Retail investors back for some ‘Dhoom’ on IPO boom also fire up grey market

By Dan Neff On Nov 4, 2022

Mumbai: India’s primary market is showing signs of revival with retail investors’ appetite for initial public offerings (IPOs) perking up and pre-listing share prices of these companies seeing an uptick. With over 75% of the IPOs in 2022 still trading over their IPO prices, bankers and market participants said retail investor activity has picked up after the recent lull.

Five IPOs that are set to be launched in November are currently trading at a 7-38% premium over their expected issue prices in the unofficial grey market, they said.

For instance, the ₹500-crore IPO of DCX Systems, which was subscribed 69.79 times this week, is currently trading at a premium of nearly ₹80 per share over its issue price of ₹207. It means the public issue of the cable and wire harness assembly manufacturer is expecting to list around ₹287, which is nearly a 39% premium to the issue price. The retail segment of the cable and wire harness assembly manufacturer was subscribed 61.77 times.

Bikaji Foods International, whose IPO opened for subscription on Thursday, is trading at a premium of ₹75 in the grey market, which is nearly 25% more than the upper price band of ₹300.

“The grey market premium of the new issuances shows retail investors are very bullish on the primary market,” said Sambhav Aggarwal, director Parasram Holding. “The buoyant secondary market and the good performance of post-listing most recent issuances have revised their interest in IPOs.”

The grey market premium of Fusion Micro Finance, whose IPO is still open for subscription, is at ₹35 over its price range of ₹350-368 a share. The IPO has been subscribed 29% so far on Thursday’s second day of subscription.

Specialty chemical manufacturer Archean Chemical, whose IPO will open for public subscription on November 9, is currently trading at a premium of ₹60, said market participants.

The grey market activity in Five Star Business Finance is yet to start, according to market participants. The ₹1,960-crore IPO will open for public subscription on November 9. There is a good demand for smaller quality issues that are reasonably priced, said Dharmesh Mehta, MD, DAM Capital Advisors.

“Selective IPOs, especially smaller to mid-size, will find takers as there is enough liquidity in the system for reasonable-sized IPOs.”

IPOs in 2022 have made investors better money than the previous two years.

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