Five Star Business Finance IPO GMP (Grey Market Premium)

Five Star Business Finance IPO GMP
Five Star Business Finance IPO GMP

IPOs
by 5paisa Research Team Last Updated: 2022-11-21T11:14:37+05:30

Five Star Business Finance IPO worth Rs.1,960.01 crore, comprises entirely of an offer for sale of the said amount. The offer for sale (OFS) component is by the promoters and early shareholders of the company. Since there is no fresh issue component in this IPO, there will not be any equity dilution or EPS dilution as a result of this IPO. The issue has been priced in the band of Rs.450 to Rs.474 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. 

Five Star Business Finance IPO Review:

 


The issue opened for subscription on 09th November 2022 and closes for subscription on 11th November 2022 (both days inclusive). The basis of allotment will be finalized on 16th November 2022 and the refunds will be initiated on 17th November 2022. In addition, the demat credits are expected to happen on 18th November 2022 and the stock is scheduled to list on 21st November 2022. 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 Five Star Business Finance Ltd, we have GMP data for just 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 Five Star Business Finance Ltd.

Date

GMP

21-Nov-2022

Rs. -2

20-Nov-2022

Rs. -2

19-Nov-2022

Rs. -2

18-Nov-2022

Rs. -2

17-Nov-2022

Rs. -2

16-Nov-2022

Rs. -7

15-Nov-2022

Rs. -7

14-Nov-2022

Rs. -7

13-Nov-2022

Rs. -7

12-Nov-2022

Rs. -5

11-Nov-2022

Rs. -5

10-Nov-2022

Rs. -8

9-Nov-2022

Rs. 9

8-Nov-2022

Rs. -1

7-Nov-2022

Rs. -1

6-Nov-2022

Rs.0


In the above case, the GMP trend shows that the grey market premium has opened at around Rs-1. A negative GMP showing a likely discount listing to the issue price at the upper band. However, subsequently, the GMP has spiked to Rs9, which is still quite paltry but better than a negative number. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription post 09th November, 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, Five Star Business Finance Ltd has shown rather tepid traction in the grey market.


If you consider the upper end of the price band of Five Star Business Finance Ltd at Rs.474 as the indicative price, then the likely listing price is being signalled at around Rs.483 per share. 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.9 on a likely upper band pricing of Rs.474 indicates a listing premium of a rather tepid 1.90% for Five Star Business Finance Ltd over the listing price. That pre-supposes a listing price of approximately Rs.483 per share, when Five Star Business Finance Ltd lists on 21st November 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.


Five Star Business Finance is an NBFC-ND-SI (non-deposit taking, systemically important NBFC). It provides secured business loans to micro-entrepreneurs and self-employed individuals and is predominant in the southern states of Tamil Nadu, Andhra Pradesh, Telangana and Karnataka. It has over 185,000 customers in total.


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Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.

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