Grey market turns choosy, sends out mixed signals for UTI, Mazagon, Likhitha Infra IPOs

This is going to be a busy week for the IPO mart, as three new issues hit the market.

UTI AMC, Mazagon Dock Shipbuilders and Likhitha Infrastructure would be open for subscription between September 29 and October 1.

The recent robust listings and solid subscription levels have kept the grey market busy. Activity in the unofficial market for trading in unlisted shares is sending out important signals for investors.

Dealers from the grey market largely have mixed views on the forthcoming issues, thanks to the volatility seen in the secondary market last week.

UTI AMC has fixed the price band for its IPO at Rs 552-554 a share. At the upper end of the price band, the IPO would fetch Rs 2,160 crore. The issue comprises sale of 3,89,87,081 equity shares, or 30.75 per cent stake, by existing shareholders including State Bank of India, LIC, Bank of Baroda, Punjab National Bank and T Rowe Price International.

The unlisted stock is commanding a premium of Rs 45, less than 10 per cent of the price band. Some off-market dealers are surprised the way the issue is being shunned by high networth investors, who dominate the unlisted space.

“We were expecting a slightly higher price band than what has been announced. Shares were trading at a premium in the off market," said Sandip Ginodia of Abhishek Securities, a Kolkata-based firm that deals in unlisted shares.

The grey market premium has since dropped from Rs 75 to Rs 45. Dinesh Gupta of UnlistedZone said there were hints of heavy discounts as there have been only sellers knocking the doors of late.

"In the BFSI sector, only industry leaders enjoy premium valuation,” he said. "UTI is not among the top five players in the mutual fund industry. However, investors can subscribe to the issue for listing gains."

Mazagon Dock Shipbuilders, the only firm in India that makes destroyers and submarines for the Indian Navy, will hit the market on September 29. The government will offload 15.17 per cent stake to raise a maximum of Rs 444 crore.

The price band for the IPO has been fixed at Rs 135-145. The unlisted stock is commanding a grey market premium of Rs 125-130, translating into an almost 90 per cent premium.

Dealers from the unofficial market are speculating that this stock could be the next IRCTC, the PSU firm with multibagger potential.

Abhay Doshi, a Gujarat-based independent dealer of unlisted securities, said Mazagon is a monopoly, like IRCTC, and there has been a lot of push to the defence sector post Galwan faceoff. That's why the issue is enjoying a superior premium."

Likhitha Infrastructure, the Hyderabad-headquartered oil and gas pipeline infrastructure service provider, will hit the market with its Rs 61.20 crore IPO on September 29. The price band for the issue has been fixed at Rs 117-120. The issue will close on October 1. In the grey market, the issue was quoting a premium of Rs 12.