Shera Energy IPO GMP (Grey Market Premium)

Shera Energy IPO worth Rs. 35.20 crore, comprises of a fresh issue of Rs. 5.97 crore and an offer for sale of Rs. 29.23 crore. The total SME IPO of Shera Energy Ltd is divided into 2 parts. The Fresh issue portion entails the issue of 10.48 lakh shares at a price range of Rs. 55 to Rs. 57 per share. At the upper end of the band, the fresh issue size is Rs. 5.97 crore. The offer for sale (OFS) portion entails the issue of 51.28 lakh shares at a price range of Rs. 55 to Rs. 57 per share. At the upper end of the band, the OFS size is Rs. 29.23 crore. Thus the overall IPO of Shera Energy entails the issue of 61.76 lakh shares at a price range of Rs. 55 to Rs. 57 per share. At the upper end of the band, the total overall issue size is Rs. 35.20 crore.

The stock of Shera Energy has a face value of Rs. 10 and bidders can only bid in minimum lot size of 2,000 share each, entailing a minimum investment of Rs. 114,000 in the IPO. That is also the maximum that a retail investor can apply for in the IPO. In the case of HNI / NII investors, they can bid for a minimum 2 lots of 4,000 shares entailing a minimum investment of Rs. 228,000. As per the terms of the offer, 48.42% of the net offer is reserved for QIBs, 15.84% of the net offer for HNIs / NIIs and the balance 35.74% for retail investors. It is a book built issue where price will be discovered through book building. Holani Consultants Private Ltd will act as the market maker for the SME IPO of Shera Energy Ltd.

The issue opened for subscription on 07th February 2023 and closes for subscription on 09th February 2023 (both days inclusive). The basis of allotment will be finalized on 14th February 2023 and the refunds will be initiated on 15th February 2023. In addition, the demat credits are expected to happen on 16th February 2023 and the stock is scheduled to list on 17th February 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. The grey market price (GMP) trading normally starts about 3-4 days prior to IPO opening and continues till the listing date. In the case of Shera Energy Ltd, we already have GMP data, 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.

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 Shera Energy Ltd, data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 19, and has since bounced to Rs. 22 before falling back to Rs. 16. Of course, we have to wait for the actual subscription numbers to flow in when the issue opens for subscription 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, Shera Energy Ltd has shown good traction in the grey market.

If you consider the upper band price of the IPO of Shera Energy Ltd at Rs. 57, then the likely listing price is being signalled at around Rs. 73 per share as per the GMP indicator on 08th February 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 from here.

The GMP of Rs. 16 on a IPO upper band price of Rs. 57 indicates a listing premium of a healthy 28.07% for Shera Energy Ltd over the listing price. That pre-supposes a listing price of approximately Rs. 73 per share, when Shera Energy Ltd lists on 17th February 2023. Of course, these are approximations, so you must keep a margin of safety. However, that would depend on the GMP sustaining over the next few days after the issue opens. 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.

Shera Energy Ltd was incorporated in 2009 and it is engaged in manufacturing of winding wires and strips made of non-ferrous metals primarily Copper and Aluminium. In addition, they also process products like wire rods, wires, and tubes of Copper and Brass. They also undertake customized manufacture of products. Some of their key products include paper covered wires, enamel covered wires, round wires, rectangular wires, bunched wires, tubes, rods and strips.

Shera Energy Ltd will use the funds for meeting the working capital needs of the company. Post the IPO, the promoter share in equity will dilute from 66.57% to 63.51%. The issue is being lead managed by Holani Consultants Private Limited. Bigshare Services Private Limited will be the registrars to the issue.