Archean Chemical IPO GMP (Grey Market Premium)

Archean Chemical Industries Ltd IPO worth Rs.1,462.31 crore, comprises of a fresh issue of shares worth Rs. 805 core and an offer for sale of Rs657.31 crore. The offer for sale (OFS) component is by the promoters and early shareholders of the company. The issue has been priced in the band of Rs.386 to Rs.407 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. 

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The issue opens for subscription on 09th November 2022 and closes for subscription on 11th November 2022 (both days inclusive). The basis of allotment will be finalized on 16th November 2022 and the refunds will be initiated on 17th November 2022. In addition, the demat credits are expected to happen on 18th November 2022 and the stock is scheduled to list on 21st November 2022. 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 Archean Chemical Industries Ltd, we already have GMP data for the last 4 days, which should give a reasonable picture of the likely listing performance.

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 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 summary for Archean Chemical IPO GMP - 

In the above case, the Archean Chemical IPO GMP trend shows that the grey market premium has opened at around Rs. 60, spiked to Rs. 80 levels and is now back to the Rs. 60 mark. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 09th November, 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, Archean Chemical Industries Ltd has shown good traction in the grey market.

If you consider the upper end of the price band of Archean Chemical Industries Ltd at Rs.407 as the indicative price, then the likely listing price is being signalled at around Rs.467 per share. 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 Rs.60 on a likely upper band pricing of Rs.407 indicates a listing premium of a healthy 14.74% for Archean Chemical Industries IPO over the listing price. That pre-supposes a listing price of approximately Rs.467 per share, when Archean Chemical Industries IPO lists on 21st November 2022. 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.

Archean Chemical Industries Limited is India's largest exporter of bromine and industrial salt in Fiscal 2021. The company is the leading speciality marine chemical manufacturer in India and is focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world.

Archean Chemical Industries sells to 18 global customers in 13 countries, apart from 24 domestic customers. Archean Chemical Industries is the largest exporter of Bromine from India and is the sole manufacturer of sulphate potash in India. The company's marine chemicals business is predominately conducted on a B2B basis. IPO fresh proceeds will go towards NCD redemption.