Aeroflex Industries IPO GMP (Grey Market Premium)

Aeroflex Industries IPO worth ₹351 crore comprises of an offer for sale and also of a fresh issue of shares. The offer for sale (OFS) component is by the promoters and early shareholders of the company. Here it must be noted that while the fresh issue component infuses fresh funds into the company, it also is EPS dilutive and equity dilutive. On the other hand, the OFS is just a transfer of shares so there is no fresh infusion of funds, but it also does not dilute the equity. The issue has been priced in the band of ₹102 to ₹108 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. For our analysis, the upper end of the band is assumed.

Issue details of Aeroflex Industries IPO

Let us not get to the specifics of the Aeroflex Industries IPO. The fresh issue portion comprises the issue of 1,50,00,000 shares (1.50 crore shares), which at the upper price band of ₹108 per share will translate into fresh issue size of ₹162 crore. The offer for sale (OFS) portion of the IPO comprises the issue of 1,75,00,000 shares (1.75 crore shares), which at the upper price band of ₹108 per share will translate into an offer for sale (OFS) size of ₹189 crore. Therefore, the overall IPO portion will comprise of the issue of 3,25,00,000 shares (3.25 crore shares), which at the upper price band of ₹108 per share will translate into a total IPO issue size of ₹351 crore.

The issue opens for subscription on 22nd August 2023 and closes for subscription on 24th August 2023 (both days inclusive). The basis of allotment will be finalized on 29th August 2023 and the refunds will be initiated on 30th August 2023. In addition, the demat credits are expected to happen on 31st August 2023 and the stock is scheduled to list on 01st September 2023 on the NSE and the BSE. The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of Aeroflex Industries Ltd, we already have GMP data for the last 7 days, which should give a reasonable picture of the likely listing performance.

Aeroflex Industries IPO GMP

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, which includes the levels of the Nifty and Sensex as well as the general IPO market and macro conditions. Secondly, the extent of subscription for the IPO across the retail and the QIB segments also has a deep impact on the GMP as it is indicative of investor interest in the stock. Generally, strong QIB subscription is a trigger for a spike in GMP.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.

GMP price trend for Aeroflex Industries IPO

GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing. Here is a quick GMP summary for Aeroflex Industries Ltd for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹20, but its up by ₹71. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 22nd August 2023, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the IPO also saw a very robust positive shift in the grey market pricing. For a start, Aeroflex Industries Ltd has shown good traction in the grey market, especially in the last 3 days.

If you consider the upper end of the price band of Aeroflex Industries IPO at ₹108 as the indicative price, then the likely listing price is being signalled at around ₹163 per share as of the GMP indicator on 16th August 2023. One data point to track will be the subscription update on the stock as that would chart the GMP course from here. As mentioned, the institutional QIB subscription is a key trigger for the GMP pricing.

The GMP of ₹55 on a likely upper band pricing of ₹108 indicates a listing premium of a healthy 50.93% for Aeroflex Industries Ltd over the listing price. That pre-supposes a listing price of approximately ₹163 per share, when Aeroflex Industries Ltd lists on 01st September 2023. Of course, these are approximations, so you must keep a margin of safety. However, that would depend on the GMP sustaining over the next few days after the issue opens.

GMP (grey market price) is an important indicator, albeit informal, of likely listing price. One cannot take this price at face value However, the GMP tends to be quite dynamic and changes direction with the flow of news and events. Investors must note here that this is just an informal indication and has no official acceptance. The best thing one can do with the GMP is to observe the trend closely as that gives the best hints on listing status. Focus on the time series trend than on numbers.

Read about Aeroflex Industries IPO

Brief on Aeroflex Industries Ltd

Aeroflex Industries Ltd was incorporated in 1993 and manufactures environment-friendly metallic flexible flow solution products made of stainless steel. Its product catalogue includes braided hoses, un-braided hoses, solar hoses, gas hoses, vacuum hoses, interlock hoses, hose assemblies, lancing hose assemblies, jacketed hose assemblies, exhaust connectors, exhaust gas recirculation tubes, expansion bellows, and related end fittings. The company has more than 1,700 Product SKUs (Stock Keeping Units) in its product catalogue. Its manufacturing plant is located at Taloja, Navi Mumbai. The client roster of Aeroflex Industries includes distributors, fabricators, Maintenance Repair and Operations Companies (MROs), Original Equipment Manufacturers (OEMs) etc.

Aeroflex Industries Ltd has global leadership in the manufacture of flexible hoses and exports its products to over 80 countries. Stainless steel hoses, in which Aeroflex Industries Ltd specializes, is capable of handling high temperatures, apart from shocks and vibrations. The demand for stainless steel hoses is expected to increase by 50-60% in the next 3 years, so the business volumes are expected to expand rapidly. SAT Industries, which is listed on the NSE and on the BSE, is the holding company of Aeroflex Industries Ltd and is also offering shares in the OFS. The issue will be lead managed by Pantomath Capital Advisors Private Ltd. Link Intime India Private Ltd will be the registrar to the issue.