Aristo Bio-Tech and Lifescience IPO GMP (Grey Market Premium)

Aristo Bio-Tech and Lifescience IPO, worth Rs. 13.05 crore comprises entirely of a fresh issue of the IPO amount. The total of Aristo Bio-Tech and Lifescience IPO SME entails the issue of 18.128 lakh shares at a price of Rs. 72 per share aggregating to Rs. 13.05 crore. The stock has a face value of Rs. 10 and bidders can only bid in minimum lot size of 1,600 shares each, entailing a minimum investment of Rs. 115,200 in the IPO. That is also the maximum that a retail investor can apply for in the IPO. HNIs / NIIs can apply for a minimum of 2 lots in the IPO comprising of 3,200 shares and worth Rs. 230,400. As per the terms of the offer, 50% of the net offer is reserved for the retail investors and the other 50% for HNIs / NIIs. It is a fixed price issue and Sunflower Broking Private Limited will act as the market maker for the SME IPO of Aristo Bio-Tech and Lifescience Ltd.

The issue opens for subscription on 16th January 2023 and closes for subscription on 19th January 2023 (both days inclusive). The basis of allotment will be finalized on 24th January 2023 and the refunds will be initiated on 25th January 2023. In addition, the demat credits are expected to happen on 26th January 2023 and the stock is scheduled to list on 27th January 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 3-4 days prior to IPO opening and continues till the listing date. In the case of Aristo Bio-Tech and Lifescience Ltd, we already have GMP data for the last 3 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 Aristo Bio-Tech IPO GMP updates for the 3 days:

In the above case, the Aristo Bio-Tech IPO GMP trend shows that the grey market premium has opened at around Rs. 9, and has then remained in the range of Rs. 50 to Rs. 48 over the next couple of days. Of course, we have to wait 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, Aristo Bio-Tech and Lifescience Ltd has shown good traction in the grey market.

If you consider the price of the IPO of Aristo Bio-Tech and Lifescience Ltd at Rs. 72, then the likely listing price is being signalled at around Rs. 82 per share as per the GMP indicator on 12th January 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 from here.

The GMP of Rs. 10 on a fixed IPO price of Rs. 72 indicates a listing premium of a healthy 13.89% for Aristo Bio-Tech and Lifescience Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 82 per share, when Aristo Bio-Tech and Lifescience Ltd lists on 27th January 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. 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.

Aristo Bio-Tech and Lifescience Ltd was incorporated in 2005 with focus on agrochemicals. Aristo has a robust market in India and an export market, for its products including insecticides, herbicides, fungicides, plant growth regulators etc. They supply to manufacturers of value added products and also directly supply to farmers to enhance crop yields and quality. Its products reach out to 20 Indian states and 15 export markets with some of the key markets including Australia, Bangladesh, Belgium, Cambodia, Germany, Italy, Kenya, New Zealand, Poland, South Africa, UAE, Ukraine and Vietnam.

Aristo plans to use the funds for working capital requirements and for general corporate purposes. Post the IPO, the promoter share in equity will dilute from 100% to 73.37%. The issue is being lead managed by Beeline Capital Advisors Private Limited. Link Intime India Private Limited will be the registrars to the issue.