Grey Market Premium of Star Health & Allied Insurance IPO

5paisa Research Team 5paisa Research Team 30th November 2021 - 12:54 pm

The Rs.7,249 crore Star Health & Allied Insurance IPO consisted of a fresh issue of Rs.2,000 crore and an offer for sale at Rs.5,249 crore. The issue has been priced in the band of Rs.870 to Rs.900 per share and the price will be discovered post the book building.

The issue opens for subscription on 30-Nov and closes for subscription on 02-Dec. The stock is scheduled to list on 10th December. The GMP trading normally starts about 4-5 days prior to IPO opening and continues till the listing date.

However, there are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP. Secondly, the extent of subscription also has a deep impact on the GMP as it is indicative of investor interest in the stock.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has proved to be a good informal gauge of demand and supply for the IPO.

Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance would be.

While the GMP is just an informal approximation, it has been generally seen to be a good mirror of the real story. More than the actual price, it is the GMP trend over time that really gives the insights about the stock being upgraded or downgraded over a period of time and which direction the wind is blowing.

Here is a quick GMP summary for Star Health & Allied Insurance over the last 5 days.

24-Nov	25-Nov	26-Nov	27-Nov	28-Nov
Rs.150	Rs.90	Rs.40	Rs.10	Rs.10

Check - Star Health and Allied Insurance IPO - 7 Things to Know

In the above case, the GMP trend has compressed sharply from Rs.150 per share to Rs.10 per share over the last 5 days.

Of course, we have to await for the actual subscription numbers to flow in. But, clearly this shows some concerns over large sized issues after the experience with Paytm.

The sharp fall in the GMP from Rs.150 to Rs.10 and now even close to Rs.0 on 29-November, shows that the GMP has also been impacted by the latest virus variant B.1.1.529 or the Omnicron variant.

If the overall markets become risky then FPIs may think twice about buying into Indian IPOs due to their risk-off tendencies.

If you consider the upper end of the price band as the indicative price, then the likely listing price has fallen from Rs.1,050 to Rs.910, hardly leaving any margin for the IPO investors to make any money on the table. This is most likely to impact sentiments of investors planning to opt for IPO funding.

GMP is an important informal indicator of likely listing price, although it tends to be quite dynamic and changes direction with the flow of news. However, investors must note that this is just an informal indication and has no official sanction.

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Star Health and Allied Insurance IPO - Information Note