Grey Market Premium of Tarsons Products Ltd IPO

The Rs.1,023.47 crore IPO of Tarsons Products Ltd consists of an offer for sale of Rs.873.47 crore and a fresh issue of Rs.150 crore. The issue had been priced in the band of Rs.635 to Rs.662 per share and the price discovery will depend on the IPO response. The issue opened for subscription on 15-Nov and closed for subscription on 17-Nov.

Most of the shares start trading in the grey market well ahead of the IPO opening, which offers important indicators. Ahead of the issue and ahead of listing, one of the key parameters for evaluating the potential IPO is the GMP or the grey market price.

A word of caution 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.

Check - Tarsons Products IPO - Subscription Day 3

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.

One of the key factors that impacts the GMP in most cases, is the extent of oversubscription, which is above 77 times in case of Tarsons. The GMP premiums will largely predicate on the extent of oversubscription in each of the categories. That would make the GMP premiums robust in the informal trading market.

As per updates coming in on Tuesday, 17-Nov, the Tarsons Products Ltd IPO is commanding a premium of Rs.200 over the issue price in the grey market. The GMP has spiked sharply in the last 5 days from Rs.150 levels to Rs.200 levels. Of course, this GMP will keep changing even after the issue closes on 17-Nov and till the date of listing.

The current GMP of Rs.200 for Tarsons Products Ltd IPO translates into a 30.21% premium over the upper price band of Rs.662. It also hints at an indicative listing price of approximately Rs.862 when the stock lists on 26th November, but this is subject to real time change.

GMP is an important informal indicator of likely listing price. However, investors must keep in mind that this is just an informal indication and has no official sanction.

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