Quality Foils India IPO GMP (Grey Market Premium)

Quality Foils India IPO worth Rs. 4.52 crore, comprises entirely of a fresh issue of the IPO amount. The total SME IPO of Quality Foils India Ltd entails the issue of 7.54 lakh shares at a fixed price of Rs. 60 per share aggregating to Rs. 4.52 crore. The stock has a face value of Rs. 10 and retail bidders can only bid in minimum lot size of 2,000 share each, entailing a minimum investment of Rs. 120,000 in the IPO. That is also the maximum that a retail investor can apply for in the IPO.

In the case of HNI / NII investors, they can bid for a minimum 2 lots of 4,000 shares entailing a minimum investment of Rs. 240,000. As per the terms of the offer, 50% of the net offer is reserved for the retail investors and the balance 50% for HNI / NII investors. It is a fixed price issue and Khambatta Securities Limited will act as the market maker for the SME IPO of Quality Foils India Ltd. The market maker portion comprises of 38,000 shares.

The issue opens for subscription on 14th March 2023 and closes for subscription on 16th March 2023 (both days inclusive). The basis of allotment will be finalized on 21st March 2023 and the refunds will be initiated on 22nd March 2023. In addition, the demat credits are expected to happen on 23rd March 2023 and the stock is scheduled to list on 24th March 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 3-4 days prior to IPO opening and continues till the listing date; but in this case the GMP trading also started only on 09th March 2023. In the case of Quality Foils India Ltd, we already have GMP data for the last 2 days, which should give a reasonable picture of the likely listing to begin with.

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, albeit not an official one. 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 Quality Foils India Ltd for the 2 days for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 14 and jumped by Rs. 37 at this level. Of course, we have to wait 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, Quality Foils India Ltd has shown good traction in the grey market.

Read What you must know about the Quality Foils India IPO

If you consider the price of the IPO of Quality Foils India Ltd at Rs. 60, then the likely listing price is being signalled at around Rs. 74 per share as per the GMP indicator on 10th March 2023. This is dynamic and keeps changing. One data point to track will be the real time subscription update on the stock as that would chart the GMP course from here.

The GMP of Rs. 14 on a fixed IPO price of Rs. 60 indicates a listing premium of a very healthy and robust 23.33% for Quality Foils India Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 74 per share, when Quality Foils India Ltd lists on 24th March 2023. 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. Remember, that the GMP can also be negative, which is illustrative of a discount listing.

Quality Foils India Ltd was incorporated in 1990 to manufacture and export cold rolled stainless strips and cold rolled (CR) coils. It also manufactures stainless steel flexible hoses. Its raw materials are predominantly procured from Jindal Stainless Hissar. It has a 30 years track record in the market and has established a strong brand in domestic and international markets. The products manufactured by Quality Foils India Ltd are used in the manufacture of downstream SS Tubes, kitchen sinks, stainless steel hoses, utensils etc. They also find application in the automotive industry, sugar, petrochemicals, steel, and power sector.

The fresh funds will be used by Quality Foils India Ltd to fund its capex for new machinery and for working capital requirements. Post the IPO, the promoter share in equity will dilute from 72.80%. The issue is being lead managed by Khambatta Securities Limited, while Bigshare Services Private Limited will be the registrars to the issue.