Paragon Fine & Speciality Chemicals IPO GMP (Grey Market Premium)

Paragon Fine & Speciality Chemicals IPO opens for subscription on 26th October 2023 and closes on 30th October 2023. The IPO is a book built issue. The face value of the stock of Paragon Fine & Speciality Chemicals Ltd is ₹10 per share and the price band for the book built IPO is from ₹95 to ₹100 per share. The final price of the IPO will be discovered through the process of book building. The IPO of Paragon Fine & Speciality Chemicals Ltd is entirely a fresh issue component with no book built portion. As part of the fresh issue portion, Paragon Fine & Speciality Chemicals Ltd will issue a total of 51,66,000 shares (51.66 lakhs), which at the upper IPO price band of ₹100 per share aggregates to total fresh issue size of ₹51.66 crore. As there is no offer for sale (OFS), the total IPO size will also comprise of 51.66 lakh shares, which at the IPO price of ₹100 per share aggregates to ₹51.66 crore.

As is the practice with every SME IPO, this IPO will also have a market maker portion allocation of 2,61,600 shares. The market maker (Hem Finlease Private Ltd) will provide two-way quotes to ensure liquidity post listing combined with low basis spreads.  The promoters currently hold 100% of the shares of the company and post the IPO, the promoter stake in the company will get diluted to 75.13%. Paragon Fine & Specialty Chemicals will use the fresh funds for capex for the factory premises, repayment of loans and for working capital needs; apart from a small allocation for general corporate purposes. Hem Securities will be the lead manager to the issue and Bigshare Services Private Ltd will be the IPO registrar.

About Paragon Fine & Speciality Chemicals 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 Paragon Fine & Speciality Chemicals 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 Paragon Fine & Speciality Chemicals IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹20, but has since stayed at ₹105 or which GMP data is available. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 26th October 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, Paragon Fine & Speciality Chemicals Ltd has shown good traction in the grey market.

If you consider the upper band of the price of the IPO of Paragon Fine & Speciality Chemicals Ltd at ₹100 per share, the likely listing price is being signalled at around ₹120 per share as per the GMP indicator on 20th October 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 ₹20 on the fixed IPO price of ₹100 indicates a listing premium of a healthy 20% for Paragon Fine & Speciality Chemicals Ltd over the IPO issue price. That pre-supposes a listing price of approximately ₹120 per share, when Paragon Fine & Speciality Chemicals Ltd lists on 07th November 2023. Of course, these are purely 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 the absolute numbers.

How to apply for the Paragon Fine & Speciality Chemicals IPO

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹120,000 (1,200 x ₹100 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹240,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

The company has allocated 5.06% of the issue size for the market makers to the issue, Hem Finlease Private Ltd. The net offer (net of market maker allocation) will be allocated to the QIBs, retail investors and the HNI / NII investors with the anchor portion (if any) being carved out of the QIB allocation of shares. The breakdown of the overall IPO of Paragon Fine & Speciality Chemicals Ltd in terms of the allocation to various categories are captured in the table below.

Like in every SME IPO, the IPO of Paragon Fine & Speciality Chemicals Ltd also has a market maker. The Market maker typically provides buy and sell quotes post listing to ensure liquidity and low basis risk in the stock. In this case, the makers will be Hem Finlease Private Ltd, will act as the market maker for the SME IPO of Paragon Fine & Speciality Chemicals Ltd. The company has set aside 2,61,600 shares for the market maker.

The issue opens for subscription on 26th October 2023 and closes for subscription on 30th October 2023 (both days inclusive). The basis of allotment will be finalized on 02nd November 2023 and the refunds will be initiated on 03rd November 2023. In addition, the demat credits are expected to happen on 06th November 2023 and the stock is scheduled to also list on 07th November 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.