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What the grey market premium is suggesting for upcoming IPOs

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The unofficial grey market price of an IPO is the best indicator of how the market perceives the IPO to be. It is the rate of premium an IPO commands in the informal market.

What the grey market premium is suggesting for upcoming IPOs
The market is going to be busy with UTI AMC, Mazagaon Dock Shipbuilders, and Likhitha Infrastructure IPOs launching on September 29. On the other hand, the grey market, is not only busy, but cautious as well.
The unofficial grey market price of an IPO is the best indicator of how market perceives an IPO. It is the rate of premium an IPO commands in the informal market.
UTI AMC, the second-largest Asset Management Company -- due to close on October 1 -- has priced its offer between Rs 552 and Rs 554 per share. This issue comprises of 3,89,87,081 equity shares with a face value of Rs 10 per share.
The company manages domestic MFs of UTI Mutual Fund, provides portfolio management services (PMS) to institutional clients and high net worth individuals (HNIs) and manages retirement funds, offshore funds and alternative investment funds.
Due to the recent volatility in the secondary market, its grey market price has seen its fair share of ups and downs. While its grey market price was Rs 70 on September 26, on September 28 it dropped to Rs 40. This uncertainty suggests cautiousness on the part of investors, which can be attributed to a sell-off in the secondary market witnessed last week.
Mazagon Dock Shipbuilders IPO, also scheduled to be open from September 29 to October 1 is priced in the range of Rs 135-145 per share.
Mazagon Docks is a defence public sector undertaking shipyard with a maximum shipbuilding and submarine capacity of 40,000 DWT (dead weight tonnage). The company is engaged in the construction and repair of warships and submarines for the MoD for use by the Indian Navy. It is looking to raise Rs 433.69 crore via the IPO, with a retail allocation of 39 percent.
According to IPO Central, the Mazagaon Docks' initial offer commands a substantial premium and is traded actively in the grey market, despite volatility. Its grey market price, which was Rs 100 as of September 25, rose to Rs 120 on September 28.
However, Likhitha Infrastructure looks considerably weaker than its peers, priced between Rs 5 to Rs 10 in the grey market, according to IPO Watch. This oil and gas pipeline infrastructure service provider in the country has brought an IPO of 5,100,000 shares priced between Rs 117 and Rs 120. With an issue size of 61.2 crore, the issue will close on October 1.
These mixed views on the issues releasing on the same date are attributed to the secondary market volatility. Retail investors are strongly influenced by market sentiment and are often prone to overreaction. This, combined with the shock sell-off in the secondary market in the last week, has made the investors cautious. It remains to be seen how the market responds to these three IPOs tomorrow.
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