Crayons Advertising IPO GMP (Grey Market Premium)

Crayons Advertising IPO worth ₹41.80 crore comprises entirely of a fresh issue of shares for the said amount. There is no offer for sale (OFS) by promoters or early shareholders as part of this SME IPO issue. The price band has been fixed in the range of ₹62 to ₹65. The fresh issue portion entails the issue of 64.30 lakh shares which at the upper end of the price band at ₹65 is worth ₹41.80 crore. Since there is no OFS portion, the fresh issue portion is the entire issue size.

The stock of MOS Utility has a face value of ₹10 and bidders can only bid in minimum lot size of 2,000 share each, entailing a minimum investment of ₹130,000 in the IPO at the upper end of the price band of ₹65 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 4,000 shares entailing an investment of ₹260,000. The table below captures the lot sizes permissible.

As per the terms of the offer, not more than 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 not less than 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. SS Corporate Securities Ltd will act as the market maker for the SME IPO of Crayons Advertising Ltd. The company has set aside 329,600 shares for the market maker.

The issue opens for subscription on 22nd May 2023 and closes for subscription on 25th May 2023 (both days inclusive). The basis of allotment will be finalized on 30th May 2023 and the refunds will be initiated on 31st May 2023. In addition, the demat credits are expected to happen on 01st June 2023 and the stock is scheduled to list on 02nd June 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 Crayons Advertising 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.

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 Crayons Advertising IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹35, and improved ₹42. 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, Crayons Advertising Ltd has shown good traction in the grey market.

If you consider the upper end of band price of the IPO of Crayons Advertising Ltd at ₹65, then the likely listing price is being signalled at around ₹101 per share as per the GMP indicator on 17th 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 ₹36 on the upper end of the book built IPO price of ₹65 indicates a listing premium of a healthy 55.38% for Crayons Advertising Ltd over the listing price. That pre-supposes a listing price of approximately ₹101 per share, when Crayons Advertising Ltd lists on 02nd June 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.

A quick background of Crayons Advertising Ltd. The company was incorporated in 1986 and positioned as an integrated marketing and communications agency. It offers a 360-degree view to the client problem spectrum and also offers a 360-degree solution to the clients. Crayons Advertising Ltd offers top of the line creative brand marketing strategy, online and  offline media planning as well as media buying. Moreover, Crayons kept pace with the big digital shift and now offers cutting-edge digital expertise, on-ground as well as virtual activation capabilities. Its solutions work across platforms like TV, print, internet, radio etc.

Crayons offers communication services and advertising media services as two verticals. The latter comprises brand strategy, Events, Print Media, Digital Media, and out-of-home (OOH) Media services. In terms of deliverables, Crayons offer advertisement modes including Newspapers, Brochures, Magazines, Television Channels, FM channels, and Outdoor Hoardings.

 The fresh issue portion will be used to fund its working capital expenditure and for technology to facilitate expansion. The issue will be lead managed by Corporate Capital Ventures Private Limited while Skyline Financial Services Private Ltd will be the registrars to the SME IPO of Crayons Advertising Ltd.