Navigating Grey Market Trends and Insights in IPOs 2023

Introduction:

2023 has ushered in a remarkable IPO boom in India, with 54 companies raising a staggering Rs 49,000 crore. What's catching the eye alongside this surge is the escalating trend in the grey market premiums (GMP). The GMP, an indicative price at which a stock might list, is on the rise, riding high on the bullish wave engulfing Dalal Street.

From the India Shelter Finance Corporation IPO, boasting a 2.34 times subscription, to the promising trajectory of Doms Industries, Inox India, Suraj Estate Developers, Muthoot Microfin, and Motisons Jewellers, the grey market is buzzing with anticipation. Even IPOs like Happy Forgings and RBZ Jewellers are making waves in the grey market before hitting the bidding floor.

Analysts note that these heightened GMPs signify expectations of oversubscription and robust listing prices. This aligns with the broader market sentiment seen in the strong debuts of recent IPOs like Tata Technologies and Utkarsh Small Finance Bank.

As we explore the surge in IPO activity and dissect the nuances of grey market premiums, it's clear that investors are increasingly drawn to IPOs, foreseeing potential listing premiums. The success stories in various sectors contribute to an overarching optimism in the financial markets.

In this article, we'll delve into the latest trends in grey market premiums, unraveling the factors driving this fervor and analyzing the broader implications for investors in India's dynamic financial landscape.

Understanding Grey Market IPOs:

To comprehend grey market IPOs, it's essential to first grasp the concept of a grey market. This unofficial market involves the sale of goods outside official distribution channels. If you've ever purchased a branded camera or watch at a significantly lower price than its MRP, chances are it was from the grey market. In the context of IPOs, the Grey Market is where individuals engage in buying and selling IPO shares or applications before their official listing on stock exchanges. Notably, this market operates unofficially, devoid of regulatory bodies like SEBI, NSE, or BSE.

Why engage in grey market trading?

Participating in the grey market has always been a popular trend among traders and investors. Those anticipating high valuations upon listing often engage in grey market trading, presenting an opportunity to acquire shares at a discounted price. Additionally, investors who miss the IPO application deadline can still apply for shares through the grey market. Grey market prices function based on the principles of demand and supply, influencing valuations and aiding underwriters in gauging share demand before listing.

How Grey Market IPO Trading Works:

Grey market trading unfolds in two primary ways – 

• Trading IPO shares 

Trading IPO shares involves buyers seeking premium listings and sellers looking to lock in profits. Buyers connect with grey market dealers, finalize deals with willing sellers, and settle transactions based on allotment. The process is dynamic, influenced by the desired Grey Market Premium (GMP).

• Trading IPO applications.

Trading IPO applications centers on buyers eager to secure entire applications and sellers aiming to book profits before the market debut. Buyers offer Kostak rates to sellers, deals are finalized through dealers, and shares are transferred or sold upon allotment. The simplicity of this process underscores the dynamics of trading in the grey market for both shares and applications.

Latest IPO GMP Today

Latest Mainboard IPO GMP: Updated as of December 26-2023

• Innova Captab IPO GMP    

Innova Captab IPO's Grey Market Premium (GMP) started at Rs 210 per share and has risen by Rs 119 per share, reflecting strong traction in the grey market. The IPO's upper price band of Rs 448 suggests a potential listing price of around Rs 658 per share, indicating a robust 31% premium over the issue price. Monitoring subscription updates and the GMP trend will provide better insights into the listing status. The dynamic nature of GMP underscores the need to observe its time series trend for a more accurate assessment.

•  Azad Engineering IPO GMP

Azad Engineering IPO's Grey Market Premium (GMP) initially opened at Rs 400 per share and has now surged by Rs 280 per share based on available GMP data. Despite the recent announcement of Azad Engineering Ltd.'s IPO price, the actual GMP may take time to reflect the true underlying value.

Historically, oversubscribed IPOs have experienced a significant positive shift in grey market pricing, and Azad Engineering Ltd. has already demonstrated strong traction in the grey market.

Considering the upper end of the IPO price band at Rs 524, the potential listing price was indicated at around Rs 964 per share as per the GMP indicator on December 18, 2023.

The Grey Market Premium (GMP) for Azad Engineering IPO stands at Rs 305 per share, with an IPO price range of Rs 499 to Rs 524. This GMP indicates a substantial 58.21% expected gain over the issue price when Azad Engineering Ltd. lists on December 28, 2023. These are estimations, so maintaining a margin of safety is advisable.

• Credo Brands (MUFTI) IPO GMP

Credo Brands Marketing Ltd. (MUFTI) has shown strong traction in the grey market, often indicative of positive shifts in oversubscribed IPOs.

Credo Brands (MUFTI) IPO's Grey Market Premium (GMP) started at Rs 123 per share, rising by Rs 80. At the upper end of the Rs 280 IPO price band, the potential listing price was estimated at around Rs 405 per share as of December 18, 2023. Credo Brands (MUFTI) IPO currently boasts a Grey Market Premium (GMP) of Rs. 105 per share. With the IPO price ranging from Rs. 266 to Rs. 280, the anticipated gains are at 37.50%. when Credo Brands Marketing Ltd. (MUFTI) lists on December 27, 2023. 

•  RBZ Jewellers IPO GMP    

As of December 27, the RBZ Jewellers IPO maintains a steady Grey Market Premium (GMP) of Rs 30 per share, with stability observed over the past two days. The GMP trend is still unfolding, having commenced recently. Subscription numbers and progress until December 21, 2023, are awaited for a comprehensive assessment. RBZ Jewellers has demonstrated strong traction in the grey market.

Indicative of a 30% listing premium, the GMP of Rs 30 on the upper end of the IPO price band of Rs 100 suggests a potential listing price of around Rs 130 per share when RBZ Jewellers lists on December 27, 2023. These figures are approximate, emphasizing the need for a margin of safety. Monitoring the dynamic GMP trend, especially the time series, offers valuable insights into the listing status.

•  Happy Forgings IPO GMP

As of December 27, 2023, the Grey Market Premium (GMP) for Happy Forgings IPO stands at Rs 282 per share. The GMP trend, starting at Rs 25 and surging to Rs 235, indicates strong traction. It's essential to interpret this data cautiously, considering the late announcement of the indicative price on December 13, 2023. The actual GMP may take time to reflect the genuine underlying value. Monitoring subscription numbers post the IPO opening on December 19, 2023, is crucial, given the historical correlation between oversubscribed IPOs and positive shifts in the grey market. With With the IPO price band set at Rs 808 to Rs 850, the potential listing price is estimated at around Rs 1,300 per share, reflecting a 33.18% listing premium. 

• Suraj Estate Developers IPO GMP

As of December 26, the Grey Market Premium (GMP) for Suraj Estate Developers IPO is Rs 15 per share, maintaining stability from an opening of Rs 55 per share. The GMP data is static, potentially influenced by the recent announcement of the IPO price band (Rs 340 to Rs 360) on December 14, 2023. Given the IPO's recent unveiling, the actual GMP may take time to reflect the genuine underlying value. Monitoring subscription numbers post the IPO opening on December 18, 2023, is crucial, considering the historical correlation between oversubscribed IPOs and positive shifts in the grey market. With the upper end of the IPO price band at Rs 360 per share, the indicative listing price is around Rs 415 per share, suggesting a 4.17% listing premium.

• Motisons Jewellers IPO GMP

As of December 26, the Grey Market Premium (GMP) for Motisons Jewellers IPO stands at Rs 70 per share, reflecting an increase from an opening of Rs 60. The GMP data is available, but considering the recent announcement of the IPO price band (Rs 52 to Rs 55) on December 12, 2023, the true underlying value may take time to materialize. Monitoring subscription numbers post the IPO opening on December 18, 2023, is essential, given the historical correlation between oversubscribed IPOs and positive shifts in the grey market. With the upper end of the IPO price band at Rs 55 per share, the indicative listing price is around Rs 115 per share, indicating a robust 127.27% listing premium.

• Muthoot Microfin IPO GMP  

As of December 26, the Grey Market Premium (GMP) for Muthoot Microfin IPO stands at Rs 27 per share, with the IPO price range set at Rs 277 to Rs 291. This GMP represents a 9.28% premium over the IPO issue price.

Latest SME IPO GMP: Updated as of December 26-2023

• Kay Cee Energy IPO

The Grey Market Premium (GMP) for Kay Cee Energy's IPO stands at Rs. 35 per share. With an IPO price range of Rs. 51 to Rs. 54, investors anticipate a gain of 64.81% over the issue price, reflecting positive market sentiment.

• Electro Force India IPO

The Electro Force India IPO reports a GMP of Rs. 0, indicating no premium in the grey market. Priced at Rs. 93, investors foresee no additional gains beyond the issue price, suggesting a neutral market outlook.

• Supreme Power Equipment IPO

Supreme Power Equipment's IPO boasts a GMP of Rs. 60 per share. With an IPO price range of Rs. 61 to Rs. 65, investors expect a significant gain of 92.31% over the issue price, signaling positive market anticipation.

• Trident Techlabs IPO

Trident Techlabs IPO registers a GMP of Rs. 50 per share. Priced between Rs. 33 and Rs. 35, investors foresee a substantial gain of 142.86%, reflecting high optimism in the grey market about the stock's potential listing performance.

Final Thoughts – Grey Market IPO:

In conclusion, the surge in India's 2023 IPO boom, marked by 54 companies raising a staggering Rs 49,000 crore, has brought heightened attention to the escalating trend in Grey Market Premiums (GMP). As investors navigate this dynamic landscape, drawn by potential listing premiums, it is crucial to understand the legal intricacies surrounding grey market trades. Whether opting for regulated avenues or venturing into the unofficial realm of grey markets, exercising caution and making informed decisions remain imperative in the ever-evolving landscape of  IPO trading.

 

Frequently Asked Questions

1. How do IPO applications change hands in the grey market?

IPO applications are traded similarly to IPO shares within the grey market. The key distinction lies in the fact that the buyer must pay a premium price to the seller, even if the seller doesn't secure any shares through the application.

2. What is the process for trading in the grey market?

Grey market trading is predominantly conducted through phone calls, given its unofficial nature. There are no registered authorities or formal traders present in this market. Those interested in grey market trading need to connect with a local dealer to facilitate transactions between buyers and sellers.

3. Why engage in grey market trading?

Grey markets offer investors and traders an avenue to profit through buying or selling before the security is officially traded on stock exchanges. It also serves as an indicator of potential gains or losses from an IPO by assessing sentiment through grey market transactions.

4. What exactly is Kostak?

Kostak represents the premium at which an IPO application is traded in the grey market. In simpler terms, it is the profit margin one can achieve by selling an IPO application before it is allotted or before the IPO issue is listed.

5. How are prices in the IPO grey market determined?

Similar to stock prices, grey market IPO prices hinge on the principles of demand and supply. If the subscription for an IPO is lower than the available shares, grey market prices will decrease, and vice versa.

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Disclaimer: This blog is dedicated exclusively for educational purposes. Please note that the securities and investments mentioned here are provided for informative purposes only and should not be construed as recommendations. Kindly ensure thorough research prior to making any investment decisions. Participation in the securities market carries inherent risks, and it's important to carefully review all associated documents before committing to investments. Please be aware that the attainment of investment objectives is not guaranteed. It's important to note that the past performance of securities and instruments does not reliably predict future performance.