Electronic manufacturing services and solutions provider Cyient DLM seems to be in great demand in the grey market as its shares traded with a 45 percent premium over the issue price of Rs 265 per share ahead of its listing next week, analysts said on anonymity.
The healthy subscription demand for its IPO, positive equity market conditions and the strong growth potential in the EMS industry are the primary reasons for a premium, experts said.
The grey market is an unofficial market where IPO shares can be bought and sold till their listing on the bourses. The grey market generally helps investors to build the assumption about listing price.
The initial public offering of Cyient DLM was subscribed 67.31 times during June 27-30 as we have seen every category of investors participate in the offer.
Qualified institutional investors (QIIs) have bought 90.44 times the allotted quota, while retail investors have bid 49.22 times the reserved portion and the part set aside for high-networth individuals (HNIs) was booked 45.05 times.
"The grey premium observed in Cyient DLM IPO can be attributed to a combination of market conditions and subscription demand," Abhishek Jain, Head of Research at Arihant Capital said. We have seen benchmark indices reaching fresh record highs on July 6, rising over 15 percent from March lows, he said.
"Additionally, the overall state of the IPO market and prevailing macroeconomic factors influence investor perception and appetite for new offerings," Abhishek said, adding strong demand, especially from QIBs, has a significant impact on driving up the grey premium. This reflects the confidence and enthusiasm of institutional investors in the potential of the IPO and its underlying company.
Cyient DLM provides EMS as build-to-print and build-to-specification services with core solutions comprising printed circuit board assembly, cable harnesses and box build. These are critical solutions for cockpits, inflight systems, landing systems and medical diagnostic equipment.
It is the fast-growing company with the potential for significant listing gains, Anubhuti Mishra, Equity Research Analyst at Swastika Investmart said, adding Cyient DLM is benefiting from the increasing adoption of digital technologies by businesses. The company has a strong track record of growth and is well-positioned for future growth.
The subsidiary of listed software services firm Cyient has registered revenue growth at a CAGR of 15 percent during FY21-FY23, which experts feel is lagging behind its peers but having a strong order book is expected to provide good visibility of growth going ahead.
Its order book of Rs 2,440 crore at the end of FY23, increasing by 103 percent over the previous year, is a result of its strong relations with leading industrial giants globally.
The company recorded a profit growth at a CAGR of 4 percent and EBITDA (earnings before interest, tax, depreciation and amortisation) at a CAGR of 18 percent during FY21-FY23, with EBITDA margin at 10.6 percent in FY23 against 11.7 percent in FY22 and 7.3 percent in FY21.
"Cyient DLM is operating into the sunshine electronic manufacturing services sector which has a great potential in terms of sustained business performance amid the conducive environment provided by the government," Dhruv Mudaraddi, research analyst at Stoxbox said.
He believes the company enjoys several competitive advantages and capabilities which provide them with a strong edge in the marketplace, including their sectoral expertise, the high complexity of the products they manufacture, their ability to provide end-to-end solutions and the trust of their customers.
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