Elin Electronics IPO GMP (Grey Market Premium)

Elin Electronics IPO, worth Rs. 475 crore comprises of a fresh issue of shares to the tune of Rs. 175 crore and an offer for sale (OFS) of Rs. 300 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 infusion of funds, but it also does not dilute the equity. The issue has been priced in the band of Rs. 234 to Rs. 247 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process.

The issue opens for subscription on 20th December 2022 and closes for subscription on 22nd December 2022 (both days inclusive). The basis of allotment will be finalized on 27th December 2022 and the refunds will be initiated on 28th December 2022. In addition, the demat credits are expected to happen on 29th December 2022 and the stock is scheduled to list on 30th December 2022 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 Elin Electronics Ltd, we already have Elin Electronics IPO GMP data for the last 5 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 Elin Electronics 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. 22, but has spiked to well above the Rs. 40 mark in the last 4 days. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 20th December 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, Elin Electronics Ltd has shown good traction in the grey market.

If you consider the upper end of the price band of Elin Electronics Ltd at Rs. 247 as the indicative price, then the likely listing price is being signalled at around Rs. 293 per share as of the GMP indicator on 20th December 2022. 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. 46 on a likely upper band pricing of Rs. 247 indicates a listing premium of a healthy 18.62% for Elin Electronics Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 293 per share, when Elin Electronics Ltd lists on 30th 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.

Elin Electronics Ltd is a 53 year old company and is a key player in the electronics manufacturing services (EMS) business. It manufacturers on a work contract basis on behalf of leading brands in the areas of lighting, fans and kitchen appliances. Elin Electronics is also the largest fractional horsepower motors manufacturers in India. Elin currently caters to the original equipment manufacturer (OEM) and original design manufacturer (ODM) as part of its core business model. It has 3 manufacturing units at Ghaziabad in Uttar Pradesh, Baddi in Himachal Pradesh and Verna in Goa. It also has an in-house R&D centre to provide value added research on concept sketching, design refinement, optional features and testing.

Elin Electronics is an existing profit making company and will use the fresh issue component for debt repayment and capex. The issue is being lead managed by Axis Capital and JM Financial. KFIN Technologies will be the registrars to the issue.