Arihant Academy IPO GMP (Grey Market Premium)

Arihant Academy IPO worth Rs. 14.72 crore , comprises entirely of a fresh issue of the IPO amount. The total SME IPO of Arihant Academy Ltd entails the issue of 16,35,200 shares at a price of Rs. 90 per share aggregating to Rs. 14.72 crore. The stock has a face value of Rs. 10 and retail bidders can bid in minimum lot size of 1,600 share each, entailing a minimum investment of Rs. 144,000 in the IPO. That is also the maximum that a retail investor can apply for in the IPO. HNIs can bid in minimum of 2 lots comprising of 3,200 shares of Arihant Academy and having an investment value of Rs. 288,000. As per the terms of the offer, 50% of the net offer is reserved for the retail investors and the balance 50% for the HNIs. It is a fixed price issue and Shreni Shares Private Limited will act as the market maker for the SME IPO of Arihant Academy Ltd. It will be listed on the NSE SME segment.

The issue opens for subscription on 16th December 2022 and closes for subscription on 21st December 2022 (both days inclusive). The basis of allotment will be finalized on 26th December 2022 and the refunds will be initiated on 27th December 2022. In addition, the demat credits are expected to happen on 28th December 2022 and the stock is scheduled to list on 29th December 2022 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 Arihant Academy Ltd, we already have GMP data for the last 4 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 Arihant Academy Ltd for the 4 days, data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 50, but has then stayed in the range of Rs. 38 to Rs. 43. 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, Arihant Academy Ltd has shown good traction in the grey market.

If you consider the price of the IPO of Arihant Academy Ltd at Rs. 90, then the likely listing price is being signalled at around Rs. 130 per share as per the GMP indicator on 16th December. 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 from here.

The GMP of Rs. 40 on a fixed IPO price of Rs. 90 indicates a listing premium of a healthy 44.44% for Arihant Academy Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 130 per share, when Arihant Academy Ltd lists on 29th December 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. 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.

Arihant Academy Ltd has been providing coaching services and parallel educational support for the last 15 years in the Western suburbs of Mumbai. It focuses on the science and commerce streams for training students of Class 8, 9 and 10 for both State Board and ICSE Board as well as for Class 11 and 12. In addition, Arihant Academy also prepares students with tutoring and counselling for JEE (Main), JEE (Advanced) and MHT- CET (State level), NEET (National Level); apart from preparing students for professional exams like Chartered Accountancy, Company Secretary, Cost Accountancy etc.

Arihant Academy Limited caters to around 6,000 students across its 14 coaching centres. It has adopted a hybrid model of coaching combining online an offline techniques supported by a high quality faculty and an experienced management team. The issue of Arihant Academy Ltd will be lead managed by Shreni Shares Private Limited and the registrars to the issue will be Bigshare Services Private Limited.