Ideaforge Technology IPO GMP (Grey Market Price)
The ₹567 crore Ideaforge Technology IPO comprises of an offer for sale and also of a fresh issue of shares. 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 ₹638 to ₹672 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.
Let us now look at the details of the issue of Ideaforge Technology Ltd. The offer for sale of the company IPO will entail the issue of 48,69,712 shares which at the upper end of the price band of ₹672 would result in an offer for sale component of ₹327 crore. The fresh issue component of the company IPO will entail the issue of 35,71,429 shares which at the upper end of the price band of ₹672 would result in an offer for sale component of ₹240 crore. Therefore, the overall size of the company IPO will entail the issue of 84,41,141 shares which at the upper end of the price band of ₹672 would result in the total issue size of ₹567 crore.
The issue opens for subscription on 26th June 2023 and closes for subscription on 29th June 2023 (both days inclusive). The basis of allotment will be finalized on 04th July 2023 and the refunds will be initiated on 05th July 2023. In addition, the demat credits are expected to happen on 06th July 2023 and the stock is scheduled to list on 07th 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 Ideaforge Technology Ltd, we already have GMP data for the last 3 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 Ideaforge Technology Ltd for which the data is available.
|Date||GMP (grey market price)|
In the above case, the GMP trend shows that the grey market premium has opened at around ₹550, but has down by ₹515. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 26th 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, Ideaforge Technology Ltd has shown good traction in the grey market.
If you consider the upper end of the price band of Ideaforge Technology Ltd at ₹672 as the indicative price, then the likely listing price is being signalled at around ₹1,157 per share as of the GMP indicator on 21st 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 ₹485 on a likely upper band pricing of ₹672 indicates a listing premium of a healthy 72.17% for Ideaforge Technology Ltd over the listing price. That pre-supposes a listing price of approximately ₹1,157 per share, when Ideaforge Technology Ltd lists on 07th 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.
Ideaforge Technology was Incorporated in 2007 to engage in the business of manufacturing Unmanned Aircraft Systems (UAS). More popularly, these UAS systems are referred to as drones. It manufactures Unmanned Aircraft Vehicles for Mapping, Security & Surveillance. Drones manufactured by Ideaforge are capable of a wide range of mining area planning, and mapping applications; apart from helping in construction and real estate businesses. In addition, these drones also assist the defence forces in conducting Intelligence, Surveillance, and Reconnaissance (ISR) operations along some of the most sensitive borders.
The company operates through two principal software products viz. BlueFire Live and BlueFire Touch. While the former enables secure and live streaming of UAV video feed and remote payload control; the latter is a Ground Control Software (GCS) to plan and command mapping and surveillance missions with identifying target locations through waypoint-based navigation. It is a market leader in the UAS business with nearly 50% market share in FY22. The issue is being lead managed by JM Financial and IIFL Securities Ltd. Link Intime India Private Ltd will be the registrars to the issue.
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