations are getting absurd actually. You are getting stocks like Prithvi at about six times, Zensar at about 10 times, so why should I pay almost 27-28 times for MindTree which is not a company of the size of Infosys, Wipro or Satyam. When you are getting frontline companies for 20-23 times to FY08 earnings, I think MindTree at about 27-28 certainly looks to be very stretched. I think one should happily exit the counter without any second thoughts."

Investment advisor PN Vijay believes that it could be some large funds may have placed an order to get a piece of action of the stock. "Sometimes what happens is in these highly successful IPOs, I have seen that QIB, FIIs don''t get any allotment at all; and then they just place an order that we want to go upto 3 per cent and they start building up; we saw that in fact Tech Mahindra for example. So it maybe a situation of some large funds, which want to have a piece of the action."

PN Vijay is also of the opinion that it is rather overpriced. He says, "MindTree took everybody by surprise unless there are buyers who know something that you and I don''t. Right now it is just too overpriced even the issue was heftily priced but right now it is rather overpriced."

With a market cap of about Rs700 crore, MindTree has a long way to go before it can become an Infosys or TCS. However, people who do not own enough of the stock, rush to buy it. If one is a lay investor, then these are good selling opportunities, when stocks get horrendously expensive.