Baba Food Processing India IPO GMP (Grey Market Premium)

Baba Food Processing India IPO opens for subscription on 03rd November 2023 and closes on 07th November 2023. The stock of Baba Food Processing India Ltd has a face value of ₹10 per share and issue price for the book building issue has been set in the price band of ₹72 to ₹76 per share. The actual price will be discovered in this range. The IPO of Baba Food Processing India Ltd has only a fresh issue component with no book built portion. As part of the fresh issue portion, Baba Food Processing India IPO will issue a total of 43,42,105 shares (43.42 lakh shares approximately), which at the upper IPO band price of ₹76 per share aggregates to a total fund raising of ₹33 crore. Since there is no offer for sale portion, the overall IPO size will also comprise of the issue of 43,42,105 shares, which at the upper price band of ₹76 per share will aggregate to ₹33 crore.

Like every SME IPO, this issue also has a market making portion with an inventory allocation of 2,17,600 shares. The market maker for the issue is Nikunj Stock Brokers Ltd and they will provide two-way quotes to ensure liquidity and low basis costs, post listing. The promoter, Yogesh Kumar Sahu, will see the promoter stake in the company dilute from 99.99% to 73.42% post the IPO. The fresh issue funds will be used by the company for investment in its wholly owned subsidiary (Panchakanya Foods), financing purchase of machinery to make Besan and Sattu and for working capital requirements. Horizon Management Private Ltd will be the lead manager to the issue, and MAS Services Ltd will be the issue registrar.

About the Baba Food Processing India IPO GMP

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 Baba Food Processing India 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.

How has the GMP panned out in last few days?

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 Baba Food Processing India IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹24, and has since remained static at ₹10 for which the GMP data is available. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 03rd November 2023 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, Baba Food Processing India Ltd has shown good traction in the grey market.

If you consider the upper band price of the IPO of Baba Food Processing India Ltd at ₹76 per share, then the likely listing price is being signalled at around ₹100 per share as per the GMP indicator on 31st October 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 ₹24 on the upper band IPO price of ₹76 per share indicates a listing premium of a healthy 31.58% for Baba Food Processing India Ltd over the IPO issue price. That pre-supposes a listing price of approximately ₹100 per share, when Baba Food Processing India Ltd lists on 16th November 2023. Of course, these are purely 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 the absolute numbers.

How to apply for the Baba Food Processing India IPO?

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹121,600 (1,600 x ₹76 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹243,200. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Baba Food Processing India Ltd has allocated 5.01% of the issue size for the market makers to the issue, Nikunj Stock Brokers Ltd. The net offer (net of market maker allocation) will be divided between the qualified institutional buyers (QIBs), retail investors and the HNI / NII investors. The breakdown of the overall IPO of Baba Food Processing India Ltd in terms of the allocation to various categories are captured in the table below.

The issue opens for subscription on 03rd November 2023 and closes for subscription on 07th November 2023 (both days inclusive). The basis of allotment will be finalized on 10th November 2023 and the refunds will be initiated on 13th November 2023. In addition, the demat credits are also expected to happen on 15th November 2023 and the stock is scheduled to also list on 16th November 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.