Rajgor Castor Derivatives IPO GMP (Grey Market Premium)

Rajgor Castor Derivatives IPO opens for subscription on 17th October 2023 and closes for subscription on 20th October 2023. The IPO is a book building issue with the IPO priced in the range of ₹47 to ₹50 per share. The face value of the stock is ₹10 per share and being a book built issue, the actual price discovery will happen post the IPO. The IPO will combine a fresh issue and an offer for sale (OFS). The fresh issue entails the issue of 88.95 lakhs, which at the upper end of the IPO price band of ₹50 per share aggregates to ₹44.48 crore. The OFS entails the sale by promoter shareholders of 6.66 lakhs, which at the upper IPO price band of ₹50 per share aggregates to ₹3.33 crore. Therefore, the total IPO will comprise the issue of 95.61 lakhs, which at the upper IPO price band of ₹50 per share aggregates to a total issue size of ₹47.81 crore.

Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 5,01,000 shares. The market maker, Spread X Securities Ltd, will provide two-way quotes to ensure liquidity on the counter post listing and low basis risk. The promoter holding post the IPO would get diluted from 100.00% to 60.02%. The company plans to use the fresh funds for working capital funding and for general corporate expenses. Beeline Capital Advisors Private Ltd will be the lead manager to the issue and Link Intime India Private Ltd will be the registrar to the issue.

About the GMP pricing for Rajgor Castor Derivatives IPO

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 Rajgor Castor Derivatives 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.

How has the GMP panned out in last few days

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 Rajgor Castor Derivatives IPO for which data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹6, but has since stayed at ₹5. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 17th October 2023 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, Rajgor Castor Derivatives IPO has shown good traction in grey market.

If you consider the fixed IPO price of Rajgor Castor Derivatives Ltd at ₹50 per share, then the likely listing price is being signalled at around ₹56 per share as per the GMP indicator on 11th October 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 ₹6 on the upper end IPO price of ₹50 per share indicates a listing premium of a healthy 12% for Rajgor Castor Derivatives Ltd over the IPO issue price. That pre-supposes a listing price of approximately ₹56 per share, when Rajgor Castor Derivatives Ltd lists on 31st October 2023. Of course, these are purely 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 the absolute numbers.

How to apply for the Rajgor Castor Derivatives IPO

The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹150,000 (3,000 x ₹50 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 6,000 shares and having a minimum lot value of ₹300,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

As per the terms of the offer; 5.24% of the total issue size is reserved for the Market Makers, 47.38% of offer size for the QIB investors, 14.21% for the HNI / NII investors and the balance 33.17% is reserved for the retail investors. The company has set aside 5,01,000 shares for the market maker, Spread X Securities Ltd.

The issue opens for subscription on 17th October 2023 and closes for subscription on 20th October 2023 (both days inclusive). The basis of allotment will be finalized on 26th October 2023 and the refunds will be initiated on 27th October 2023. In addition, the demat credits are expected to happen on 30th October 2023 and the stock is scheduled to also list on 31st October 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.