Hi-Green Carbon IPO GMP (Grey Market Premium)

Hi-Green Carbon IPO worth ₹52.80 crore comprises of a fresh issue of ₹44.93 crore and an offer for sale by promoters and early shareholders of ₹7.88 crore. The price band has been fixed in the range of ₹71 to ₹75 per share and the final price will be discovered in this band via book building. The fresh issue portion of the IPO entails the issue of 59.90 lakh shares which at the upper end of the IPO price band of ₹75 per share is worth ₹44.93 crore. The offer for sale (OFS) portion of the IPO entails the sale of 10.50 lakh shares which at the upper end of the IPO price band of ₹75 per share is worth ₹7.88 crore. Therefore, the overall size of the IPO entails the sale of 70.40 lakh shares which at the upper end of the IPO price band of ₹75 per share is worth ₹52.80 crore.

How to apply for the Hi-Green Carbon IPO

The stock of Hi-Green Carbon IPO has a face value of ₹10 and bidders can only bid in minimum lot size of 1,600 share each, entailing a minimum investment of ₹120,000 in the IPO at the upper end of the price band of ₹75 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 3,200 shares entailing an investment of ₹240,000. The table below captures the lot sizes permissible.

As per the terms of the offer, 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 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. It is captured in the table below.

Like in every SME IPO, the IPO of Hi-Green Carbon Ltd also has a market maker. The Market maker typically provides buy and sell quotes post listing to ensure liquidity and low basis risk in the stock. In this case, the makers will be Spread X Securities Ltd, who will act as the market maker for the SME IPO of Hi-Green Carbon Ltd. The company has set aside 4,20,800 shares for the market maker.

The issue opens for subscription on 21st September 2023 and closes for subscription on 25th September 2023 (both days inclusive). The basis of allotment will be finalized on 28th September 2023 and the refunds will be initiated on 29th September 2023. In addition, the demat credits are expected to happen on 03rd October 2023 and the stock is scheduled to also list on 04th September 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.

About the Hi-Green Carbon IPO GMP

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 Hi-Green Carbon 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.

How has the GMP panned out in last few days

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 Hi-Green Carbon IPO for which the data is available:

In the above case, the GMP trend shows that the grey market premium has opened at around ₹20, but has since improved to ₹60. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 21st September 2023 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, Hi-Green Carbon Ltd has shown good traction in the grey market.

If you consider the upper end of band price of the IPO of Hi-Green Carbon Ltd at ₹75 per share, then the likely listing price is being signalled at around ₹105 per share as per the GMP indicator on 15th September 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 ₹30 on the upper end of the book built IPO price of ₹75 indicates a listing premium of a healthy 40% for Hi-Green Carbon Ltd over the listing price. That pre-supposes a listing price of approximately ₹105 per share, when Hi-Green Carbon Ltd lists on 04th October 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.

Brief on Hi-Green Carbon Ltd

Hi-Green Carbon Ltd was incorporated in 2011 and is into the business of waste tyres recycling. Its manufacturing plant is located in Rajasthan, operating on a continuous pyrolysis process. The entire process is automated end-to-end with virtually no human intervention, making it economical and error-free. The plant in Rajasthan has the capacity to recycle 100 MT of waste tyres per day. Hi-Green Carbon Ltd is also planning to put up another manufacturing plant with similar capacity in the Dhule district of Maharashtra.

Some of its key products sold by Hi-Green Carbon Ltd include Recovered Carbon Black (RCB) and Steel Wires under Raw Material Category and Fuel Oil and Synthesis Gas under Energy components category. The Synthesis Gas is further used for the manufacture of sodium silicate better known in common parlance as raw glass. The company is fully compliant with good manufacturing practice (GMP) and all products comply with sustainability standards.

The company was promoted by M/S RNG Finlease Private Ltd, Amitkumar Bhalodi, Shaileshkumar Makadia, Krupa Detharia, Radhika Bhalodi, Shriyakumari Makadia and Koosh Detharia. Post the IPO, the promoter holding will dilute from 100.00% to 71.83%. Fresh issue proceeds will be used for setting up a new manufacturing unit in Maharashtra, meeting working capital funding gaps and for general corporate purposes. The issue will be lead managed by Beeline Capital Advisors Private Ltd while Link Intime India Private Ltd will be the registrar to the issue. The market maker for the issue is Spread X Securities Ltd.