Electronics manufacturing services company Syrma SGS Technology shares were available at more than 20 percent premium in the grey market on August 24, indicating a strong debut for the stock on August 26.
Keeping the issue price lower than pre-IPO placement price, better financial performance, strong clients relationship and diversified product portfolio along with experienced promoters could be the reasons for the premium enjoyed by the company in grey market, analysts said.
The grey market premium (GMP) for Syrma was around Rs 50-55, or 22-25 percent, over the final issue price of Rs 220 per share, experts said.
While the pre-IPO placement price was Rs 290 and the issue price was at a significant discount.
The grey market is an unofficial platform for trading. Trading starts with the announcement of the price band of an IPO and continues till the listing of shares.
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Syrma SGS Technology raised around Rs 840 crore through its public issue, which was a fresh issue worth Rs 766 crore and an offer for sale of shares worth Rs 74 crore.
The company intends to utilise fresh issue money for development of a R&D facility and expansion of manufacturing facilities, working capital requirements, and general corporate purposes.
The IPO public was subscribed 32.61 times during August 12-18. Qualified institutional buyers showed great interest in the IPO, as the portion set aside for them was subscribed 87.56 times.
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Non-institutional investors and retail investors bought shares 17.5 times and 5.53 times their quotas, respectively.
Most analysts gave a subscribe rating to the issue, given the reasonable valuations.
Syrma is one of India’s leading electronics exporters, providing a high-value integrated design and production solution for internationally recognized OEMs.
Its revenue from operations increased by 42.7 percent to Rs 1,266.6 crore in FY22, mainly due to an increase in the sale of manufactured goods. It grew at a CAGR of 20.8 percent over FY20-22 on the back of strong demand traction across the industries it serves, said Vikrant Kashyap of KRChoksey Research, who had a subscribe rating on the IPO.
The company's diverse product portfolio is ideal for capturing the growth opportunity, he said, adding innovation & R&D remain the key factors for Syrma's growth.
India’s electronics manufacturing services' (EMS) addressable market is expected to grow at a CAGR of 30 percent, set to reach $135 billion by FY26 from $36 billion in FY21. India's EMS market is expanding owing to the China+1 strategy, import substitution, and government incentives like the production-linked incentive.
With its superior product mix, strong R&D capabilities, and adding capacities, Syrma is well placed to capitalise on domestic and global opportunities, research analyst Karan Desai said.
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