Lead Reclaim and Rubber Products IPO GMP (Grey Market Premium)

Lead Reclaim and Rubber Products IPO worth Rs. 4.88 crore, comprises entirely of a fresh issue of the IPO amount. The total SME IPO of Lead Reclaim and Rubber Products Ltd entails the issue of 19.50 lakh shares at a price of Rs. 25 per share aggregating to Rs. 4.88 crore. The stock has a face value of Rs. 10 and bidders can only bid in minimum lot size of 6,000 share each, entailing a minimum investment of Rs. 150,000 in the IPO. That is also the maximum that a retail investor can apply for in the IPO. In the case of HNI / NII investors, they can bid for a minimum 2 lots of 12,000 shares entailing a minimum investment of Rs. 300,000. As per the terms of the offer, 50% of the net offer is reserved for the retail investors and the balance 50% for HNI / NII investors. It is a fixed price issue and SVCM Securities Private Ltd will act as the market maker for the SME IPO of Lead Reclaim and Rubber Products Ltd.

The issue opened for subscription on 09th February 2023 and closes for subscription on 13th February 2023 (both days inclusive). The basis of allotment will be finalized on 16th February 2023 and the refunds will be initiated on 17th February 2023. In addition, the demat credits are expected to happen on 20th February 2023 and the stock is scheduled to list on 21st February 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 3-4 days prior to IPO opening and continues till the listing date. In the case of Lead Reclaim and Rubber Products Ltd, we already have GMP data, 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 Lead Reclaim and Rubber Products Ltd IPO.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs4, bounced to Rs. 6 and has since tapered back to Rs. 4 of GMP trading. Of course, we have to wait 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, Lead Reclaim and Rubber Products Ltd has shown good traction in the grey market.

If you consider the price of the IPO of Lead Reclaim and Rubber Products Ltd at Rs. 25, then the likely listing price is being signalled at around Rs. 29.50 per share as per the GMP indicator on 09th February 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 from here, going ahead since the issue has already opened. 

The GMP of Rs4.50 on a fixed IPO price of Rs. 25 indicates a listing premium of a healthy 18.00% for Lead Reclaim and Rubber Products Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 29.50 per share, when Lead Reclaim and Rubber Products Ltd lists on 21st February 2023. 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. 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.

Lead Reclaim and Rubber Products Limited was incorporated in the year 2012 and has been around for 10 years in business. It is into manufacturing of reclaimed rubber, crumb rubber powder and rubber granules. It is a Gujarat based company and the manufacturing unit is located at Sarali Road Village in Kheda district of Gujarat. The unit has a total installed capacity of 5,520 metric tons per annum (MTPA). Its business focus is largely on saving valuable natural resources by way of recycling and encouraging the use of reclaimed rubber products. The company delivers its product basket to OEMs (original equipment manufacturers); which are Tier I automotive companies, distributors and dealers.

Lead Reclaim and Rubber Products Limited will use the funds for purchase of plant and machinery as well as for working capital needs of the company. Post the IPO, the promoter share in equity will dilute from 86.48% to 63.51%. The issue is being lead managed by Fedex Securities Ltd. Bigshare Services Private Ltd will be the registrars to the issue.