Ratnaveer Precision Engineering IPO GMP (Grey Market Premium)

Ratnaveer Precision Engineering IPO worth ₹165.03 crore comprisaes of an offer for sale and also of a fresh issue of shares. The offer for sale (OFS) component is by the promoters and early shareholders of the company. 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 ₹93 to ₹98 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 Ratnaveer Precision Engineering IPO

Let us now look at the details of the issue of Ratnaveer Precision Engineering IPO. The offer for sale of the company IPO will entail the issue of 30,40,000 shares which at the upper end of the price band of ₹98 per share would result in an offer for sale component of ₹29.79 crore. The fresh issue component of the company IPO will entail the issue of 1,38,00,000 shares which at the upper end of the price band of ₹98 would result a fresh issue component of ₹135.24 crore. Therefore, the overall size of the company IPO will entail the issue of 1,68,40,000 shares which at the upper end of the price band of ₹98 per share would result in the total issue size of ₹165.03 crore.

The issue opens for subscription on 04th September 2023 and closes for subscription on 06th September 2023 (both days inclusive). The basis of allotment will be finalized on 11th September 2023 and the refunds will be initiated on 12th September 2023. In addition, the demat credits are expected to happen on 13th September 2023 and the stock is scheduled to list on 14th September 2023 on the NSE and the BSE.

Understanding Ratnaveer Precision Engineering 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 Ratnaveer Precision Engineering Ltd, we already have GMP data for the last 5 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.

Ratnaveer Precision Engineering IPO GMP

Here is a quick GMP summary for Ratnaveer Precision Engineering IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹25, but its down by ₹52 per share. 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 day ago and hence this fall 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 04th 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, Ratnaveer Precision Engineering Ltd has shown moderate to strong traction in the grey market.

If you consider the upper end of the price band of Ratnaveer Precision Engineering Ltd at ₹98 as the indicative price, then the likely listing price is being signalled at around ₹110 per share as of the GMP indicator on 29th 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 ₹12 on a likely upper band pricing of ₹98 indicates a listing premium of a moderate to healthy 12.24% for Ratnaveer Precision Engineering Ltd over the listing price. That pre-supposes a listing price of approximately ₹110 per share, when Ratnaveer Precision Engineering Ltd lists on 14th September 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.

Read more about Ratnaveer Precision Engineering IPO

Brief on Ratnaveer Precision Engineering Ltd business model

Ratnaveer Precision Engineering Ltd was incorporated in the year 2002 and the company currently manufactures stainless steel finished sheets, washers, solar roofing hooks, pipes, and tubes. Most of these are highly specialized stainless steel-based products. Ratnaveer Precision Engineering Ltd customizes such stainless products for use in industries as diverse as automobiles, solar power, wind energy, power plants, hydrocarbons, pharmaceuticals, plumbing, instrumentation, electromechanics, architecture, building & construction etc. Some of its new product launches include circlip, spring washers, retaining rings, toothed lock washers, serrated lock washers etc. The company produces more than 2,500 washers in different sizes and adhering to international standards. The company is also a star rated export house, recognized by the government of India. In the last 5 years, the company has achieved CAGR growth of 75%, albeit on a relatively smaller base.

Ratnaveer Precision Engineering has 4 manufacturing units located in India. Out of these,  two manufacturing units i.e., Unit-I and Unit-II are located at the Gujarat Industrial Development Corporation (GIDC), Vadodara, Gujarat. The third unit; Unit-III is located at Waghodia, which is also in Vadodara, Gujarat. The fourth unit, Unit-IV, is located at GIDC, Vatva which is very near to the commercial capital of Ahmedabad. Broadly, Ratnaveer Precision Engineering Ltd manufacturers SS finishing sheets, SS washers and SS solar mounting hooks at Unit I, while it manufactures SS pipes & tubes at Unit II. The remaining two units viz. Unit III and Unit IV are dedicated to the backward integration process, which actually supply inputs to Unit 1 and 2. Unit III is the melting unit where melted steel scrap is turned into steel ingots, and Unit IV is the rolling unit where flat ingots are further processed into SS sheets; the principal raw materials for SS washers.

The issue of Ratnaveer Precision Engineering Ltd will be lead managed by Unistone Capital Private ltd, acting as the book running lead manager (BRLM) to the issue. For managing the shareholder records, Link Intime India Private Ltd will be the registrars to the issue.