Sai Silks Kalamandir IPO GMP (Grey Market Premium)

Sai Silks Kalamandir IPO worth ₹1,201 crore 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 ₹210 to ₹222 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 Sai Silks Kalamandir IPO

Let us now look at the details of the issue of Sai Silks Kalamandir IPO. The offer for sale of the company IPO will entail the issue of 2,70,72,000 shares which at the upper end of the price band of ₹222 per share would result in an offer for sale component of ₹601 crore. The fresh issue component of the company IPO will entail the issue of 2,70,27,027 shares which at the upper end of the price band of ₹222 would result a fresh issue component of ₹600 crore. Therefore, the overall size of the company IPO will entail the issue of 5,40,99,027 shares which at the upper end of the price band of ₹222 per share would result in the total issue size of ₹1,201 crore.

The issue opens for subscription on 20th September 2023 and closes for subscription on 22nd September 2023 (both days inclusive). The basis of allotment will be finalized on 27th September 2023 and the refunds will be initiated on 29th September 2023. In addition, the demat credits are expected to happen on 03rd October 2023 and the stock is scheduled to list on 04th October 2023 on the NSE and the BSE. The anchor portion has been completed at the upper band price a day ahead of the IPO opening.

Understanding the GMP for Sai Silks (Kalamandir) 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 Sai Silks (Kalamandir) Ltd, we already have GMP data for the last 3 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.

GMP price colour of Sai Silks (Kalamandir) Ltd

Here is a quick GMP summary for Sai Silks Kalamandir IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹7, and its same as ₹7per 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 few days back and hence this GMP may not be too reflective. However, the GMP level is still indicative of modest traction for the IPO grey market price. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 20th 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, Sai Silks (Kalamandir) Ltd has shown very moderate traction in the grey market.

If you consider the upper end of the price band of Sai Silks (Kalamandir) Ltd at ₹222 as the indicative price, then the likely listing price is being signalled at around ₹229 per share as of the GMP indicator on 20th September 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 ₹7 on a likely upper band pricing of ₹222 indicates a listing premium of a very modest 3.15% for Sai Silks (Kalamandir) Ltd over the listing price. That pre-supposes a listing price of approximately ₹229 per share, when Sai Silks (Kalamandir) Ltd lists on 04th October 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.

Brief on Sai Silks (Kalamandir) Ltd business model

Sai Silks (Kalamandir) Ltd was incorporated in 2005 to market ethnic apparel and value-fashion products. While the basic inspiration for the offerings of Sai Silks (Kalamandir) Ltd is India’s rich ethnic diversity and its cultural history, it has also packaged its product offerings to have a solution for every possible occasion. Sai Silks (Kalamandir) Ltd currently offers a whole range of ultra-premium and premium sarees that are ideal for weddings, party wear and daily wear. In addition, Sai Silks (Kalamandir) Ltd also offers lehengas, men's ethnic wear, children's ethnic wear as well as semi-western wear with ethnic content for women, men, and children. It sells its apparel products through 4 different format stores that constitute the front end for the company’s marketing. Sai Silks (Kalamandir) Ltd has more than 54 stores in the 4 south Indian states of Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu.

The company’s first store format is the Kalamandir, which offers contemporary ethnic fashion for the middle income groups. These include varieties of sarees, such as Tusser, Silk, Kota, Kora, Khadi, Georgette, Cotton etc. The second format store is Vara Mahalakshmi Silks, which offers premium ethnic silk sarees and handlooms for wedding and special occasion wear. These include Banarasi, Patola, Kota, Kanchipuram, Paithani, and Organza. The third format store is the Mandir, which offers ultra-premium designer sarees targeting wealthy customers. These include designer sarees like Banarasi, Patola, Ikat, Kanchipuram, Paithani, and Kuppadam. Finally, the fourth type of format store is the KLM Fashion Mall, which offers value fashion at affordable prices. These include fusion wear, sarees for daily wear, and western wear for women, men, and children. It has an omnichannel approach and sells its products through physical store formats and through e-commerce channels; offering a standard yet differentiated experience.

The fresh issue funds will be used to fund the opening of 30 new stores and its 2 new warehouses. Funds will also be applied to repayment of loans and working capital usage. The issue is lead managed by Motilal Oswal Investment Advisors, HDFC Bank and Nuvama Wealth Management. Bigshare Services Private Ltd will be the registrar to the issue.