TVS Supply Chain Solutions IPO GMP (Grey Market Premium)
TVS Supply Chain Solutions IPO worth ₹880 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 ₹187 to ₹197 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 as the reference price for all calculations.
Details of the TVS Supply Chain Solutions IPO
Let us now look at the details of the issue of TVS Supply Chain Solutions IPO. The offer for sale of the company IPO will entail the issue of 1,42,13,198 shares which at the upper end of the price band of ₹197 would result in an offer for sale component of ₹280 crore. The fresh issue component of the company IPO will entail the issue of 3,04,56,853 shares which at the upper end of the price band of ₹197 would result in a fresh issue component of ₹600 crore. Therefore, the overall size of the company IPO will entail the issue of 4,46,70,051 shares which at the upper end of the price band of ₹197 would result in the total issue size of ₹880 crore. This is the combination of the offer for sale portion and the fresh issue portion.
Key dates for the TVS Supply Chain Solutions IPO
The issue opens for subscription on 10th August 2023 and closes for subscription on 14th August 2023 (both days inclusive). The basis of allotment will be finalized on 18th August 2023 and the refunds will be initiated on 21st August 2023. In addition, the demat credits are expected to happen on 22nd August 2023 and the stock is scheduled to list on 23rd August 2023 on the NSE and the BSE. 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 TVS Supply Chain Solutions 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. Here is a quick GMP summary for TVS Supply Chain Solutions IPO for which the data is available.
In the above case, the GMP trend shows that the grey market premium has opened at around ₹22, and now its down by ₹3. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 10th June 2023, as that would have a very significant impact on the GMP. The 3 days of subscription will hold the key to the subscription levels and the GMP impact. 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, TVS Supply Chain Solutions Ltd has shown good traction in the grey market.
If you consider the upper end of the price band of TVS Supply Chain Solutions Ltd at ₹197 as the indicative price, then the likely listing price is being signalled at around ₹219 per share as of the GMP indicator on 10th 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 ₹22 on a likely upper band pricing of ₹197 indicates a listing premium of a healthy 11.17% for TVS Supply Chain Solutions Ltd over the listing price. That pre-supposes a listing price of approximately ₹219 per share, when TVS Supply Chain Solutions Ltd lists on 23rd August 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.
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 the business model of TVS Supply Chain Solutions Ltd
TVS Supply Chain Solutions (TVS SCS), is part of TVS Mobility Group (part of the reputed TVS group of South India). TVS SCS is among the largest and fastest growing integrated supply chain solutions provider in India and has been handling complex projects for a long time now. Over the years, the company has brought in its in-depth understanding of multi-sector dynamics and local markets, operational experience, corporate governance standards, and the implicit trust of stakeholders. It was TVS Supply Chain Solutions Ltd that pioneered outsourced logistics industry in India. They have managed complex value chains across sectors for more than 15 years. TVS Supply Chain Solutions Ltd has over 100 years of experience addressing supply chain challenges for global businesses; apart from government departments, and MSMEs through a fully integrated offerings. The company is just a formalization of the skills sets built and fine-tuned over the years.
Even within the gamut of supply chain solutions, TVC SCS provides Integrated Supply Chain Solutions, Global Forwarding and Last Mile Solutions that are customized to the needs of the customers. As of date, TVS Supply Chain Solutions employs over 18,000 logistics professionals, has more than 100 owned operating locations and services over 55 global Fortune 500 customers across different parts of the world. Some of the sectors to which they provide logistics solutions include Automotive, beverages, FMCG, defence, ecommerce healthcare, railways, telecom, utilities, technology, ITES, and financial services. Some of its blue chip customers include Babcock, Denso, Coca Cola, Daimler Trucks, Diageo, Ford, GM, Isuzu, Hagemeyer, Ministry of Defence, Siemens, and Volkswagen.
The proceeds of the public issue will be used for the repayment and prepayment of some of the outstanding borrowings of TVS Supply Chain Solutions Ltd and its subsidiaries located abroad. The issue will be lead managed by JM Financial, Axis Capital, JP Morgan, BNP Paribas, Equirus Capital and Nuvama Wealth. Link Intime India Private Ltd will be the registrar to the issue.
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