India’s drone manufacturer IdeaForge Technology is expected to make a blockbuster market debut on July 7, with experts citing its first-mover advantage, a strong outlook for the defence industry and healthy IPO subscription.
The minimum listing premium can be 50-65 percent and could go up to 75 percent over the issue price of Rs 672 a share, they said. The Rs 567-crore initial public offering was subscribed 106.6 times during June 26-30 period.
Qualified institutional investors were at the forefront, buying 125.81 times their reserved portion, followed by retail investors and high-networth individuals who had bid 85.20 times and 80.58 times the allotted quota.
Grey market buzzing
"Following a strong response to the IPO, we expect a minimum 65-70 percent premium, in the opening due to the company’s first mover advantage in the drone industry, diversified product portfolio and wide range of customers to sustain business performance in the long run," Manish Chowdhury, Head of Research at StoxBox said. He advised profit booking on the opening day.
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Astha Jain, Senior Research Analyst, Hem Securities, also recommended partial profit booking if stock trades at more than 75 percent premium. She expects the company to list at more than 50 percent premium to the issue price.
The grey market, the unofficial market, also indicated a huge demand for IdeaForge. Its shares traded with 75 percent premium in the grey market over the issue price, analysts said. Investors generally consider grey market premium to make an assumption about the listing price.
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"The grey market premium for IdeaForge's IPO is currently around 75 percent, which means that we can expect the stock to list at around Rs 1,182 (issue price Rs 672 + premium Rs 510). This is a significant premium over the IPO price," Anubhuti Mishra, Equity Research Analyst, Swastika Investmart, said.
"The IPO was very well received by investors, subscribing more than 106 times. This suggests that there is strong demand for the stock. Secondly, the IPO size is relatively small, which could also contribute to a high listing price."
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IdeaForge is the market leader in the Indian unmanned aircraft systems market with a market share of 50 percent as of FY22. Its UAVs are utilised in mapping applications, security and surveillance purposes.
The company also assists defence forces in conducting intelligence, surveillance, and reconnaissance (ISR) operations along borders.
The issue was available at the P/E of 87x at the upper price band, with a market capitalisation of Rs 2,800.2 crore post-issue of equity shares.
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"We expect listing price to remain positive because of defence industry tailwind and company’s unique moat (pure play drone manufacturer)," Narendra Solanki, Head- Equity Research at Anand Rathi Shares & Stock Brokers said.
The company has raised Rs 240 crore via fresh issue and over Rs 320 crore through an offer for sale. The net proceeds from the fresh issue will be utilised for repaying debts, working capital requirements, and investment in product development.
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