Cyient DLM IPO GMP (Grey Market Premium)
Cyient DLM IPO, ₹607 crore worth comprises entirely of a fresh issue of shares. There is no offer for sale component in the IPO. Here it must be noted that while the fresh issue component infuses fresh funds into the company, it also is EPS dilutive and equity dilutive. On the other hand, the OFS is just a transfer of shares so there is no fresh infusion of funds, but it also does not dilute the equity. The issue is a book built issue and has been priced in the band of ₹250 to ₹265 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. For our analysis, the upper end of the band is assumed as the benchmark price.
Let us now look at the details of the issue of Cyient DLM IPO. The fresh issue component of the company IPO will entail the issue of 2,23,39,623 shares which at the upper end of the price band of ₹265 would result in a fresh issue component of ₹592 crore. As stated earlier, the overall IPO does not have an OFS component and hence the fresh issue size will also be the total issue size. Therefore, the overall size of the company IPO will entail the issue of 2,23,39,623 shares which at the upper end of the price band of ₹265 would result in the total issue size of ₹592 crore.
The issue opens for subscription on 27th June 2023 and closes for subscription on 30th June 2023 (both days inclusive). The basis of allotment will be finalized on 05th July 2023 and the refunds will be initiated on 06th July 2023. In addition, the demat credits are expected to happen on 07th July 2023 and the stock is scheduled to list on 10th July 2023 on the NSE and the BSE. 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 Cyient DLM Ltd, we have GMP data for the last 2 days, which should give a reasonable picture of the likely listing performance.
There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, which includes the levels of the Nifty and Sensex as well as the general IPO market and macro conditions. Secondly, the extent of subscription for the IPO across the retail and the QIB segments also has a deep impact on the GMP as it is indicative of investor interest in the stock. Generally, strong QIB subscription is a trigger for a spike in GMP.
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 Cyient DLM IPO Ffor data is available.
| Date | GMP |
|---|---|
| 2-July-2023 | ₹125 |
| 1-July-2023 | ₹125 |
| 30-June-2023 | ₹112 |
| 29-June-2023 | ₹110 |
| 28-June-2023 | ₹105 |
| 27-June-2023 | ₹96 |
| 26-June-2023 | ₹98 |
| 25-June-2023 | ₹102 |
| 24-June-2023 | ₹102 |
| 23-June-2023 | ₹100 |
| 22-June-2023 | ₹95 |
In the above case, the GMP trend shows that the grey market premium has opened at around ₹95, but it is back to ₹125. However, these are early days still and we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 27th June 2023, 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, Cyient DLM Ltd has shown good traction in the grey market.
If you consider the upper end of the price band of Cyient DLM Ltd at ₹265 as the indicative price, then the likely listing price is being signalled at around ₹365 per share as of the GMP indicator on 23rd June 2023. One data point to track will be the subscription update on the stock as that would chart the GMP course from here. As mentioned, the institutional QIB subscription is a key trigger for the GMP pricing.
The GMP of ₹100 on a likely upper band pricing of ₹265 indicates a listing premium of a healthy 37.74% for Cyient DLM Ltd over the listing price. That pre-supposes a listing price of approximately ₹365 per share, when Cyient DLM Ltd lists on 10th July 2023. 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.
GMP (grey market price) is an important indicator, albeit informal, of likely listing price. One cannot take this price at face value However, the GMP tends to be quite dynamic and changes direction with the flow of news and events. Investors must note here that this is just an informal indication and has no official acceptance. 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.
Cyient DLM Ltd is a subsidiary of Cyient Ltd, the Hyderabad based industry-centric technology solutions company. Cyient holds 92.84% in Cyient DLM Ltd while Amansa Investments holds the balance 7.16%. The company was incorporated in the year 1993 to provide electronic manufacturing services (EMS) and the promoters have sold their stake to Cyient but remain as nominee directors on the board of Cyient DLM. The company undertakes EMS services as Built to Print (B2P) or as Built to Specifications (B2S) services.
The B2P business entails the client giving design specifications for the product and Cyient DLM manufacturing as per specifications. The B2S service includes designing the product based on specifications and then manufacturing it. The EMS solutions offered by Cyient DLM comprises of PCBA (printed circuit board assembly), cable harness and box build used in safety systems in aircraft cockpits. Its prestigious clients include Honeywell, Thales, BEL etc.
The Book running lead managers to the IPO are JM Financial and Axis Capital Ltd. KFIN Technologies Ltd will be the registrars to the issue. The IPO has a minimum lot size of 56 shares.
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