Polysil Irrigation Systems IPO Lists 3.70% higher, then falls at -3.13%

Positive listing for Polysil Irrigation Systems Ltd, then tapers lower

What do you call a stock that lists at a marginal gains over the issue price and then almost gives up all its gains during the day? The stock of Polysil Irrigation Systems Ltd was perhaps one such case. The stock had a positive listing on the NSE, listing at ₹56 per share; a small premium of 3.70% to the issue price of ₹54 per share on 16th February 2024. However, after a slightly positive opening, the stock struggled under the selling pressure and closed the day -3.13% below the listing price. Despite tapering from the listing price of the day, the stock of Polysil Irrigation Systems Ltd still closed at a marginal premium of 0.46% over the IPO issue price, although it did close at a discount of -3.13% to the listing price of ₹56 per share. The closing price of the day was ₹54.25 per share.

Despite the marginal positive listing, it was the volatility in the market that actually did the stock in. The stock of Polysil Irrigation Systems Ltd closed -3.13% lower at the close of 16th February 2024. It must be noted here that the Nifty and Sensex closed the day in the negative; with the Nifty gaining 130 points in the day and the Sensex gaining about 376 points in the day. During the day, the Nifty and the Sensex were volatile with a sharp upward bias towards the close of the day, and managed to close with gains despite the sharp bouts of volatility during the day. As a result, the stock of Polysil Irrigation Systems Ltd, after a marginally positive listing, ended up closing lower for the day.

Did sectoral sentiments impact the stock on listing day?

The limited interest in the stock was also evident in the IPO subscription, as we shall see later. However, the one factor that worked against the stock was the industry that it operates in. The Indian rural demand has been tepid for some time on the back of weak agricultural output and higher rural inflation. That has had an impact on rural demand for a number of specific products. Polysil Irrigation Systems Ltd caters to the rural demand for agricultural spending and that is one of the reason the demand for the stock has been relatively tepid. The weak sentiments surrounding the particular sector could be one of the reasons for the tepid demand in the IPO and also the subsequent lack of interest post listing of the stock on the stock exchanges.

Subscription levels, and how it impacted listing of Polysil Irrigation Systems Ltd

Let us now turn to the subscription story of Polysil Irrigation Systems Ltd. The IPO of Polysil Irrigation Systems Ltd did not have a QIB allocation, and so obviously, there was no anchor allocation in the IPO. After the market maker allocation of shares, the balance shares were split between the Retail investors and the HNI / NII investors. With subscription of 11.62X for the retail portion, and 2.12X for the non-retail HNI / NII portion; the overall subscription was extremely tepid at 6.88X. The IPO was a fixed price issue with the IPO price fixed at ₹54 per share. Being a fixed price IPO, there was no question of price discovery in the IPO. The stock listed with gains of just 3.70% on the NSE. However, subsequently, due to the tepid subscriptions, the stock went on to close the day -3.13% lower. What stood out about the listing day performance on 16th February 2024 was the high degree volatility with the stock touching the upper circuit price and the lower circuit price on the listing day.

This was also reflective of pressure on the stock at higher levels, on a day when overall market sentiments were modest, at best. The subscription normally impacts the price discovery in book building issues and the listing price. The tepid subscription had an impact on the stock price performance on listing day in two ways. Firstly, the stock opened the day with very marginal gains on listing and secondly, even these gains could not be sustained as the stock went on to close at a discount to the listing price. On the day of listing, the stock managed to get a marginally positive opening of 3.70% over the IPO issue price of ₹54 per share. However, eventually, the stock went on to -3.13% below the listing price of ₹56 per share. The stock closed the day at ₹54.25 per share; a marginal gain of 0.46% on issue price.

Stock closes Day-1 lower, after a marginally positive listing

Here is the pre-open price discovery for the SME IPO of Polysil Irrigation Systems Ltd on the NSE.

Data Source: NSE

The SME IPO of Polysil Irrigation Systems Ltd was a fixed price issue priced at ₹54 per share. On 16th February 2024, the stock of Polysil Irrigation Systems Ltd listed on the NSE at a price of ₹56 per share, which is a marginal premium of 3.70% over the IPO price. However, amidst a volatile day post listing on 16th February 2024, the stock of Polysil Irrigation Systems Ltd closed exactly almost flat at ₹54.25 per share. The stock had an upper circuit limit of ₹58.80 per share for the day and a lower circuit limit of ₹53.20 per share for the day of listing i.e., 16th February 2024.

In the midst of the volatility in trading during the day, the stock price did manage to open above the listing price, although it could not sustain gains for the day. Through the better part of the trading day on 16th February 2024 the stock traded under the listing price; in fact, the stock was so volatile that it touched the upper circuit and the lower circuit on the same day. The closing price reflects a mixed day of trading, because it closed weak after a marginally positive listing on the bourses. Despite the stock weakening after listing, it had still closed at a marginal premium to the issue price of just about 0.46%.

Trade to Trade (ST) category SME listing

Being an SME IPO on the NSE, the stock of Polysil Irrigation Systems Ltd was subjected to 5% circuit filter either side on listing day and was also placed in the ST (trade to trade) segment, specifically for SME stocks. That means, only delivery trades are permitted on the stock. Like the upper circuit price, even the lower circuit price on listing day is calculated on the listing price and not on the IPO price. The opening price of the day was at a marginal premium of 3.70% over the issue price of ₹54 per share.

During the day, the stock was volatile at opening but never really seriously got to stay above the listing price and remained under that price, eventually closing the day at ₹54.25 per share. In fact, the stock touched the upper and lower circuits on 16th February 2024. On the NSE, the stock of Polysil Irrigation Systems Ltd has been admitted to trade in the ST category. The ST category is specifically for the SME Emerge segment of the NSE with compulsory trade to trade settlement. On such stocks, netting of positions is not permitted and every trade has to be settled by delivery only.

How prices traversed for Polysil Irrigation Systems Ltd on listing day

On Day-1 of listing i.e., on 16th February 2024, Polysil Irrigation Systems Ltd touched a high of ₹58.80 per share on the NSE and a low of ₹53.50 per share. The high price of the day was above the listing price of ₹56 per share but for most part of the day the stock stayed below the listing price. The high price was exactly at the upper circuit price of ₹58.80 per share. However,  the stock low price of the day was also just almost at the lower circuit for the day, although it just stopped short. In the end, the stock closed in between, but the volatility was evident from the way the stock oscillated between the upper and the lower circuits.

In terms of the circuit filter limits, the stock of Polysil Irrigation Systems Ltd had an upper circuit filter limit of ₹58.80 and a lower circuit band limit of ₹53.20. The stock closed the day at a marginal 0.46% above the IPO issue price of ₹54 per share but the stock also closed at a discount of -3.13% below the listing price of the day. However, the stock got very close to the lower circuit price of the day and spent most part of the day below the IPO listing price of the day. The stock closed under pressure but there was some late buying with pending buy quantity of 2,000  shares and no buyers in the counter on the NSE. For the SME IPOs, it may be recollected, that 5% is the upper limit and also the lower circuit limit on the listing price on the day of listing. This circuit is not contingent on the issue price in any way.

Tepid volumes for Polysil Irrigation Systems Ltd on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Polysil Irrigation Systems Ltd stock traded a total of 8.86 lakh shares on NSE SME segment amounting to trading value (turnover) of ₹496.96 lakhs on the first day. The order book during the day showed a lot of volatility with the sell orders consistently exceeding the buy orders at any point of time post the listing. However, there was some buying visible at the end. That led the stock to close with pending buy orders of 2,000 shares at the end of the trading session, although the price did oscillate a good deal during the day. It must be noted here that Polysil Irrigation Systems Ltd is in the trade to trade (T2T) segment so only delivery trades are possible on the stock. Hence the entire volume for the day represents delivery volumes only.

At the close of Day-1 of listing, Polysil Irrigation Systems Ltd had a market capitalization of ₹61.53 crore with free-float market cap of ₹43.38 crore. It has a total of 113.41 lakh shares as the issued capital of the company and a face value of ₹10 per share. As stated earlier, since the trading is on the T2T segment, the entire volume of 8.86 lakh shares during the day is accounted by delivery trades only, barring some market trade exceptions in the market. The stock trades on the NSE SME segment under the trading code (POLYSIL) and will be available in the demat account under ISIN code (INE517M01028).

IPO size to Market cap contribution ratio

One way to assess the significance of the IPO on the market cap of the segment is the ratio of market overall to the IPO size. Polysil Irrigation Systems Ltd had a market cap of ₹61.53 crore and the issue size was ₹17.44 crore. Therefore, the Market cap contribution ratio of the IPO works out to a modest 3.53 times. Remember, this is not the ratio of the market cap to original book value, but the ratio of the market cap created to the size of the IPO. That shows the significance of the IPO to the overall market cap accretion of the stock exchange.