Archean Chemical IPO: Grey market premium suggests a higher likelihood of listing gains

Ahead of its initial public offering opening (IPO) of Archean Chemical Industries to investors for subscription tomorrow, the shares are already commanding a premium of 17 percent in the grey market. The IPO will open for subscription on November 9 and remain open for bids till November 11. With the price band fixed at Rs 386 to Rs 407 per share for the IPO, shares of the company have a grey market premium (GMP) of Rs 70, according to market observers.

The GMP of a stock can help serve as an indication of how the investor sentiment of an IPO may impact its performance. A strong GMP may indicate a higher likelihood of listing gains while a weak GMP may signal that shares of a company don’t list with any gains. The shares of the company will most likely be allotted on November 16 with listing expected to happen on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) by November 21.

Archean Chemical is a marine chemical manufacturer producing bromine, industrial salt, and sulphate of potash. The company was the largest exporter of industrial salt in the country with exports of 2.7 million MT, in FY 2020-21.

The company will be looking to raise Rs 1,462.31 crore from the IPO, which consists of the issuance of fresh shares worth Rs 805 crore along with an offer for sale (OFS) where existing promoters and shareholders will be selling around 1,61,50,000 equity shares. Existing shareholders and promoters India Resurgence Fund II, Chemikas Speciality, India Resurgence Fund and Piramal Natural Resources will be offloading their stakes in Archean Chemicals. Brokerages and analysts remain mostly positive about the issue though warn to exercise caution due to its pricey valuation.

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