Auro Impex and Chemicals IPO GMP (Grey Market Premium)

Auro Impex and Chemicals IPO worth Rs.24.29 crore, comprises of a fresh issue and an offer for sale (OFS) by promoters and early shareholders. The price band has been fixed in the range of Rs74 to Rs78. The fresh issue portion entails the issue of 25.64 lakh shares which at the upper end of the price band at Rs78 is worth Rs20.00 crore. The OFS portion entails the issue of 5.50 lakh shares which at the upper end of the price band at Rs78 is worth Rs4.29 crore. Overall, the IPO entails the issue of 31.14 lakh shares, which at the upper price band of Rs78 per share works out to total issue size of Rs24.29 crore.

The stock of Auro Impex and Chemicals Ltd has a face value of Rs10 and bidders can only bid in minimum lot size of 1,600 share each, entailing a minimum investment of Rs124,800 in the IPO at the upper end of the price band of Rs76 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 3,200 shares entailing an investment of Rs249,600. The table below captures the lot sizes permissible.

As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), 15% of the offer is reserved for the HNI / NII investors and the balance 35% is reserved for the retail investors. It is a Book Built issue with the price band and the final price will be discovered through book building process. The table below captures the gist.

The issue opens for subscription on 11th May 2023 and closes for subscription on 15th May 2023 (both days inclusive). The basis of allotment will be finalized on 18th May 2023 and the refunds will be initiated on 19th May 2023. In addition, the demat credits are expected to happen on 22nd May 2023 and the stock is scheduled to list on 23rd May 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 Auro Impex and Chemicals 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 Auro Impex and Chemicals IPO for which data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 15, but now it is dropped to GMP price of Rs. 2. 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, Auro Impex and Chemicals Ltd has shown good traction in the grey market.

If you consider the upper end of band price of the IPO of Auro Impex and Chemicals Ltd at Rs78, then the likely listing price is being signalled at around Rs97 per share as per the GMP indicator on 03rd May 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 Rs19 on the upper end of the book built IPO price of Rs78 indicates a listing premium of a healthy 24.36% for Auro Impex and Chemicals Ltd over the listing price. That pre-supposes a listing price of approximately Rs97 per share, when Auro Impex and Chemicals Ltd lists on 17th May 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.

Auro Impex and Chemicals was incorporated in 1994 for manufacturing, exporting, and supply of Discharge & Collecting Electrodes, and Electrostatic Precipitator (ESP). It supplies to the Original Equipment manufacturers (OEMs) and service providers. Its offerings range from sourcing of components, designing, manufacturing, quality testing etc. Some of its renown clients in the OEM market include Thermax, L&T, ISGEC Heavy Engineering etc.

Madhu Goenka will be selling 5.5 lakh shares in the OFS as a promoter while the fresh funds will be used for working capital needs. The issue will be lead managed by Affinity Global Capital Markets Private Limited while Cameo Corporate Services will be the registrars to the IPO of Auro Impex and Chemicals Ltd.