AG Universal IPO GMP (Grey Market Premium)

AG Universal IPO worth Rs. 8.72 crore comprises entirely of a fresh issue of shares by the company. It is a fixed price IPO and the price of the IPO has bene fixed at Rs. 60 per share. The fresh issue portion entails the issue of 14.54 lakh shares which at the price of Rs. 60 is worth Rs. 8.72 crore. There is no offer for sale (OFS) portion in the IPO of AG Universal Ltd.

The stock of AG Universal Ltd has a face value of Rs. 10 and bidders can only bid in minimum lot size of 2,000 share each, entailing a minimum investment of Rs. 120,000 in the IPO at the fixed price of Rs. 60 per share. That is also the maximum that a retail investor can bid in the IPO. HNIs, NIIs can bid for minimum of 2 lots of 4,000 shares entailing an investment of Rs. 240,000. The table below captures the lot sizes permissible.

As per the terms of the offer, 50% of the net offer is reserved for the retail investors in the issue while the balance 50% is reserved for the HNI / NII category. Share India Securities Ltd will act as the market maker for the SME IPO of AG Universal Ltd. The company has set aside 74,000 shares for the market maker. The market maker typically provides two-way liquidity on the stock, by providing buy and sell quotes for a defined period post listing.

The issue opens for subscription on 11th April 2023 and closes for subscription on 13th April 2023 (both days inclusive). The basis of allotment will be finalized on 19th April 2023 and the refunds will be initiated on 20th April 2023. In addition, the demat credits are expected to happen on 21st April 2023 and the stock is scheduled to list on 24th April 2023 on the NSE SME segment. This is the segment, in contrast to the mainboard, where IPOs of small and medium enterprises (SMEs) are incubated. 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 AG Universal Ltd, we already have GMP data for the last 2 days, which should give a reasonable picture of the likely listing.

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, especially the liquidity conditions in the market. Secondly, the extent of subscription for the IPO has a deep impact on the GMP as it is indicative of investor interest in the stock. GMP can also technically be in negative, which means the stock would list at a discount to the issue price.

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 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 AG Universal IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 5, but now its down by Rs. 4, of course. We have to await for the actual subscription numbers to flow in when the issue opens for subscription and also watch the progress, 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, AG Universal Ltd has shown moderate traction in grey market.

If you consider the fixed price of the IPO of AG Universal Ltd at Rs. 60, then the likely listing price is being signalled at around Rs. 62 per share as per the GMP indicator on 11th April 2023. This is dynamic and keeps changing. One data point to track will be the subscription update on the stock as that would chart the GMP course.

The GMP of Rs. 2 on the fixed IPO price of Rs. 60 indicates a listing premium of a tepid 3.33% for AG Universal Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 62 per share, when AG Universal Ltd lists on 24th April 2023. Of course, these are approximations, so you must keep a margin of safety. One needs to observe the trend of GMP closely as that gives the best hints on listing status. Look at the time series trend than on numbers.

Here is a quick background of AG Universal Ltd. The company is coming out with an SME IPO on the NSE which is opening for subscription from 11th April 2023 to 13th April 2023. AG Universal Ltd, was incorporated in the 2008 and is a leading supplier of industrial MS Tubes, GI Pipes and Hollow Sections. Its product portfolio comprises of stainless steel pipes, mild steel pipes, ERW Black Pipes, TMT Bars, wire rods, CR Coils (cold rolled coils) and HR Coils (hot rolled coils).

Also read What you must know about the AG Universal IPO

AG Universal was established as Akshata Polymers operating in the petroleum polymers business. It has a dealership agreement with Reliance Industries Ltd for its petroleum products and has other reputed clients like Surya Roshni Ltd, Jindal Supreme India Ltd, Swastik Pipes Ltd, Ravindra Tubes Ltd, and SKS Ispat. The promoters of the company currently have a holding of 95.53% in the company, which will dilute to 70.20% post the IPO. The company will be using the proceeds of the fresh issue for working capital purposes.