JSW Infrastructure IPO GMP (Grey Market Premium)

JSW Infrastructure IPO worth ₹2,800 crore comprises entirely of a fresh issue of shares with no offer for sale component in the IPO. 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 ₹113 to ₹119 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.

Details of the JSW Infrastructure IPO

Let us now look at the details of the JSW Infrastructure IPO issue. The fresh issue component of the company IPO will entail the issue of 23,52,94,118 shares (23.53 crore shares approximately) which at the upper end of the price band of ₹119 would result a fresh issue component of ₹2,800 crore. Therefore, the overall size of the company IPO will also entail the issue of 23,52,94,118 shares (23.53 crore shares approximately) which at the upper end of the price band of ₹119 per share would result in the total issue size of ₹2,800 crore.

The issue opens for subscription on 25th September 2023 and closes for subscription on 27th September 2023 (both days inclusive). The basis of allotment will be finalized on 03rd October 2023 and the refunds will be initiated on 04th October 2023. In addition, the demat credits are expected to happen on 05th October 2023 and the stock is scheduled to list on 06th October 2023 on the NSE and the BSE.

Understanding the JSW Infrastructure 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 JSW Infrastructure 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.

JSW Infrastructure IPO GMP

Here is a quick GMP summary for JSW Infrastructure IPO for which the data is available:

In the above case, the GMP trend shows that the grey market premium has opened at around ₹18, but has improved to ₹25 per share. However, it must be remembered that initially the stock was trading in the grey market without the price band for the IPO being announced. The price band was just announced a few days back and hence this fall in GMP may not be too reflective. However, the GMP level is still indicative of moderate to strong traction for the IPO grey market price. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription from 25th September 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, JSW Infrastructure Ltd has shown moderate to strong traction in the grey market.

If you consider the upper end of the price band of JSW Infrastructure Ltd at ₹119 as the indicative price, then the likely listing price is being signalled at around ₹133 per share as of the GMP indicator on 20th September 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 ₹14 on a likely upper band pricing of ₹119 indicates a listing premium of a moderate to healthy 11.76% for JSW Infrastructure Ltd over the listing price. That pre-supposes a listing price of approximately ₹133 per share, when JSW Infrastructure Ltd lists on 06th October 2023. Of course, these are approximations, so you must keep a margin of safety. However, from here on, a lot will depend on the GMP sustaining over the next few days after the issue opens, as well as the subscription flow into the company IPO.

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.

Read about JSW Infrastructure IPO

Brief on JSW Infrastructure Ltd business model

JSW Infrastructure Ltd was incorporated in the year 2006 and the company provides maritime-related services. These include cargo handling, storage solutions and logistics support services. In addition, JSW Infrastructure Ltd  also develops and operates ports and port terminals under Port Concessions. JSW Infrastructure Ltd is the second largest commercial port operator in India; measured in terms of cargo handling capacity. It handles dry bulk cargo, break bulk cargo, liquid bulk cargo, gases, and containers. Apart from coal, the other key cargo materials handled by the company include iron ore, sugar, urea, steel products, rock phosphate, molasses, gypsum, barites, edible oil, LNG, and LPG.

Currently the ports operated by JSW Infrastructure Ltd have fairly long concession periods ranging between 30 years to 50 years. This is likely to provide long term sustainable visibility in terms of revenues. JSW Infrastructure Ltd is present across India with non-major ports in Maharashtra as well as port terminals in Goa and Karnataka. On the east coast, it has presence in Odisha and Tamil Nadu, apart from global presence in the UAE. In all, JSW Infrastructure operates 9 Port Concessions in India with an installed cargo handling capacity of 158.43 MTPA. The company's cargo handling capacity in India has grown at an impressive CAGR of 15.27% over the last 3 years.

The fresh funds would be used for capex at its various port terminals and for repayment or prepayment of certain loans taken. The issue of JSW Infrastructure Ltd will be lead managed by an impressive line-up of lead managers comprising of JM Financial, Axis Capital, Credit Suisse Securities, DAM Capital (formerly IDFC Securities), HSBC Securities, ICICI Securities, Kotak Mahindra Capital and SBI Capital Markets. KFIN Technologies Ltd will be the registrar to the issue.