IREDA IPO GMP (Grey Market Premium)

Indian Renewable Energy Development Agency IPO (IREDA) opens on 21st November 2023 and closes for subscription on 23rd November 2023. The stock of IREDA has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹30 to ₹32 per share. The final price will be discovered in this band. The IPO of Indian Renewable Energy Development Agency Ltd (IREDA) will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion of Indian Renewable Energy Development Agency Ltd (IREDA) IPO comprises the issue of 40,31,64,706 shares (4,031.65 lakh shares approximately), which at the upper price band of ₹32 per share will translate into fresh issue size of ₹1,290.13 crore. The offer for sale (OFS) portion of the IPO of the company comprises the sale of 26,87,76,471 shares (2,687.76 lakh shares), which at the upper price band of ₹32 per share translates into offer for sale (OFS) size of ₹860.08 crore.

The OFS selling will be by the promoter shareholders of the company, which is the Government of India. Since IREDA is currently 100% owned by the government of India, the entire OFS portion of 2,687.76 lakh shares, will be offered by the Government of India only. Therefore, the overall IPO of Indian Renewable Energy Development Agency Ltd (IREDA) will comprise of issue and sale of 67,19,41,177 shares (6,719.41 crore shares approximately), which at the upper price band of ₹32 per share will translate into total IPO issue size of ₹2,150.21 crore. While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. The net proceeds from the IPO fresh issue portion will be utilized for augmenting the capital base (a basic necessity for all financial institutions looking to expand their loan books). The OFS portion is being entirely offered by the promoters (government of India). The IPO will be lead managed by IDBI Capital Management Services, BOB Capital Markets and SBI Capital Markets Ltd. Link Intime India Private Ltd will be the registrar to the issue.

About the GMP pricing for Indian Renewable Energy Development Agency IPO (IREDA) 

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 Indian Renewable Energy Development Agency Ltd (IREDA), we already have GMP data for the last 3 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 Indian Renewable Energy Development Agency IPO (IREDA) for which data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹3, but has later gone up to ₹12 per share for which GMP data is available. The IPO price of Indian Renewable Energy Development Agency Ltd (IREDA) was only announced on Sunday, so the actual GMP may still take some time to manifest the real underlying value. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 21st November 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, Indian Renewable Energy Development Agency Ltd (IREDA) has shown moderately strong traction in the grey market.

If you consider the upper end of price band of the IPO of Indian Renewable Energy Development Agency Ltd (IREDA) at ₹32, then the likely listing price is being signalled at around ₹36 per share as per the GMP indicator on 15th November 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 ₹4 on the upper end of the book built IPO price of ₹32 indicates a listing premium of a healthy 12.5% for Indian Renewable Energy Development Agency Ltd (IREDA) over the IPO issue price. That pre-supposes a listing price of approximately ₹36 per share, when Indian Renewable Energy Development Agency Ltd (IREDA) lists on 04th December 2023. Of course, these are purely 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 instead of just the GMP absolute numbers.

How to apply for the Indian Renewable Energy Development Agency (IREDA) IPO?

You can only apply in the IPO based on minimum lot sizes subject to the maximum lot size limit. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Indian Renewable Energy Development Agency Ltd (IREDA), the minimum lot size is 460 shares with upper band indicative value of ₹14,720. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Quota allocation across IPO investor categories

The company was promoted by the Government of India, holding the outstanding shares of Indian Renewable Energy Development Agency Ltd (IREDA) under the seal of the President of India. Currently the promoters (government of India) hold 100.00% stake in the company, which will get diluted post the IPO to 75%, just about meeting the listing requirements of the stock exchange of 25% public ownership. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The stock of Indian Renewable Energy Development Agency Ltd (IREDA) will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categorie

It may be noted here that the Net Offer above refers to the quantity net of employee quota. Employees may get a discount to the IPO price, but that would be communicated separately in the application forms. The anchor portion, will be carved out of the QIB portion.

The issue opens for subscription on 21st November 2023 and closes for subscription on 23rd November 2023 (both days inclusive). The basis of allotment will be finalized on 29th November 2023 and the refunds will be initiated on 30th November 2023. In addition, the demat credits are expected to happen on 01st December 2023 and the stock is scheduled to list on 04th December 2023 on the NSE and the BSE. It is a mainboard issue so it will be traded in the regular EQ listing on the NSE.