According to IPO market watchers, Tata Capital’s grey market premium stood at ₹5 apiece, or 1.5%, over the upper end of its price band of ₹326 on Tuesday evening. LG shares were at 27.4%, or ₹312 premium to the upper end of the issue price of ₹1,140.
“The grey market premium of Tata Capital IPO has been on a declining trend since the announcement of the price band, as the pricing of the stock is slightly on the higher side when compared with its peers,” said Gaurav Sharma, head of research at Globe Capital Market. “The premium for LG has been rising given the expectations of gains on listing of its shares due to the ongoing festive season, GST reduction, its fair valuation among the white goods segment and its brand value.”
Since the announcement of Tata Capital’s price band on September 29, its GMP has declined from ₹31 to ₹5 per share. On September 26, the premium was at ₹50 apiece.
For LG, since the announcement of the offer’s price band on October 1, the GMP has gone up from ₹150, or 13%, to ₹312, or 27.3% in a week.
The GMP may not reflect the exact listing price, but by watching the trends in the GMP, traders try to forecast the direction of the listing performance.If an IPO has seen robust demand, then its GMP is high, which implies a potential upside in the stock on listing. Similarly, if the demand for an IPO is moderate, the GMP tends to be lower, which points to a modest listing.The Tata Capital IPO, which is open for subscription from October 6 to October 8, has seen 0.75 times subscription on Tuesday – the end of its second day for bids. Market watchers expect the issue to sail through. LG Electronics India’s IPO, which opened on October 7 and will close on October 9, had been subscribed 1.04 times on Tuesday – the first day for bids.
“At the current IPO pricing for Tata Capital, valuations appear stretched, leaving limited upside for investors,” said Geetanjali Kedia of SPTulsian Investment Advisers.The ₹15,512 crore issue is priced at ₹310-326 per share. The company had raised ₹4,642 crore from its anchor investors earlier this month. LG Electronics India’s ₹11,607 crore issue, which is entirely an offer for sale by its parent company, is priced at ₹1080-1,140 per share.
Apurva Sheth, head of Research at Samco Securities, said that the decline in Tata Capital’s share price, from ₹1,100 in the unlisted market to ₹720 before the RHP filing, and further to ₹326 soon after the IPO price was announced, has dampened market sentiment.
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