Dharmaj Crop Guard IPO GMP (Grey Market Premium)

Dharmaj Crop Guard IPO GMP
Dharmaj Crop Guard IPO GMP

IPOs
by 5paisa Research Team Last Updated: 2022-12-06T10:57:22+05:30

Dharmaj Crop Guard IPO worth Rs. 251.15 crore, comprises of a fresh issue of shares worth Rs. 216 core and an offer for sale of Rs. 35.15 crore. The offer for sale (OFS) component is by the promoters and early shareholders of the company. 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 issue of funds, but it also does not dilute the equity. The issue has been priced in the band of Rs. 216 to Rs. 237 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process.

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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 the same day on 06th December 2022 and the stock is scheduled to list on 08th December 2022 on the NSE and the BSE. The grey market price (GMP) trading normally starts about 4-5 days prior to Dharmaj Crop Guard IPO opening and continues till the listing date. In the case of Dharmaj Crop Guard Ltd, we already have GMP data for the last 4 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 Dharmaj Crop Guard Ltd for the 4 days, data is available.

 

Date

GMP

6-Dec-2022

Rs. 48

5-Dec-2022

Rs. 52

4-Dec-2022

Rs. 55

3-Dec-2022

Rs. 55

2-Dec-2022

Rs. 50

1-Dec-2022

Rs. 53

30-Nov-2022

Rs. 62

29-Nov-2022

Rs. 54

28-Nov-2022

Rs. 46

27-Nov-2022

Rs. 66

26-Nov-2022

Rs. 65

25-Nov-2022

Rs. 65

24-Nov-2022

Rs. 34

23-Nov-2022

Rs. 32

22-Nov-2022

Rs. 32

In the above case, the GMP trend shows that the grey market premium has opened at around Rs32, but has since surged to the Rs55 levels and it is holding there. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 28th November 2002, 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, Dharmaj Crop Guard Ltd has shown good traction in the grey market.

If you consider the upper end of the price band of Dharmaj Crop Guard Ltd at Rs. 237 as the indicative price, then the likely listing price is being signalled at around Rs. 292 per share as of the GMP indicator on 25th November. 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 Rs. 55 on a likely upper band pricing of Rs. 237 indicates a listing premium of a healthy 23.21% for Dharmaj Crop Guard Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 292 per share, when Dharmaj Crop Guard 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.

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.

Dharmaj Crop Guard Ltd is an agrochemicals manufacturer since 2015 and is based out of Gujarat. It manufactures insecticides, fungicides, herbicides, plant growth regulators, micro fertilizers and antibiotics. It caters to the B2C and to the B2B segments. The company also exports its products over 20 countries spread across Latin America, East Africa, Middle East and East Asia.

Dharmaj Crop Guard has over 196 institutional products sold to over 600 customers based in India and abroad. It exports to over 60 customers spread across 20 countries. It also has a formidable network of over 3,700 dealers. Between FY19 and FY21, sales more than doubled from Rs. 139.36 crore to Rs. 302.41 crore. The IPO is being lead managed by Elara Capital and Monarch Net Worth services. Link Intime will be the registrar to the issue.


 


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