IPO party over? Grey market premia vanish for all but one stock

MUMBAI: After a volatile debut on bourses by new entrants on Thursday, Dalal Street is now getting nervous about the IPO market as grey market premia have vanished for all but one issue.

Only Mazagon Dock Shipbuilders is still commanding a premium. In this case too, the premium has dropped to Rs 95 from Rs 125 earlier, dealers said. This would still imply a premium of 66 per cent on the upper end of the price band of Rs 135-145.

The IPO garnered the best ever response among its public sector undertaking (PSU) peers as it was subscribed a whopping 157.41 times.

High net worth individuals (HNIs) flocked to the issue, and the portion reserved for them was subscribed nearly 679 times, while that reserved for retail investors was filled in nearly 35.63 times.

The grey market is typically driven by HNIs who put in bids to subscribe to large chunks of an IPO, far in excess of the portion reserved for such investors. This pushes the overall subscription levels for the issue and, in turn, lures investors to buy shares in the grey market at a premium.

For UTI Asset Management Company (AMC), premium has vanished and the issue was quoting at par, while Angel Broking was trading at a discount of Rs 10.

The Rs 2,160 IPO by UTI AMC was subscribed 2.31 times, but lacked euphoria. While shares reserved for retail investors witnessed 2.32 times applications while those reserved for HNI investors saw only 92 per cent subscription.

“The IPOs that got listed on Thursday, opened with robust gains, but the gains fizzled due to profit booking. That has shaken the confidence of investors,” said Dinesh Gupta, co-founder of Unlisted Zone.

On Thursday, Chemcon Speciality Chemicals debuted at 115 per cent premium at Rs 730.95, outperforming the recent stellar debut by Happiest Minds Technologies. The shares, however, pared some gains and hit lower circuit and they fell 20 per cent from its opening level to close at Rs 584.80. They were still 72 per cent higher from its issue price of Rs 340.

Computer Age Management Services (CAMS), the biggest IPO of FY21 so far, witnessed a listing pop of 23 per cent at Rs 1,518, from its issue price of Rs 1,230. The stock erased some gains and closed nearly 14 per cent higher from its issue price at Rs 1,401.60.

Gupta added that the lack of heavy bidding for UTI AMC was also a dampener for investors' sentiment. The premium for the smaller IPO of Likhita Infrastructure had also dropped, and the shares were quoting at par. However, dealers said that considering the small issue size, the interest in the grey market was not very high for the stock.

Likhitha Infrastructure’s IPO to raise up to Rs 61.20 crore has been extended up to October 7. The lower end of its price band has also been reduced. However, the IPO was subscribed 8.4 times on day 3.

Data from exchanges showed the issue had received poor response from qualified institutional buyers (QIBs), and the portion reserved for them was filled in only 45 per cent. The response from retail investors was robust, and the portion reserved for them was subscribed more than 21 times.

“The euphoria seems to have evaporated. It remains to be seen how the further listings pan out in days to come. We don’t have high hopes anymore,” said a Gujarat-based dealer who did not wish to be named.