SBFC Finance IPO GMP (Grey Market Premium)

Brief note on the SBFC Finance IPO issue

SBFC Finance IPO worth ₹1,025 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 price band for the book built issue is yet to be finalized and only after that we will know the number of shares to be issued. What we know now is that the total IPO of SBFC Finance will comprise of a fresh issue of shares to the tune of ₹600 crore and an offer for sale of ₹425 crore.

Who is selling in the offer for sale?

Let us now look at the details of the issue of SBFC Finance IPO. The offer for sale of OFS of the company IPO will entail the sale of shares worth ₹425 crore. The promoters selling in the OFS of SBFC Finance Ltd include SBFC Holdings Pte Ltd, Clermont Financial Pte Ltd, Arpwood Partners Investment Advisors LLP, Arpwood Capital Partners, and Eight45 Services LLP. The fresh issue component of the company IPO will be worth ₹600 crore. The NBFC constantly needs to spruce up its capital buffers so that it is adequate to support loan growth. The fresh issue inflow will be purely used to spruce up its capital buffer. Therefore, the overall size of the company IPO will be the combination of the fresh issue and the offer for sale, which would be worth ₹1,025 crore.

The issue opens for subscription on 03rd August 2023 and closes for subscription on 07th August 2023 (both days inclusive). The basis of allotment will be finalized on 10th August 2023 and the refunds will be initiated on 11th August 2023. In addition, the demat credits are expected to happen on 14th August 2023 and the stock is scheduled to list on 16th August 2023 on the NSE and the BSE.

About grey market pricing of the shares

SBFC Finance IPO GMP (Grey Market Premium) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of SBFC Finance Ltd, we already have GMP data for the last 3 days, which should give a reasonable picture of the likely listing performance. Needless to say, the real picture would only be evident once the price of the issue is also finalized which will give an idea of the percentage return on listing that is embedded in the GMP.

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.

What does the SBFC Finance IPO GMP tell us about likely listing price?

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 SBFC Finance IPO for which the data is available.