Krishca Strapping Solutions IPO GMP (Grey Market Premium)

Krishca Strapping Solutions IPO ₹17.93 crore, worth comprises entirely of a fresh issue of the said amount. The price band has been fixed in the range of ₹51 to ₹54. The fresh issue portion entails the issue of 33.20 lakh shares which at the upper end of the price band at ₹54 is worth ₹17.93 crore. Overall, the IPO entails the issue of 33.20 lakh shares, which at the upper price band of ₹54 per share works out to total issue size of ₹17.93 crore, since the fresh issue accounts for the entire IPO size.

The stock of Krishca Strapping Solutions Ltd has a face value of ₹10 and bidders can only bid in minimum lot size of 2,000 share each, entailing a minimum investment of ₹108,000 in the IPO at the upper end of the price band of ₹54 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 4,000 shares entailing an investment of ₹216,000. 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. Share India Securities Ltd will act as the market maker for the SME IPO of Krishca Strapping Solutions Ltd. The company has set aside 300,000 shares for the market maker.

The issue opens for subscription on 16th May 2023 and closes for subscription on 19th May 2023 (both days inclusive). The basis of allotment will be finalized on 24th May 2023 and the refunds will be initiated on 25th May 2023. In addition, the demat credits are expected to happen on 26th May 2023 and the stock is scheduled to list on 29th May 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. 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 Krishca Strapping Solutions 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.

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 Krishca Strapping Solutions Ltd for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹28, but has since improved to ₹68 on the second day on which GMP data is available. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription 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, Krishca Strapping Solutions Ltd has shown very strong traction in the grey market.

If you consider the upper end of band price of the IPO of Krishca Strapping Solutions Ltd at ₹54, then the likely listing price is being signalled at around ₹89 per share as per the GMP indicator on 12th May 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 ₹35 on the upper end of the book built IPO price of ₹54 indicates a listing premium of a healthy 64.81% for Krishca Strapping Solutions Ltd over the listing price. That pre-supposes a listing price of approximately ₹89 per share, when Krishca Strapping Solutions Ltd lists on 29th May 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.

Krishca Strapping Solutions Ltd was incorporated in the year 2017 to manufacture and sell Strapping Tools and Strapping Seals. It has a plant in Chennai with capacity of 18,000 MT of steel straps and 80 million seals per annum. It has a wide product range including PLC Controlled automatic production line, Automated heat treatment process, Pollution-free production process - Lead-free and super jumbo coils upto 500 Kg

Finally, a word on how the funds of the fresh issue would be utilized. The fresh issue portion will be used to fund its capital expenditure for the new strapping line, repayment of loans and for working capital requirements. The issue will be lead managed by Share India Capital Services Private Ltd while Purva Share Registry India Private Ltd will be the registrars to the SME IPO of Krishca Strapping Solutions Ltd.