Pentagon Rubber IPO GMP (Grey Market Premium)
Pentagon Rubber IPO worth ₹16.17 crore, comprises entirely of a fresh issue with no offer for sale (OFS) component by promoters and early shareholders. The OFS is a transfer of ownership and is hence is not EPS dilutive, unlike the fresh issue of shares. The price band has been fixed in the range of ₹65 to ₹70. The fresh issue portion entails the issue of 23.10 lakh shares which at the upper end of the price band at ₹70 is worth ₹16.17 crore. Since there is no OFS portion in the IPO, the overall size issue if the same as the fresh issue, entailing the issue of 23.10 lakh shares, at the upper price band of ₹70 per share worth a total issue size of ₹16.17 crore.
The stock of Pentagon Rubber IPO has a face value of ₹10 and bidders can only bid in minimum lot size of 2,000 share each, entailing a minimum investment of ₹140,000 in the IPO at the upper end of the price band of ₹70 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 ₹280,000. The table below captures the lot sizes permissible.
As per the terms of the offer, 50% of the net offer is reserved for the 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. The gist of the allotment is captured in the table below.
|QIB Shares Offered||Not more than 50.00% of the Net offer|
|NII (HNI) Shares Offered||Not less than 15.00% of the Offer|
|Retail Shares Offered||Not less than 35.00% of the Offer|
Sunflower Broking Ltd will act as the market maker for the SME IPO of Pentagon Rubber Ltd. The company has set aside 116,000 shares for the market maker. This will be carved out of the HNI / NII portion of the IPO and used to offer buy and sell bids to create liquidity.
The issue opens for subscription on 26th June 2023 and closes for subscription on 30th June 2023 (both days inclusive). The basis of allotment will be finalized on 05th July 2023 and the refunds will be initiated on 06th July 2023. In addition, the demat credits are expected to happen on 07th July 2023 and the stock is scheduled to list on 10th July 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 Pentagon Rubber 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.
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 Pentagon Rubber Ltd for the which the data is available.
In the above case, the GMP trend shows that the grey market premium has opened at around ₹4, and now up by ₹42 on which GMP data is available. 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, Pentagon Rubber Ltd has shown moderate traction in the grey market.
If you consider the upper end of band price of the IPO of Pentagon Rubber Ltd at ₹70, then the likely listing price is being signalled at around ₹74 per share as per the GMP indicator on 21st June 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 ₹4 on the upper end of the book built IPO price of ₹70 indicates a listing premium of a moderate 5.71% for Pentagon Rubber Ltd over the listing price. That pre-supposes a listing price of approximately ₹74 per share, when Pentagon Rubber Ltd lists on 10th July 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.
Pentagon Rubber Ltd, is an SME IPO on the NSE which is opening for subscription on 26th June 2023. The company was incorporated in the year 2004 and manufactures rubber conveyor belts, transmission belts, rubber sheets and elevator belts. These are precision rubber products requiring technological finesse. The manufacturing plant of Pentagon Rubber Ltd is located in Dera Bassi in the state of Punjab; 25 KM from Chandigarh.
Pentagon Rubber has one of the longest conveyor belting presses in India with a production capacity of 21 metres in a single stroke. The unit has a production capacity of more than 300 square KM of rubber belts on annual basis. To boost its R&D efforts, the company also has modern laboratory that can produce conveyor belts as per most global protocols. The company has a large domestic and global export market and has received accolades in India and abroad. The issue will be lead managed by Beeline Capital Advisors Private Ltd, while Link Intime India Private Ltd will be the registrars to the SME IPO of Pentagon Rubber Ltd.
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