Pattech Fitwell Tube Components IPO GMP (Grey Market Premium)

Pattech Fitwell Tube Components IPO worth Rs. 12.00 crore, comprises entirely of a fresh issue of shares by the company. It is a fixed price IPO and the price of the IPO has been fixed at Rs. 50 per share. The fresh issue portion entails the issue of 24.00 lakh shares which at the price of Rs. 50 is worth Rs. 12.00 crore. There is no offer for sale (OFS) portion in the IPO of Pattech Fitwell Tube Components Ltd.

The stock of Pattech Fitwell Tube Components Ltd has a face value of Rs. 10 and bidders can only bid in minimum lot size of 3,000 share each, entailing a minimum investment of Rs. 150,000 in the IPO at the fixed price level of Rs. 50 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 4,000 shares entailing an investment of Rs. 300,000. The table below captures the lot sizes permissible.

As per the terms of the offer, 50% of the net offer is reserved for the retail investors while the balance 50% is for HNI / NII investors. It is a fixed price issue with the price set at Rs50 per share. Pure Broking Private Ltd will act as the market maker for the SME IPO of Pattech Fitwell Tube Components Ltd. The company has set aside 126,000 shares for the market maker. The market maker provides buy and sell quotes post listing to give liquidity.

The issue opens for subscription on 05th April 2023 and closes for subscription on 12th April 2023 (both days inclusive). The basis of allotment will be finalized on 18th April 2023 and the refunds will be initiated on 19th April 2023. In addition, the demat credits are expected to happen on 20th April 2023 and the stock is scheduled to list on 21st 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 Pattech Fitwell Tube Components Ltd, we already have GMP data for the last 7 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.

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 Pattech Fitwell Tube Components IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened in the negative at around Rs-4, but now it has dropped to Rs-3 on 24th of April 2023. 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, Pattech Fitwell Tube Components Ltd has shown signs of a discount listing on the bourses, which is what negative GMP shows.

If you consider the fixed price of the IPO of Pattech Fitwell Tube Components Ltd at Rs. 50, then the likely listing price is being signalled at around Rs. 44 per share as per the GMP indicator on 11th April 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. But consistent discount on GMP may be an indicator of negative price listing on NSE.The GMP of Rs-6 on the fixed IPO price of Rs50 indicates a listing discount of -12.00% for Pattech Fitwell Tube Components Ltd on the listing price. That pre-supposes a listing price of approximately Rs44 per share, when Pattech Fitwell Tube Components Ltd lists on 21st 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.

Also read What you must know about the Pattech Fitwell Tube Components SME IPO

Here is a quick background of Pattech Fitwell Tube Components Ltd. The company is engaged in the manufacture of forging products for the non-automotive sector i.e., industrial forgings. Its product basket includes forged flanges, specialized machine components etc. It is into bending, cutting, drilling, blasting, polishing, and painting as part of the industrial value-add service that it provides. The IPO proceeds will be used for working capital purposes in the company. The promoters have a 100% stake in the company, which will dilute to 69.06% post the IPO.