As the Precision Camshafts IPO opens on 27 January, activity in the grey market has started picking up in the new year. Priced in the range of INR180-186 per share, the first public issue under the T+6 rule, the IPO will mobilize over INR400 crore. Although the issue is yet to open for subscription for general public or even anchor investors, Precision Camshafts GMP rates suggests the IPO will end up rewarding investors.
In case you haven’t gone through IPO Central’s review of the IPO, here is the link:
Grey market is the unofficial agreement between an IPO investor and a stock broker which allows investors to lock profits before the stock lists. Even though the grey market is entirely based on trust with zero regulations, premium or discounts are often seen by high net worth and retail investors as a strong indicator of likely scenarios post listing. Under this system, shares allotted to IPO applications are sold by brokers without actually transferring the shares to their accounts. As one can guess, activity in the grey market is volatile and unstable and the premiums can quickly diminish if the broader markets correct heavily.
According to brokers in key markets such as Ahmadabad and Jaipur, Precision Camshafts GMP rates are in the range of INR15-18 per share which indicate that the stock’s listing is expected at more than
INR300 INR200 per share. Grey market worked as a solid indicator in the case of Dr Lal Path Labs and Alkem Laboratories, but Precision Camshafts GMP numbers are not big and marginal at best. As noted above, these rates are subject to change and given the extreme volatility in the secondary market, grey market premiums can correct sharply from these levels.
In the coming days, Precision Camshafts’ subscription levels and allotments to anchor investors will be the prominent IPO news but it may be worthwhile to keep an eye on grey market premium as the IPO is certainly not among the most sought after. In any case, investors need not rush into buy into any specific IPO as they have the luxury of choosing from the long list of upcoming IPOs this year in India.