Rategain Travel Technologies IPO - Grey Market Premium

5paisa Research Team 5paisa Research Team 7th December 2021 - 11:33 pm

The Rs.1,335.74 crore IPO of Rategain Travel Technologies Ltd consists of a fresh issue of Rs.375 crore and an offer for sale of Rs.960.74 crore. The issue has been priced in the band of Rs.405 to Rs.425 per share and the price will be discovered post the book building.

The issue opens for subscription on 07-Dec and closes for subscription on 09-Dec. The stock is scheduled to list on 17th 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.

A quick GMP summary for Rategain Travel Technologies Ltd over the last 5 days.

02-Dec	03-Dec	04-Dec	05-Dec	06-Dec
Rs.100	Rs.140	Rs.120	Rs.120	Rs.120

In the above case, the GMP trend has been in the range of Rs.100 to Rs.140 per share over the last 5 days, before settling at Rs.120 per share on 06th December. Of course, we have to await for the actual subscription numbers to flow in. But, clearly this shows reasonable interest in the grey market ahead of the IPO.

The GMP has stabilized at around the Rs.120 levels as of 06-December. While it did peak around Rs.140 about 3 days back, the GMP has now tapered to a more stable level of Rs.120 per share. This could still change once the subscription numbers start coming in.

If you consider the upper end of the price band as the indicative price, then the likely listing price has fallen marginally from Rs.565 to Rs.545, where it appears to have stabilized. One data point to track will be the listing of Star Health IPO, which got just 79% subscribed.

The GMP of Rs.120 on a likely upper band pricing of Rs.425 indicates a listing premium of 28.24% over the listing price. That presupposes a listing price of approximately Rs.545 per share, when the stock lists on 17-December. However, GMP is a dynamic price.

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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