Paragon Fine IPO Soars 125%, Triggers Lower Circuit

Premium listing for Paragon Fine And Speciality Chemicals IPO, hits lower circuit

Paragon Fine And Speciality Chemicals Ltd had a strong listing on 03rd November 2023, listing at a premium of 125%. However, after a strong opening, the stock failed to sustain the gains and eventually closed -5% below the listing price; albeit still substantially above the IPO issue price of the stock. For the day, the stock closed comfortably above the IPO issue price but below the listing price of the day on 03rd November 2023. Even in the midst of strong market conditions overall, the stock failed to sustain the gains on listing. On Friday, 03rd November 2023, the Nifty closed 97 points higher while the Sensex closed 283 points higher for the day. In the last few days, the Nifty has been volatile but has managed to hold above the 19,000 mark during the week. On Friday, the Nifty closed technically strong above the 19,200 mark. The strength in the market was largely on account of the US Fed maintaining status quo on rates, which resulted in a positive closing for the Nifty and the Sensex. Overnight, the Dow and NASDAQ also closed strong and that also rubbed off on markets. The markets are happy that the Fed may not be too aggressive now on.

How Paragon Fine IPO subscription levels had an impact on listing day?

Let us now turn to the subscription story of Paragon Fine And Speciality Chemicals Ltd and it is a fantastic story. With super strong subscription of 185.28X for the retail portion, 81.38X for the QIB portion, and 419.46X for the HNI / NII portion; the overall subscription was extremely strong at 205.74X. The IPO was a book built issue in the price band of ₹95 to ₹100 and it is not surprising that the price discovery happened at the upper end of the band at ₹100 per share. The stock listed at a strongly positive premium of 125%, on a day when the undertone in the market was relatively strong due to the overnight gains in the US markets. However, subsequently, despite the stock opening to a strong start for the day, it went on to close sharply lower than the listing price for the day, at the lower circuit price. However, the stock still closed substantially above the IPO issue price. The subscription normally impacts the price discovery in book building issues and the listing price. In this case, being a book built issue, the price got discovered at the upper end of the band while the stock listed at a premium of 125%. However, despite the impressive subscription levels in the IPO, the stock closed at a discount to the listing price and hit the lower circuit despite the Nifty closing 97 points higher for the day and the Sensex 283 points higher for the day.

Stock opens super strong  on Day-1, but loses value later

Here is the pre-open price discovery for the SME IPO of Paragon Fine And Speciality Chemicals Ltd on the NSE.

Data Source: NSE

Paragon Fine And Speciality Chemicals IPO was priced at the upper end of the price band at ₹100 per share, being a book built IPO. On 03rd November 2023, the stock of Paragon Fine And Speciality Chemicals Ltd listed on the NSE at a price of ₹225, a premium of 125% over the IPO issue price of ₹100 per share. However, despite a strong listing on 03rd November 2023, the stock of Paragon Fine And Speciality Chemicals Ltd closed well below the listing price at ₹213.75 per share, being the lower circuit price. In fact, the closing price of the day was at a premium of 113.75% to the IPO issue price, but it closed at a discount of -5.00% to the listing price of ₹225. The stock had an upper circuit limit of ₹236.25 for the day and a lower circuit limit of ₹213.75 for the day. In the midst of the volatility in trading during the day, the stock managed to almost hit the upper circuit and also actually hit the lower circuit before eventually closing the day exactly at the lowest point of the day which is the lower circuit. This is hinting at late selling pressure on the counter. The closing price reflected a premium to the issue price but a discount to the listing price. While the markets were positive in the day with Nifty gaining 97 points and the Sensex gaining 283 points, the strong subscription at 205.74X for the IPO could not prevent the stock from hitting the lower circuit for the day.

Being an SME IPO on the NSE, the stock of Paragon Fine And Speciality Chemicals 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 actually turned out to be the mid-point of the day. During the day, the stock got very close to the upper circuit and actually hit the lower circuit and also closed at the lower circuit price for the day. On the NSE, the stock of Paragon Fine And Speciality Chemicals 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 Paragon Fine And Speciality Chemicals IPO on listing day?

On Day-1 of listing i.e., on 03rd November 2023, Paragon Fine And Speciality Chemicals Ltd touched a high of ₹236 on the NSE and a low of ₹213.75 per share. The high price of the day was very near to the upper circuit limit price of the stock while the stock low price of the day was exactly at the closing price of the day and also exactly represented the lower circuit price of the day. Between these two extreme prices, the stock was extremely volatile and eventually closed at the lower circuit price of the day. In fact, the stock can be said to have enjoyed a strong listing but a weak close below the listing price on a day when the Nifty was up by 97 points and the Sensex ended up 283 points.

Through the entire listing day, the stock stayed above the IPO issue price although it hovered above and below the listing price of the day before closing at the lowest point of the day. In terms of the circuit filter limits, the stock of Paragon Fine And Speciality Chemicals Ltd had an upper circuit filter limit of ₹236.25 and a lower circuit band limit of ₹213.75. The stock closed the day 113.75% above the IPO issue price of ₹100 per share but it also closed -5% below the listing price of the day at ₹225 per share. During the day, the stock of Paragon Fine And Speciality Chemicals Ltd almost hit the upper circuit and actually hit the lower circuit before closing exactly at the lowest point of the day, which happened to be the lower circuit price. The stock closed with pending sell orders substantially higher than the buy orders for the day, indicating that pressure should stay. At close there were pending selling orders for 22,800 shares of the company. 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.

Moderate volumes for Paragon Fine And Speciality Chemicals IPO on listing day?

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Paragon Fine And Speciality Chemicals Ltd stock traded a total of 16.07 lakh shares on NSE SME segment amounting to trading value (turnover) of ₹3,592.16 lakhs on the first day. The order book during the day showed a lot of selling with the sell orders consistently exceeding the buy orders at any point of time. That also led the stock to close with pending sell orders of 22,800 shares at the end of the trading session, although the price was volatile during the day. It must be noted here that Paragon Fine And Speciality Chemicals 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, Paragon Fine And Speciality Chemicals Ltd had a market capitalization of ₹418.22 crore with free-float market cap of ₹110.41 crore. It has a total of 195.66 lakh shares as the issued capital of the company. As stated earlier, since the trading is on the T2T segment, the entire volume of 16.07 lakh shares during the day is accounted by delivery trades only, barring some market trade exceptions in the market.