Baheti Recycling IPO GMP (Grey Market Premium)

Baheti Recycling IPO, worth Rs. 12.42 crore comprises entirely of a fresh issue of the IPO amount. Baheti Recycling SME IPO entails the issue of 27.60 lakh shares at a price of Rs. 45 per share aggregating to Rs. 12.42 crore. The stock has a face value of Rs. 10 and bidders can only bid in minimum lot size of 3,000 share each, entailing a minimum investment of Rs. 135,000 in the IPO. That is also the maximum that a retail investor can apply for in the IPO. As per the terms of the offer, 50% of the net offer is reserved for the retail investors. It is a fixed price issue and Hem Finlease Private Limited will act as the market maker for the SME IPO of Baheti Recycling Industries Ltd.

The issue opens for subscription on 28th November 2022 and closes for subscription on 30th November 2022 (both days inclusive). The basis of allotment will be finalized on 05th December 2022 and the refunds will be initiated on 06th December 2022. In addition, the demat credits are expected to happen on 07th December 2022 and the stock is scheduled to list on 08th 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 Baheti Recycling Industries Ltd, we already have GMP data for the last 5 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 Baheti Recycling Industries Ltd for the 5 days, data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 8, but has then jumped to Rs. 12 and on Monday, the GMP has virtually doubled over the previous day. 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, Baheti Recycling SME IPO has shown good traction in the grey market.

If you consider Baheti Recycling Industries SME IPO price at Rs. 45, then the likely listing price is being signalled at around Rs. 68 per share as per the GMP indicator on 28th November. 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. 23 on a fixed Baheti Recycling Industries SME IPO price of Rs. 45 indicates a listing premium of a healthy 51.11% for Baheti Recycling Industries Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 68 per share, when Baheti Recycling Industries Ltd lists on 08th 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.

Baheti Recycling Industries Ltd is a 28 year old company based out of Dehgam in Gujarat. It is into aluminium recycling and is basically engaged in processing aluminium-based metal scrap to manufacture aluminium alloys in the form of ingots and other products. It also trades in aluminium scrap, brass scrap, copper scrap and zinc scrap.

The funds will be used for modernization and expansion of its existing units and to meet working capital requirements. Post the IPO, the promoter share in equity will dilute from 99.98% to 73.37%. The issue is being lead managed by Hem Securities Ltd. Purva Share Registry India Private Limited will be the registrars to the issue.