Pritika Engineering IPO GMP (Grey Market Premium)

Pritika Engineering IPO worth Rs. 9.42 crore comprises entirely of a fresh issue of the IPO amount. The total of Pritika Engineering Components SME IPO entails the issue of 32.48 lakh shares at a price of Rs. 29 per share aggregating to Rs. 9.42 crore. The stock has a face value of Rs. 10 and bidders can only bid in minimum lot size of 4,000 shares each, entailing a minimum investment of Rs. 116,000 in the IPO. That is also the maximum that a retail investor can apply for in the IPO. As per the terms of the offer, 50% of the net offer is reserved for the retail investors and 50% for the HNI / NIIs. It is a fixed price issue and SMC Global Securities Limited will act as the market maker for the of Pritika Engineering Components SME IPO.

The issue opened for subscription on 25th November 2022 and closes for subscription on 30th November 2022 (both days inclusive). The basis of allotment will be finalized on 05th December 2022 and the refunds will be initiated on 06th December 2022. In addition, the demat credits are expected to happen on 07th December 2022 and the stock is scheduled to list on 08th December 2022 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 Pritika Engineering Components Ltd, we already have GMP data for the last 6 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 Pritika Engineering Components Ltd for the 6 days, data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 9, but has since hovered between Rs. 7 and Rs. 9 with a slight downward bias. 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, Pritika Engineering Components Ltd has shown reasonable traction in the grey market.

If you consider Pritika Engineering IPO price at Rs. 45, then the likely listing price is being signalled at around Rs. 68 per share as per the GMP indicator on 28th November. 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 from here.

The Pritika Engineering IPO GMP of Rs. 7 on a fixed IPO price of Rs. 29 indicates a listing premium of a healthy 24.14% over the listing price. That pre-supposes a listing price of approximately Rs. 36 per share, when Pritika Engineering Components Ltd lists on 08th December 2022. 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. 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.

Pritika Engineering Components Ltd is into the manufacture of precision machined components. It caters principally to the automotive industry with focus on trucks, tractors and CVs. Some of the key auto components it manufactures include end covers, cover sealed brakes, differential cases, cover hydraulic lift, front wheel hubs, rear axle castings, front engine supports etc.

The funds will be used for investing in a new project set up by its 100% subsidiary, Meeta Castings Ltd. The issue is being lead managed by GYR Capital Advisors Ltd. Link Intime India Private Limited will be the registrars to the IPO.