Mangalam Alloys IPO GMP (Grey Market Premium)

The ₹54.91 crore IPO of Mangalam Alloys Ltd comprises of a fresh issue as well as an offer for sale (OFS) component in the IPO from promoters and early shareholders. It is a fixed price IPO with the price for the issue fixed at ₹80 per share. The fresh issue portion of the IPO entails the issue of 61.264 lakh shares which at the fixed IPO price of ₹80 per share is worth ₹49.01 crore. The offer for sale (OFS) portion of the IPO entails the sale of 7.376 lakh shares which at the fixed IPO price of ₹80 per share is worth ₹5.90 crore. As a result, the overall issue of Mangalam Alloys Ltd will entail the issue of 68.64 lakh shares which at the fixed IPO price of ₹80 per share is worth ₹54.91 crore.

How to apply for the Mangalam Alloys IPO

The stock of Mangalam Alloys IPO has a face value of ₹10 and bidders can only bid in minimum lot size of 1,600 share each, entailing a minimum investment of ₹128,000 in the IPO at the fixed IPO price of ₹80 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 3,200 shares entailing an investment of ₹256,000. The table below captures the lot sizes permissible.

As per the terms of the offer, the company has set aside 5.01% of the overall issue size for the market makers to provide liquidity on the stock post listing. The balance shares (called the net offer) will be divided equally between retail investors and non-retail investors. Here non-retail investors predominantly comprise of HNI / NII investors but also include some corporates and QIBs too. Here is the detailed allocation across categories.

Like in every SME IPO, Mangalam Alloys IPO also has a market maker. The Market maker provides buy and sell quotes post listing to ensure liquidity and low basis risk in the stock. In this case, the market makers will be Rikhav Securities Ltd, that will act as the market maker for the SME IPO of Mangalam Alloys Ltd. The company has set aside 3,44,000 shares for the market maker inventory.

The issue opens for subscription on 21st September 2023 and closes for subscription on 25th September 2023 (both days inclusive). The basis of allotment will be finalized on 29th September 2023 and the refunds will be initiated on 03rd October 2023. In addition, the demat credits are expected to happen on 04th October 2023 and the stock is scheduled to also list on 05th October 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 Mangalam Alloys 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 Mangalam Alloys 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 has the GMP panned out in last few days

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 Mangalam Alloys IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹25, and now its down ₹0 for the next day also for 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 from 21st 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, Mangalam Alloys Ltd has shown good traction in the grey market.

If you consider the fixed price of the IPO of Mangalam Alloys Ltd at ₹80, then the likely listing price is being signalled at around ₹105 per share as per the GMP indicator on 21st 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 ₹25 on the fixed IPO price of ₹80 indicates a listing premium of a healthy 31.25% for Mangalam Alloys Ltd over the listing price. That pre-supposes a listing price of approximately ₹105 per share, when Mangalam Alloys Ltd lists on 05th October 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.

Read about Mangalam Alloys IPO

Brief on Mangalam Alloys Ltd

Mangalam Alloys Ltd was incorporated in 1988 and is a key manufacturer of stainless steel-based products. In terms of its product portfolio, Mangalam Alloys Ltd manufactures SS Ingots, SS Black Bar, SS RCS, SS Bright Round Bar, Bright Hex Bar, Bright Square Bar, Angles, Forgings etc. Mangalam Alloys manufactures fasteners in more than 30 international grades and in the size range from 3 mm to 400 mm. Typically, Mangalam Alloys Ltd makes stainless steel ingots through 3 furnaces by melting stainless steel scrap, rolling ingots to stainless steel rounds & flats followed by heat treatment annealing. The manufacturing facility of Mangalam Alloys is spread across 40,000 square metres (SQM) with installed melting capacity of 25,000 tonnes per annum (TPA). The revenues of the company have shown steady growth over the last 3 years.

The company has been promoted by Uttam Chand Mehta and Tushar Mehta. With the IPO being a combination of fresh issue and offer for sale, the promoter stake will get diluted post the IPO. The fresh issue funds will be used by the company for meeting its working capital funding gaps and for capex for business expansion and R&D. Part of the monies raised will also go towards general corporate expenses. While Expert Global Consultants Private Ltd will be the lead manager to the issue, Skyline Financial Services Private Ltd will be the registrar to the issue. The market maker for the issue is Rikhav Securities Ltd.