MOS Utility IPO GMP (Grey Market Premium)

MOS Utility IPO worth Rs. 49.97 crore, comprises of a fresh issue and an offer for sale (OFS) by promoters and early shareholders. The price band has been fixed in the range of Rs. 72 to Rs. 76. The fresh issue portion entails the issue of 57.744 lakh shares which at the upper end of the price band at Rs76 is worth Rs. 43.89 crore. The OFS portion entails the issue of 8 lakh shares which at the upper end of the price band at Rs. 76 is worth Rs 6.08 crore. Overall, the IPO entails the issue of 65.744 lakh shares, which at the upper price band of Rs. 76 per share works out to total issue size of Rs. 49.97 crore.

The stock of MOS Utility has a face value of Rs. 10 and bidders can only bid in minimum lot size of 1,600 share each, entailing a minimum investment of Rs. 121,600 in the IPO at the upper end of the price band of Rs. 76 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 Rs. 243,200. 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. Rikhav Securities Ltd will act as the market maker for the SME IPO of MOS Utility Ltd. The company has set aside 329,600 shares for the market maker.

The issue opens for subscription on 31st March 2023 and closes for subscription on 06th April 2023 (both days inclusive). The basis of allotment will be finalized on 12th April 2023 and the refunds will be initiated on 13th April 2023. In addition, the demat credits are expected to happen on 17th April 2023 and the stock is scheduled to list on 18th April 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 MOS Utility 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 MOS Utility Ltd for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 4, but has improved to Rs. 6, 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, MOS Utility Ltd has shown good traction in the grey market.

If you consider the upper end of band price of the IPO of MOS Utility Ltd at Rs76, then the likely listing price is being signalled at around Rs82 per share as per the GMP indicator on 29th March 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 Rs. 6 on the upper end of the book built IPO price of Rs. 76 indicates a listing premium of a healthy 7.89% for MOS Utility Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 82 per share, when MOS Utility Ltd lists on 18th April 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.

Here is a quick background of MOS Utility Ltd. MOS Utility Ltd was incorporated in 2009 and offers value added digital products and services to B2B and B2C customers. It provides business enablement and business enhancement opportunities to shopkeepers, retailers, students, housewives, professionals, and insurance agents. They can start their own online e-commerce business on the MOS platform.

MOS has a total network comprising of agents and master distributors aggregating to nearly 1.70 lakhs. The fresh issue portion will be used to fund its working capital expenditure. The issue will be lead managed by Unistone Capital Private Limited while Skyline Financial Services Ltd will be the registrars to the SME IPO of MOS Utility Ltd.