Rishabh Instruments IPO GMP (Grey Market Premium)

The ₹490.78 crore IPO of Rishabh Instruments Ltd comprises 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 ₹418 to ₹441 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 Rishabh Instruments IPO

Let us now look at the details of the issue of Rishabh Instruments Ltd. The offer for sale of the company IPO will entail the issue of 94,28,178 shares which at the upper end of the price band of ₹441 would result in an offer for sale component of ₹415.78 crore. The fresh issue component of the company IPO will entail the issue of 17,00,680 shares which at the upper end of the price band of ₹441 would result a fresh issue component of ₹75 crore. Therefore, the overall size of the company IPO will entail the issue of 1,11,28,858 shares which at the upper end of the price band of ₹441 would result in the total issue size of ₹490.78 crore.

The issue opens for subscription on 30th August 2023 and closes for subscription on 01st September 2023 (both days inclusive). The basis of allotment will be finalized on 06th September 2023 and the refunds will be initiated on 07th September 2023. In addition, the demat credits are expected to happen on 08th September 2023 and the stock is scheduled to list on 11th September 2023 on the NSE and the BSE.

Understanding the GMP for Rishabh Instruments Ltd

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 Rishabh Instruments 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.

Rishabh Instruments IPO GMP

Here is a quick GMP summary for Rishabh Instruments IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹30, but its up by ₹61 per share on the very next day. That is indicative of 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 30th August 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, Rishabh Instruments Ltd has shown good traction in the grey market.

If you consider the upper end of the price band of Rishabh Instruments Ltd at ₹441 as the indicative price, then the likely listing price is being signalled at around ₹516 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 ₹75 on a likely upper band pricing of ₹441 indicates a listing premium of a healthy 17.01% for Rishabh Instruments Ltd over the listing price. That pre-supposes a listing price of approximately ₹516 per share, when Rishabh Instruments Ltd lists on 11th 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 about Rishabh Instruments IPO

Brief on Rishabh Instruments Ltd business model

Rishabh Instruments Ltd was incorporated in 1982 to manufacture, design and develop instruments for testing and measuring as well as the manufacture of Industrial Control Products (ICP). Basically, Rishabh Instruments offers cost-effective methods to measure, control, record, analyse, and optimize energy and processes. In addition, Rishabh Instruments also provides complete aluminium high-pressure die-casting solutions for customers in need of close tolerance fabrication. This finds applications in areas like automotive compressor manufacturing and automation high precision flow meters. These products are also used in machining, and finishing of precision components. Today, Rishabh Instruments Ltd also has a strong footprint in Europe, thanks to the acquisition of Lumel Alucast in 2011. Lumel Alucast is a European non-ferrous pressure casting company which specializes in the manufacture and supply of low-voltage current transformers.

The company also offers the outsourcing of certain manufacturing processes. This includes the manufacturing services like mould design and manufacturing, EMI and EMC testing services, Electronic Manufacturing Services (EMS), and very customized software solutions to enhance the performance of products. Broadly, in terms of business segments, Rishabh Instruments Ltd has 4 key verticals. These verticals include Electrical automation devices, Metering, control, and protection devices, Portable test and measuring instruments, and solar string inverters. Currently, the company has 3 manufacturing plants located in India and it services its local and international clients with the support of over 150 dealers in India and another 270 dealers spread across 70 international locations.

The issue will be lead managed by DAM Capital Advisors (formerly IDFC Securities), Motilal Oswal Investment Advisors and Mirae Asset Capital Markets. KFIN Technologies Ltd (formerly Karvy Computershare Ltd) will be the registrar to the issue.