Megatherm Induction IPO lists 83.33% higher, hits upper circuit

Bumper listing for Megatherm Induction IPO, then upper circuit

Megatherm Induction IPO had a real bumper listing on 05th February 2024, listing at a premium of 83.33%. After a strong  opening, the stock closed the day at the 5% upper circuit over the listing price. For the day, the stock closed comfortably above the IPO issue price and the IPO listing price at the close of trading on 05th February 2024. What also stood out about the stock was the bumper listing despite the absence of market support. In fact, on the day, the Nifty had shown a sharp correction by -82 point and the Sensex was lower by -354 points. In the last few days, the Nifty has been volatile but has managed to hold the 21,700 mark during the week and that is what matters to the market.

However, markets did show some signs of weakness today as traders rushed to book profits ahead of the RBI policy on 08th February 2024. Markets corrected after a string of positive trading days as there was some panic setting in at higher levels of the market. Investors are generally turning slightly cautious after the big rally in the markets, especially the frenetic rally over the last quarter of 2024. Also, there are big events coming up like the RBI policy, and some key macro data flows. Obviously, traders and investors are a little wary.

Subscription and price performance of Megatherm Induction IPO on listing day

Let us now turn to the subscription story of Megatherm Induction IPO. With robust subscription of 200.51X for the retail portion, 105.14X for the QIB portion, and 307.04X for the HNI / NII portion; the overall subscription was extremely healthy at 196.11X. The IPO was a book building IPO issue with the IPO price band set in the range of ₹100 to ₹108  per share. Being a book built issue and getting such solid subscription numbers, the stock obviously ended up being priced at the upper end of the price band. The stock listed at a strong premium of 83.33% on the NSE SME segment.

However, despite the stock seeing some volatility in the early parts of the day, it went on to close at the upper circuit of 5% over the listing price. This was reflective of strength in the stock amidst the volatile market sentiments. The subscription normally impacts the price discovery in book building issues and the listing price. The strong subscription had a positive impact on the ability of the stock  in 3 ways. Firstly, it ensured that the price discovery of the book built issue happened at the upper end of the price band. Secondly, it led to the stock price listing at a robust premium to the issue price. Thirdly, despite the pressure on the overall market, the stock managed to close at the 5% upper circuit for the day, which is a sign of inherent strength in the stock.

Stock closes Day-1 at upper circuit, after a bumper listing start

Here is the pre-open price discovery for the Megatherm Induction IPO on the NSE.

Data Source: NSE

The SME IPO of Megatherm Induction Ltd was a book built IPO and priced at ₹108 per share; which is the upper end of the price band of the IPO. On 05th February 2024, the stock of Megatherm Induction Ltd listed on the NSE at a price of ₹198 per share, a premium of 83.33% over the IPO issue price of ₹108. However, despite a volatile day post listing on 05th February 2024, the stock of Megatherm Induction Ltd closed exactly at the upper circuit price of ₹207.90 per share on the NSE SME segment. The stock had an upper circuit limit of ₹207.90 for the day and a lower circuit limit of ₹188.10 per share for the day. In the midst of the volatility in trading during the day, the stock did dip below the listing price of the day, but bounced back and stayed put at the upper circuit price for the better part of the day.

Although the stock went below the listing price of the day, it did not get anywhere close to the lower circuit price of the day. The stock dipped post listing, but then saw a smart bounce from lower levels as it spent better part of the day locked in upper circuit only. The closing price reflects a strong day of trading, because it closed at the upper circuit and never went below the listing price, and it remained well above the lower circuit limit for the day. Also, the upper circuit comes on top of a 83.33% premium listing of the stock, which is all the more appreciable, considering that the Nifty and the Sensex had actively been negative on the day of listing of Megatherm Induction Ltd. The Nifty had lost -82 points while Sensex was down -354 points on the day. Overall, the closing price of the stock of Megatherm Induction Ltd at ₹207.90 per share was a full 92.50% above the issue price on the first day of the stock listing on the NSE SME segment.

Listed in the ST segment for trade in T2T

Being an SME IPO on the NSE, the stock of Megatherm Induction Ltd was subjected to 5% circuit filter on listing day and was also in the ST (trade to trade) segment. 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 exactly at the low price of the day, meaning the stock never really dipped below the listing price and spent most part of the day at the upper circuit, locked in.

During the day, the stock hit the upper circuit but stayed well above the lower circuit and the close was exactly at the upper circuit price. In fact, the stock did go below the listing price but stayed well above the lower circuit price of the day. On the NSE, the stock of Megatherm Induction 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 Megatherm Induction IPO on listing day?

On Day-1 of listing i.e., on 05th February 2024, Megatherm Induction Ltd touched a high of ₹207.90 per share on the NSE and a low of ₹195 per share. The high price of the day was exactly the upper circuit limit price of the stock while the stock low price of the day was below the listing price but well above the lower circuit price of the day. Between these two extreme prices, the stock was relatively less volatile and eventually closed at the upper circuit price of the day. In fact, the stock can be said to have enjoyed a strong listing and that was despite the Nifty correcting by -82 points and the Sensex correcting by -354 points. For the day, stock of Megatherm Induction Ltd closed at 5% upper circuit on top of a premium listing on the NSE.

During the trading day, the stock went below the listing price of ₹198 per share only briefly to around the ₹195 levels, which was the low price of the day. However, the stock stayed well clear of the lower circuit price of ₹188.10 per share. The stock quickly bounced and got locked into the upper circuit price of the day. In terms of the circuit filter limits, the stock of Megatherm Induction Ltd had an upper circuit filter limit of ₹207.90 and a lower circuit band limit of ₹188.10. The stock closed the day 92.50% above the IPO issue price of ₹108 per share and it also closed 5% above the listing price of the day at ₹198 per share. During the day, the stock of Megatherm Induction Ltd hit the upper circuit and stayed locked in the upper circuit for most part of the day. However, it only briefly dipped below the listing price and so, obviously stayed well above the lower circuit price of the day. The stock closed strong at the upper circuit at the close of the day with pending buy orders for 9,600 shares and no sellers in the counter. For the SME IPOs, it may be recollected, that 5% is the upper limit and also the lower circuit on the listing price on the day of listing.

Robust volumes for Megatherm Induction IPO on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Megatherm Induction Ltd stock traded a total of 18.552 lakh shares on NSE SME segment amounting to trading value (turnover) of ₹3,728.95 lakhs on the first day. The order book during the day showed a lot of buying with the buy orders consistently exceeding the sell orders at any point of time. That also led the stock to close with pending buy orders for 9,600 shares at the end of the trading session, although the price was hardly volatile during the day. It must be noted here that Megatherm Induction 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 purely represents the delivery volumes.

At the close of Day-1 of listing, Megatherm Induction Ltd had a market capitalization of ₹391.70 crore with free-float market cap of ₹106.89 crore. It has a total of 188.41 lakh shares as the issued capital of the company with a face value of ₹10 per share. As stated earlier, since the trading is on the T2T segment, the entire volume of 18.552 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 (MEGATHERM) and will be available in the demat account under ISIN code (INE531R01010).

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. Megatherm Induction Ltd had a market cap of ₹391.70 crore and the issue size was ₹53.91 crore. Therefore, the Market cap contribution ratio of the IPO works out to 7.27 times; which is higher than the median. 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.