IPO Frenzy: Grey market suggests Fedbank listing may come a cropper but Tata Tech, a bumper

Tata Tech being third-biggest in terms of issue size in 2023, created a record of attracting the highest number of applications

Last week was one of the busiest weeks for the primary market in recent years, as five mainboard IPOs -- IREDA, Tata Technologies, Flair Writing, Fedbank Financial Services and Gandhar Oil Refinery concluded their much-awaited public offers.

The total bids for five IPOs surpassed Rs 2.5 lakh crore with Tata Technologies’ public issue alone garnering bids worth over Rs 1.56 lakh crore. All the issues got oversubscribed and now most of the stocks are commanding a decent premium in the grey market.

The grey market is an unofficial ecosystem where shares start trading much before the allotment and until the listing day. Most investors track the grey market premium (GMP) to get an idea of the listing price.

Tata Technologies

Tata Tech being third-biggest in terms of issue size in 2023, created a record of attracting the highest number of applications (73.58 lakh) on its issue. The Tata Group company broke the record of 73.38 lakh applications of LIC of India, the country’s biggest-ever IPO after Paytm.

The company’s shares were commanding a premium of over 80 percent in the grey market, implying a listing price of Rs 910 against the issue price of Rs 500.

Tata Motors’ subsidiary Tata Tech public offer was subscribed 69.43 times, with the quota reserved for qualified institutional buyers (QIBs) getting booked by a record 203.41 times, taking the second spot just after the Newteb Technologies which was subscribed 220.69 times this year. The portion set aside for non-institutional investors (NIIs) and retail investors was booked 62.11 times and 16.50 times, respectively.

“With a P/E ratio of 18.2x, the Tata Technologies IPO was priced fairly, reflecting the company's strong fundamentals and promising growth prospects. Given the immense investor interest and the company's robust capabilities, Tata Technologies is poised for a successful listing on the Indian stock exchanges,” said Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.

Prashanth Tapse, Research Analyst, Sr VP Research at Mehta Equities, recommends booking 50 percent profits and retaining the rest for the long term considering healthy long-term returns post-listing.

Also Read: IPO frenzy: About 25% HNI applications in Tata Tech, IREDA backed by leverage in record week for primary markets

Flair Writing Industries

Flair Writing Industries IPO was booked 46.68 times, with bids for 67.28 crore shares against an issue size of 1.44 crore. Retail investors bought 13.01 times, NIIs picked up 33.37 times and QIBs bought 115.6 times their allotted quotas.

The GMP rose 27 percent to Rs 84, suggesting that the stock may list somewhere around Rs 385-400.

Parth Shah, Research Analyst, StoxBox expects the stock to list at a premium of around 25 percent to the issue price of Rs 304 per share.

“Flair is among the top three players in the overall writing instruments industry and has exhibited a commendable track record of robust and consistent financial performance. We believe the company is an attractive proposition considering its reasonable valuation and advise investors who have received allotment to hold shares from a medium-term perspective,” said Shah.

Gandhar Oil Refinery

One of the largest manufacturers of white oils, Gandhar Oil, is commanding a premium of 40 percent in the grey market, hinting that the stock may list around Rs 235 against the IPO price of Rs 169 per share.

The public issue was subscribed 64.07 times, with bids coming in for 136.1 crore shares against 2.12 crore shares on the block. QIBs took the lead, booking 129 times their quota of shares. The portion set aside for retail investors was booked 28.95 times and that of HNIs 62.2 times.

Rajan Shinde, Research Analyst at Mehta Equities believe a healthy listing gain between 30-40 percent is possible against the issue price of Rs 169 per share.

“We think the company has created a niche place in white oil and serving diversified industrial users which gives this company an edge against its peers in the segment. We recommend allotted investors to book listing day profits over and above our expectations,” said Shinde.

Also Read: Primary market to remain busy this week with 7 listings, 5 IPO launches

Fedbank Financial Services 

The public offer of a retail-focused non-banking finance company (NBFC) promoted by Federal Bank received a relatively muted response from investors, with the issue getting subscribed 2.2 times. Investors had bid for 12.3 crore shares against an issue size of 5.6 crore. Retail investors bought 1.82 times their allotted quota of shares, NIIs picked up 1.45 times, while QIBs subscribed 3.51 times the shares set aside for them.

The GMP of Fedbank Financial Services has been totally wiped out after a dull interest from investors. However, it was trading at a premium of Rs 5-10 per share, when the price band for the issue was announced.

Shivani Nyati expects a flat or negative listing and warned investors to be prepared for potential short-term losses.

Shreyansh Shah, Research Analyst, StoxBox advises investors to book profits on the listing day (if there are any) and may re-consider entering the company at lower valuations.

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