Landmark Cars IPO GMP (Grey Market Premium)

Landmark Cars IPO  worth Rs. 552 crore, comprises of a fresh issue of shares to the tune of Rs. 150 crore and an offer for sale (OFS) of Rs. 402 crore. 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 Rs. 481 to Rs. 506 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process.

Landmark Cars IPO Review: 

The issue opens for subscription on 13th December 2022 and closes for subscription on 15th December 2022 (both days inclusive). The basis of allotment will be finalized on 20th December 2022 and the refunds will be initiated on 21st December 2022. In addition, the demat credits are expected to happen on 22nd December 2022 and the stock is scheduled to list on 23rd December 2022 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 Landmark Cars Ltd, we already have GMP data for the last 5 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 Landmark Cars Ltd for the 5 days, data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 54, and had remained steady for first four days before falling sharply on Monday. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 13th December 2022, 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, Landmark Cars Ltd has shown good traction in the grey market.

If you consider the upper end of the price band of Landmark Cars Ltd at Rs. 506 as the indicative price, then the likely listing price is being signalled at around Rs. 536 per share as of the GMP indicator on 12th December. 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 Rs. 30 on a likely upper band pricing of Rs. 506 indicates a listing premium of a healthy 5.93% for Landmark Cars Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 536 per share, when Landmark Cars Ltd lists on 23rd December 2022. 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.

Landmark Cars Ltd is a 24 year old company dealing in the retailing of premium automobiles of brands like Mercedes-Benz, Honda, Jeep, Volkswagen and Renault via dealership agreements. Landmark Cars also markets CVs for Ashok Leyland in India. Its service gamut includes sales of new vehicles / pre-owned cars, after-sales service, repairs, facilitation of third-party finance and insurance products. Landmark currently has a network of 112 outlets in 8 Indian states, spread across 31 key cities in India.

Landmark Cars business model is intended to capture the entire customer value chain from sales to facilitation to servicing to eventual sale of pre-owned cars. The fresh issue component will be used to repay or prepay certain borrowings availed by Landmark its subsidiaries. The issue is being lead managed by Axis Capital and ICICI Securities Ltd. Link Intime will be the registrars to the issue.