Plaza Wires IPO GMP (Grey Market Premium)

Plaza Wires IPO worth ₹71.28 crore comprises entirely of a fresh issue of shares and no offer for sale component. 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 ₹51 to ₹54 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. For our analysis, the upper end of the band is assumed.

Details of the Plaza Wires IPO

The fresh issue portion comprises the issue of 1,32,00,158 shares (1.32 crore shares approximately), which at the upper price band of ₹54 per share will translate into fresh issue size of ₹71.28 crore. Since there is no offer for sale (OFS) component, the overall IPO size will also comprise of the issue of 1,32,00,158 shares (1.32 crore shares approximately), which at the upper price band of ₹54 per share will translate into an overall IPO issue size of ₹71.28 crore. On listing, Plaza Wires Ltd will have an indicative market cap of around ₹237 crore at the IPO price upper price band of ₹54 per share. The P/E ratio of the stock will be 21.95X and the company will have an ROE of 14.15% and ROCE of 15.57%.

The issue opens for subscription on 29th September 2023 and closes for subscription on 05th October 2023 (both days inclusive). The basis of allotment will be finalized on 10th October 2023 and the refunds will be initiated on 11th October 2023. In addition, the demat credits are expected to happen on 12th October 2023 and the stock will list on 13th October 2023 on the NSE and the BSE. Plaza Wires Ltd is a relatively small-sized issue by comparison to mainboard IPO standards and it is good to see that the funds are being used for capex, which is normally value accretive for the stock.

Understanding Plaza Wires 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 Plaza Wires Ltd, we already have GMP data for the last 2 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.

Plaza Wires IPO GMP

Here is a quick GMP summary for Plaza Wires IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹12, and is same as ₹23 per share for which the GMP data is available. However, it must be remembered that initially the stock was trading in the grey market without the price band for the IPO being announced. The price band was just announced a couple of days ago and hence this shift in GMP may not be too reflective. However, the GMP level is still indicative of moderate to strong traction for the IPO grey market price. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 29th September 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, Plaza Wires Ltd has shown strong traction in the grey market.

If you consider the upper end of the price band of Plaza Wires Ltd at ₹54 as the indicative price, then the likely listing price is being signalled at around ₹67 per share as of the GMP indicator on 26th August 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 ₹13 on a likely upper band pricing of ₹54 indicates a listing premium of a moderate to healthy 24.07% for Plaza Wires Ltd over the listing price. That pre-supposes a listing price of approximately ₹67 per share, when Plaza Wires Ltd lists on 12th October 2023. Of course, these are approximations, so you must keep a margin of safety. However, from here on, a lot will depend on the GMP sustaining over the next few days after the issue opens, as well as the subscription flow into the company IPO.

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.

Brief on Plaza Wires Ltd business model

Plaza Wires Ltd was incorporated in the year 2006 and the company manufactures wires, low tension (LT) aluminium cables and fast moving electrical goods (FMEG). Its product portfolio includes house wires, flexible industrial cables and industrial cables for submersible pumps and motors up to 1.1 KV-grade. It also makes LT power control cables, TV dish antenna co-axial cables, telephone & switchboard industrial cables, LAN networking cables, close circuit television cables and solar cables; via third party manufacturers. It has more than 20 after-sales service centres spread across Uttar Pradesh, Uttarakhand, Jammu and Kashmir, Punjab, Haryana, and Tamil Nadu. Plaza Wires Ltd also recently launched miniature circuit breakers and distribution boards (DB). The company has over 1249 authorized dealers and distributors, 3 branches and 4 warehouses.

The company was promoted by Sanjay Gupta and Sonia Gupta. Currently the promoters hold 100.00% of the company, which will get diluted post the IPO to 69.83%. The fresh issue funds raised will be used by Plaza Wires Ltd to fund the capital expenditure needed to a new manufacturing unit for house wires and cables and to expand its product portfolio. The issue will be lead managed by Pantomath Capital Advisors Private Ltd. KFIN Technologies Ltd will be the registrar to the issue.