MCON Rasayan India IPO GMP (Grey Market Premium)

MCON Rasayan India IPO worth Rs. 6.84 crore, comprises entirely of a fresh issue of the IPO amount. The total SME IPO of MCON Rasayan India Ltd entails the issue of 17.10 lakh shares at a price of Rs40 per share aggregating to Rs. 6.84 crore. The stock has a face value of Rs. 10 and retail bidders can only bid in minimum lot size of 3,000 share each, entailing a minimum investment of Rs. 120,000 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 6,000 shares entailing a minimum investment of Rs. 240,000. 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 Econo Broking Private Limited will act as the market maker for the MCON Rasayan India SME IPO. The market maker portion comprises of 90,000 shares.

The issue opens for subscription on 06th March 2023 and closes for subscription on 10th March 2023 (both days inclusive). The basis of allotment will be finalized on 15th March 2023 and the refunds will be initiated on 16th March 2023. In addition, the demat credits are expected to happen on 17th March 2023 and the stock is scheduled to list on 20th March 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; but in this case the GMP trading also started only on 27th February 2023. In the case of MCON Rasayan India Ltd, we already have GMP data for the last 2 days, which should give a reasonable picture of the likely listing to begin with.

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, albeit not an official one. 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 summary for MCON Rasayan India IPO GMP for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 27 and is now trading lower around Rs. 14. 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, MCON Rasayan India Ltd has shown good traction in the grey market.

If you consider the price of the MCON Rasayan India IPO at Rs. 40, then the likely listing price is being signalled at around Rs. 67 per share as per the GMP indicator on 28th February 2023. This is dynamic and keeps changing. One data point to track will be the real time subscription update on the stock as that would chart the GMP course from here.

The GMP of Rs. 27 on a fixed IPO price of Rs. 40 indicates a listing premium of a very healthy and robust 67.50% for MCON Rasayan India Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 67 per share, when MCON Rasayan India Ltd lists on 20th March 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. Remember, that the GMP can also be negative, which is illustrative of a discount listing.

MCON Rasayan is headquartered in Mumbai with manufacturing plants in Gujarat. It manufactures and markets modern building material and construction chemicals. It sells construction chemicals in powder form and in liquid form with a portfolio of over 80 products. Powder products are in the form of ready mix plaster, tile adhesives, block adhesives, wall putty, polymer mortar and micro concrete, while liquid form products include polyurethane based liquid membrane, bonding agents and anti-corrosive coatings. MCON has 2 manufacturing plants at Valsad and Navsari in south Gujarat; with installed capacity of 2,500 MTPA and 12,500 MTPA respectively. Key clients include Runwal group, Lodha group, Rustomjee group, DB Realty and Indian Railways.

Read What you must know about the MCON Rasayan India IPO

MCON Rasayan India Ltd will use the funds for working capital needs of the company and for general corporate purposes. Post the IPO, the promoter share in equity will dilute from 91.45% to 66.64%. The issue is being lead managed by GYR Capital Advisors Limited, while Link Intime India Private Limited will be the registrars to the issue.