Canarys Automations IPO GMP (Grey Market Premium)

The ₹47.03 crore IPO of Canarys Automations Ltd comprises entirely of a fresh issue with no offer for sale (OFS) component. The price band for the book built issue been fixed in the range of ₹29 to ₹31 per share. The fresh issue portion of the IPO entails the issue of 151.72 lakh shares which at the upper end of the price band at ₹31 is worth ₹47.03 crore. Since there is no OFS component, the fresh issue size of ₹47.03 crore is also the size of the overall IPO.

About Canarys Automations 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 Canarys Automations 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 Canarys Automations IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹6, but has since stayed at ₹6 on the second day too for which 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 27th September 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, Canarys Automations Ltd has shown good traction in the grey market.

If you consider the upper end of band price of the Canarys Automations IPO at ₹31, then the likely listing price is being signalled at around ₹37 per share as per the GMP indicator on 28th September 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 ₹6 on the upper end of the book built IPO price of ₹31 indicates a listing premium of a healthy 19.35% for Canarys Automations Ltd over the IPO issue price. That pre-supposes a listing price of approximately ₹37 per share, when Canarys Automations Ltd lists on 11th October 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 Canarys Automations IPO

The stock of Canarys Automations Ltd has a face value of ₹2 and bidders can only bid in minimum lot size of 4,000 share each, entailing a minimum investment of ₹124,000 in the IPO at the upper end of the price band of ₹31 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 8,000 shares entailing an investment of ₹248,000. The table below captures the lot sizes permissible.

As per the terms of the offer; 5.19% of the total issue size is reserved for the Market Makers, 41.70% of total issue size is reserved for qualified institutional buyers (QIBs), 18.67% of offer size for the HNI / NII investors and the balance 34.44% 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.

Like in every SME IPO, the IPO of Canarys Automations Ltd also has a market maker. The Market maker typically provides buy and sell quotes post listing to ensure liquidity and low basis risk in the stock. In this case, the makers will be Alacrity Securities Ltd, will act as the market maker for the SME IPO of Canarys Automations Ltd. The company has set aside 7,60,000 shares for the market maker.

The issue opens for subscription on 27th September 2023 and closes for subscription on 03rd October 2023 (both days inclusive). The basis of allotment will be finalized on 06th October 2023 and the refunds will be initiated on 09th October 2023. In addition, the demat credits are expected to happen on 10th October 2023 and the stock is scheduled to also list on 11th October 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.