InvestorQ : How was the grey market pricing of Archean Chemical Industries?
Lavanya Subramanian made post

How was the grey market pricing of Archean Chemical Industries?

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Anamika Sodhani answered.
3 weeks ago
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The grey market trading of Archean Chemical Industries Ltd has been active for the last few days ahead of its proposed IPO comprising of fresh issue of shares worth Rs805 core and an offer for sale of Rs657.31 crore. The issue has been priced in the band of Rs.386 to Rs.407 per share and the IPO allotment price will be discovered post book building of shares. The issue opens for subscription on 09th November 2022 and closes for subscription on 11th November 2022 and is expected to list on the bourses on the 21st November 2022.

The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till listing date. We currently have the GMP data for the last few days, which should give a reasonable picture of likely listing performance. Typically, GMP is a function of the market conditions and the extent of subscription for the IPO across the retail and the QIB segments. In fact, QIB subscription has a deep impact on the GMP. Remember that GMP is not an official price point, although it has been observed to be a good informal gauge of demand and supply for the IPO.

The table below captures the GMP summary for Archean Chemical Industries Ltd.

01st Nov

02nd Nov

03rd Nov

04th Nov

05th Nov

06th Nov

07th Nov

Rs60

Rs61

Rs80

Rs58

Rs58

Rs58

Rs60

GMP for Archean Chemical Industries opened at around Rs60, spiked to Rs80 levels and is now back to the Rs60 mark, where it is hovering currently. Things could change once the IPO opens and the subscription numbers start trickling in. Normally, empirical evidence is that the stocks which got oversubscribed in the IPO saw a very robust positive shift in the grey market pricing. What does the grey market really tell you about the possible listing price of the stock when it lists in the stock exchange?

If you consider the upper end of the price band of Archean Chemical Industries at Rs.407 as likely discovered price, the estimated listing price is around Rs.467 per share. Normally, the trend matters more than the absolute number. In terms of percentage performance, the GMP of Rs.60 on a likely upper band pricing of Rs.407 indicates a listing premium of 14.74% for Archean Chemical Industries and suggests a listing price of approximately Rs.467 per share, when the stock lists on 21st November. Make provisions for the fact that these are all just approximations and the real picture may be different.

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