Shriram Properties IPO lists on Monday, what GMP indicates

Shriram Properties IPO hit the market on 8 December 2021 and is about to list on 2December 2021. The price band for the offer was fixed at INR 113 – 118 per equity share (employees stand to get a discount of INR11 per share). Here is a look at how the grey market is perceiving Shriram Properties listing view.

The company planned to raise INR 600 crore from the IPO, and has issued fresh equity shares worth INR 250 crore, and the promoters and existing investors of the company will sell shares worth INR350 crore in this public offering.

The IPO was subscribed at the average rate of 4.6 times. Highest demand came from retail investor category which was oversubscribed 12.72 times, followed by the NII category which saw subscription of 4.82 times. Demand in the QIB category was somewhat muted with subscription standing at just 1.85 times.

As the subscription rates aren’t very high (as observed in some other IPOs), it may be indicative of the eventual listing performance.

Read Also: 5 tips to increase IPO allotment chances

Shriram Properties listing view (GMP analysis)

The IPO had its fair share of fluctuations in GMP rates. Nevertheless, the volatility hasn’t been as wild as it was in some other IPOs (think CE Infosystems or Mapmyindia and RateGain Travel Technologies).  The highest GMP was observed at INR 25 per share on 8 December 2021, on the very first day of subscription. This represented a premium of nearly 22% over the higher end of the price band. The average GMP of the IPO in all these days stands at INR 15 – 16 per share.

IPO GMP rate is usually a strong indicator of how the stock may do on listing and it is no different in this case. The latest premium has come down to just INR10 per share which translates to just 8.5% of allotment prices and indicates to chances of marginally positive listing. In the likely case of wider markets going southward, the stock may also see a tepid listing in the negative zone. Please note that Shriram Properties listing view is purely based on GMP movements.  

Date	Shriram Properties IPO GMP	Kostak	Subject to Sauda
18 Dec 2021	INR10	INR200	INR400
17 Dec 2021	INR10	INR200	INR400
16 Dec 2021	INR20	INR220	INR450
15 Dec 2021	INR15	INR200	INR400
14 Dec 2021	INR15	–	INR400
13 Dec 2021	INR10	INR200	INR400
11 Dec 2021	INR10	–	–
10 Dec 2021	INR15	–	–
9 Dec 2021	INR20	INR200	INR400
8 Dec 2021	INR25	INR200	–

What should you do post-listing?

It is important to see what top guns of the market says about the IPO.

Angel One has a subscribe rating on the IPO, stating good launch pipeline, parentage of the prestigious Shriram Group and presence of marquee investors like TPG, Tata Opportunities Fund, Walton Street etc as the reasons. The brokerage house also highlighted the company’s excessive reliance on the Bangalore market as a risk factor.

Another broker, Elite Wealth has a positive view on the IPO but recommended only for listing gains. The broker sees demand tailwinds from the recent wage hikes in the IT industry and also finds merit in the developer’s strategy of entering new market with joint venture with other players, thereby limiting upfront costs.

On the downside, revenues of the company are constantly going down and it is, in fact, reporting losses for the last two years. The company’s business concentration in south India is also a cause of worry as any regulatory change many impact financial performance of the company.

Here is a look at the company’s financial performance in recent years.

Shriram Properties’ Financial Performance

	FY2019	FY2020	FY2021	H1 FY2022
Revenue	723.8	631.8	501.3	155.2
Expenses	754.2	671.1	512.1	185.4
Net income	48.1	(86.4)	(67.5)	(60.4)
Margin (%)	6.7	(13.7)	(13.5)	(38.9)

While Shriram Properties listing view is mildly positive, it is important for investors to remain in the game and keep reinvesting their principal amount. As such, following a trailing stop loss may also be an effective strategy to keep losses under control.