Utkarsh Small Finance Bank IPO GMP (Grey Market Premium)
Utkarsh Small Finance Bank IPO worth ₹500 crore, comprises entirely of a fresh issue of shares to the public. There is no offer for sale (OFS) component of Utkarsh Small Finance Bank IPO. 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 ₹23 to ₹25 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.
Let us now look at the details of Utkarsh Small Finance Bank IPO. The fresh issue of the IPO will entail the issue of 20,00,00,000 shares (20 crore shares) which at the upper end of the price band of ₹25 would result in a total fresh issue component of ₹500 crore. However, since there is no OFS component in this IPO, the fresh issue of ₹500 crore will also be the total size of the overall IPO.
The issue opens for subscription on 12th July 2023 and closes for subscription on 14th July 2023 (both days inclusive). The basis of allotment will be finalized on 19th July 2023 and the refunds will be initiated on 20th July 2023. In addition, the demat credits are expected to happen on 21st July 2023 and the stock is scheduled to list on 24th July 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.
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 Utkarsh Small Finance Bank IPO for which the data is available.
|21st July 2023||₹16.10|
|20th July 2023||₹16.10|
|19th July 2023||₹15|
|18th July 2023||₹16|
|17th July 2023||₹15|
|16th July 2023||₹15|
|15th July 2023||₹16|
|14th July 2023||₹16|
|13th July 2023||₹14|
|12th July 2023||₹16|
|11th July 2023||₹16|
|10th July 2023||₹14|
|09th July 2023||₹16|
|08th July 2023||₹15|
In the above case, the GMP trend shows that the grey market premium has opened at around ₹15, and up by ₹16.10. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 12th July 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, Utkarsh Small Finance Bank Ltd has shown good traction in the grey market.
If you consider the upper end of the price band of Utkarsh Small Finance Bank Ltd at ₹25 as the indicative price, then the likely listing price is being signalled at around ₹39 per share as of the GMP indicator on 10th July 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 ₹14 per share on a likely upper band pricing of ₹25 indicates a listing premium of a healthy 56% for Utkarsh Small Finance Bank Ltd over the listing price. That pre-supposes a listing price of approximately ₹39 per share, when Utkarsh Small Finance Bank Ltd lists on 24th July 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.
Utkarsh Small Finance Bank Ltd was incorporated in the year 2016 as an SFB (Small Finance Bank). It has an AUM of ₹5,000 crore and was one of the fastest growing SFBs in India between the fiscal years FY19 and FY22. Utkarsh Small Finance Bank Ltd broadly caters to the individuals and to businesses to assist them with their financial needs and offer them solutions. The bank offers accounts and deposits, cards, insurance and investments, and loans. The bank offers loans up to Rs50 crores with a maximum tenure of up to 30 years. The SBF offers loans to eligible salaried and self-employed individuals too.
The main bread-and-butter business of Utkarsh Small Finance Bank Ltd will remain its microfinance franchise, where it has built expertise. Some of the asset products offered by Utkarsh Small Finance Bank include microfinance loans (both individual and joint), unsecured retail loans, secured retail loans, short-term wholesale loans, long term wholesale loans, loans for affordable housing as well as loans for the purpose of purchase of commercial vehicles (CV), construction equipment etc. The company also offers gold loans. The issue will be lead managed by ICICI Securities Ltd and Kotak Mahindra Capital Company Ltd. KFIN Technologies Ltd (formerly Karvy Computershare) will be the registrar to the issue.
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