Kalahridhaan Trendz IPO Subscribed 8.15 times

About the Kalahridhaan Trendz IPO

The stock of Kalahridhaan Trendz IPO has a face value of ₹10 per share and it is a fixed price issue. The price for the IPO is set at a fixed price level of ₹45 per share. Being a fixed price issue, the issue of price discovery does not arise. The IPO of Kalahridhaan Trendz Ltd has only a fresh issue component and no offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive. As part of the fresh issue portion of the, Kalahridhaan Trendz IPO will issue a total of 49,98,000 shares (49.98 lakh shares), which at the fixed IPO price of ₹45 per share aggregates to fresh fund raising of ₹22.49 crore. Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 49,98,000 shares (49.98 lakh shares) which at the upper band IPO price of ₹45 per share will aggregate to overall IPO size of ₹22.49 crore.

Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,52,000 shares. Sunflower Broking Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing. Post the IPO, the market share of the promoters will dilute from 96.22% to 68.24%. The fresh issue funds will be used by the company towards the working capital needs of the company and towards general corporate purposes. Interactive Financial Services Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Sunflower Broking Private Ltd.

Final subscription status of Kalahridhaan Trendz IPO

Here is subscription status of Kalahridhaan Trendz IPO at close on 20th February 2024.

As can be seen from the above table, the overall IPO of Kalahridhaan Trendz Ltd got subscribed a rather modest 8.15 times. The Retail portion led the stakes with 9.63 times subscription, followed by the HNI / NII portion at 6.66 times subscription. There was no dedicated QIB allocation in this IPO. That is a very modest and moderate response to an SME IPO, especially if you consider the median subscriptions that similar other SME IPOs have got in the past. The subscription has shown very limited traction for the IPO across both the categories of investors; retail and HNI / NII investors.

Allocation quota for various categories

The issue was open for retail investors and the HNI / NII investors. There was a broad quota designed for each of the segments viz. the retail, and the HNI / NII segments. A total of 2,52,000 shares were allocated as market maker portion to Sunflower Broking Private Ltd, which will act as market maker inventory to provide bid-ask liquidity on the counter post listing. Market maker action not only improves liquidity in the counter but also reduces the basis risk. The table below captures the allocation reservation done for each of the categories out of the total number of shares offered in the IPO.

In the above Kalahridhaan Trendz IPO table, there is no QIB allocation in the IPO. The anchor allocation to the anchor investors is normally done out of this QIB allocation and hence the company has not done any anchor allocation in the IPO. Normally, the anchor is done to institutional investors, which gives confidence and assurance to the retail shareholders about the institutional interest in the stock The anchor allocation is normally adjusted and deducted from the QIB quota and only the net number of shares is available for public issue under the QIB portion.

However, in this case, there is neither any QIB quota, nor any anchor allocation to investors ahead of the IPO. Normally, the anchor portion bidding is done on the day before the IPO opens and such anchor investments are subjected to lock in at two levels. Half the anchor allocation is locked in for 30 days while the balance anchor allocation shares are locked in for a period of 90 days. The allocation of market maker inventory of 5.04% is outside the anchor portion. The market making portion is more towards ensuring liquidity post listing and ensuring low basis spreads on the stock.

How subscription built up for the Kalahridhaan Trendz IPO?

The oversubscription of the IPO was dominated by the HNI / NII investors followed by the Retail Investor category in that order. The table below captures the day-wise progression of the subscription status of Kalahridhaan Trendz Ltd. The IPO was kept open for 4 working days.

Here are the key takeaways from the subscription numbers on a day-wise basis for Kalahridhaan Trendz IPO.

• The Retail portion got the best subscription in the Kalahridhaan Trendz Ltd IPO at 9.63 times and it got 1.47 times subscribed on the first day of the IPO itself.
   
• The HNI / NII portion was behind the retail portion in terms of subscription at 6.66 times overall and it got 0.78 times subscribed at the end of the first day.
   
• While the retail portion got fully subscribed on the first day of the IPO itself, the HNI / NII portion got fully subscribed only on the second day of the IPO. As a result, the overall IPO got just about fully subscribed on the first day itself. The overall IPO, which saw subscription of 8.15 times at close, got fully subscribed at just about 1.00 times at the close of the first day.
   
• The retail, and HNI / NII portion saw the best traction on the last day of the IPO. The HNI / NII portion saw the total subscription ratio moving from 1.82X to 6.66X on the last day of the IPO. Even the retail portion saw the total subscription ratio move from 4.46X to 9.63X on the last day of the IPO.
   
• The last day traction story was true regarding the overall IPO subscription ratio also. The subscription ratio overall moved from 3.14X to 8.15X on the last day of the IPO.

Next steps in the IPO process

With the IPO closed for subscription at the end of 20th February, 2024, the next piece of action shifts to the finalization of the basis of allotment and later to the listing of the IPO. The basis of allotment will be finalized on 21st February, 2024 and the refunds will be initiated on 22nd February, 2024. In addition, the demat credits are also expected to happen on 22nd February, 2024 and the stock is scheduled to list on 23rd February 2024 on the NSE SME segment. This is the segment, in contrast to the mainboard, where IPOs of small and medium enterprises (SMEs) are incubated. The demat credits to the demat account to the extent of allotment will happen by the close of 22nd February 2024 under ISIN Number (INE02M801018).