Kody Technolab IPO GMP (Grey Market Premium)

Kody Technolab IPO worth ₹27.52 crore comprises entirely of a fresh issue with no offer for sale (OFS) component in the IPO from promoters and early shareholders. It will be a fixed price issue and the IPO price has already been fixed at ₹160 per share. The fresh issue portion of the IPO entails the issue of 17.20 lakh shares which at the fixed IPO price of ₹160 is worth ₹27.52 crore. Since there is no OFS component in the IPO, the fresh issue size of ₹27.52 crore is also the size of the overall IPO.

How to apply for the Kody Technolab IPO

The stock of Kody Technolab IPO has a face value of ₹10 and bidders can only bid in minimum lot size of 800 share each, entailing a minimum investment of ₹128,000 in the IPO at the upper end of the price band of ₹160 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 1,600 shares entailing an investment of ₹256,000. The table below captures the lot sizes permissible.

The company has allocated 5.02% of the issue size for the market makers. The balance shares will be equally allocated between the retail investors and the non-retail investors. Here non-retail investors predominantly include the HNI / NII investors and partially the QIB investors also. However, there is no dedicated QIB quota available in the IPO of Kody Technolab Ltd. The break up in terms of minimum and maximum allowed quota has been captured in the table below.

Like in every SME IPO, Kody Technolab IPO 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 Kody Technolab Ltd. The company has set aside 86,400 shares for the market maker.

The issue opens for subscription on 15th September 2023 and closes for subscription on 20th September 2023 (both days inclusive). The basis of allotment will be finalized on 25th September 2023 and the refunds will be initiated on 26th September 2023. In addition, the demat credits are expected to happen on 27th September 2023 and the stock is scheduled to also list on 28th 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 GMP pricing for Kody Technolab IPO

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 Kody Technolab 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 Kody Technolab IPO GMP is panned out:

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 Kody Technolab IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹30, but its up by ₹25 per share. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 15th 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, Kody Technolab IPO has shown good traction in the grey market.

If you consider the fixed price of the Kody Technolab IPO at ₹160, then the likely listing price is being signalled at around ₹190 per share as per the GMP indicator on 14th 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 fixed IPO price of ₹160 indicates a listing premium of a healthy 18.75% for Kody Technolab Ltd over the listing price. That pre-supposes a listing price of approximately ₹190 per share, when Kody Technolab Ltd lists on 28th September 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.

Also read about Kody Technolab IPO

Brief on Kody Technolab Ltd

Kody Technolab Ltd was incorporated in 2017 and is engaged in the business of providing software development services for an array of different industries. Most of its software stack are in the more modern and growing versions of the IT industry. Its technology stack includes staff augmentation, ML (machine learning) development, AR (augmented reality) development and maintenance, enterprise mobility, CX strategy and design etc. To sum it up, the company offers the complete package of digital transformation and guides the customer through the life cycle of the digital transformation process. It also offers as part of the stack; artificial intelligence (AI) robotics, IT consulting, Web App development and focused IOT (internet of things) support systems.

The IT industry in India has gone through 3 phases in last 15 years. It first transformed from the traditional outsourcing for BFSI (banking, financial services, insurance) IT needs to a more digital environment. The digital environment comprised of SMAC (social, mobility, analytics, and cloud). Now, Indian IT is mutating to the third stage which is the Digital-Plus segment comprising of artificial intelligence, machine learning, Internet of Things, virtual reality, augmented reality etc. It is in this third phase that the company is positioned. It is still a small company with annual revenues of just about ₹11 crore but with a high net profit margin of nearly 30%. The company has been profitable for the last two years.

The company has been promoted by Manav Patel, Manali Patel and Pooja Patel. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares and the OFS, the promoter equity holding share will reduce to 73.01%. The fresh issue funds will be used by the company for capex towards setting up a development centre at GIFT City, Gandhinagar, repayment of loans, working capital funding gaps and also to meet general corporate expenses. While Beeline Capital Advisors Private Ltd will be the lead manager to the issue, KFIN Technologies Ltd will be the registrar to the issue. The market maker for the issue is Spread X Securities Ltd.