Nexus Select Trust REIT IPO GMP (Grey Market premium)

Nexus Select Trust REIT IPO worth Rs. 3,200 crore, comprises of a fresh issue and also an offer for sale of the said amount. The fresh issue portion entails the issue of 14 crore units in the price band of Rs95 to Rs100 and at the upper band of Rs100, the value of the fresh issue works out to Rs1,400 crore. The offer for sale (OFS) portion entails the issue of 18 crore units in the price band of Rs95 to Rs100 and at the upper band of Rs100, the value of the offer for sale (OFS) works out to Rs1,800 crore. The overall offer entails the issue of 32 crore units in the price band of Rs95 to Rs100 and at the upper band of Rs100, the value of the overall REIT IPO works out to Rs3,200 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 Rs95 to Rs100 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process.

The issue opens for subscription on 09th May 2023 and closes for subscription on 11th May 2023 (both days inclusive). The basis of allotment will be finalized on 16th May 2023 and the refunds will be initiated on 17th May 2023. In addition, the demat credits are expected to happen on 18th May 2023 and the stock is scheduled to list on 09th May 2023 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 Nexus Select Trust REIT, we already have GMP data for the last 4 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 Nexus Select Trust REIT for which, data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 4, and is dropped to Rs. 3. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 09th May 2023, 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, Nexus Select Trust REIT has shown moderate traction in the grey market.

If you consider the upper end of the price band of Nexus Select Trust REIT at Rs100 as the indicative price, then the likely listing price is being signalled at around Rs105 per share as of the GMP indicator on 08th May 2023. 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.5 on a likely upper band pricing of Rs100 indicates a listing premium of a healthy 5% for Nexus Select Trust REIT over the listing price. That pre-supposes a listing price of approximately Rs105 per share, when Nexus Select Trust REIT lists on 19th May 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.

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.

Nexus Select Trust REIT is a SEBI registered Real Estate Investment Trust with 17 Grade-A Urban Consumption Centres or commercial facilities spread across 14 Indian cities. The total leasable area is 9.8 million SFT, which includes hotel assets and office assets. Its tenant mix comprises of apparel and accessories, hypermarket, entertainment, and food and beverages (F&B). Nexus is present in Delhi, Navi Mumbai, Bengaluru, Pune, Hyderabad, and Chennai.