Shanthala FMCG Products IPO Debuts 18.68% Higher, then tapers

Premium listing for Shanthala FMCG Products IPO, tapers lower

Shanthala FMCG Products IPO had a strong listing on 03rd November 2023, listing at a premium of 18.68%. However, after a strong opening, the stock failed to sustain the gains and eventually closed about -4.63% below the listing price; albeit still 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 could not 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 about hold the 19,000 mark during the week. On Friday, the Nifty managed a close 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.

How subscription levels had an impact on listing day?

Let us now turn to the subscription story of Shanthala FMCG Products IPO. With tepid subscription of 3.05X for the retail portion, and 4.76X for the HNI / NII portion; the overall subscription was extremely tepid at just about 3.91X. The IPO was a fixed price IPO issue with the IPO price already fixed at ₹91 per share. The stock listed at a strongly positive premium of 18.68%, 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. However, the stock still closed above the IPO price. The subscription normally impacts the price discovery in book building issues and the listing price. In this case, being a fixed price issue, it only had an impact on the listing day performance. As a result of the weak subscription levels in the IPO, the stock closed at a discount to the listing price despite the Nifty closing 97 points higher for the day and the Sensex 283 points higher for the day.

Stock opens higher on Day-1, but loses value later

Here is the pre-open price discovery for the SME IPO of Shanthala FMCG Products Ltd on the NSE.

Data Source: NSE

Shanthala FMCG Products IPO was priced at ₹91 per share, being the fixed price of the IPO. On 03rd November 2023, the stock of Shanthala FMCG Products Ltd listed on the NSE at a price of ₹108, a premium of 18.68% over the IPO issue price of ₹91 per share. However, despite a strong listing on 03rd November 2023, the stock of Shanthala FMCG Products IPO closed well below the listing price at ₹103 per share. In fact, the closing price of the day was at a premium of 13.19% to the IPO issue price, but it closed at a discount of -4.63% to the listing price of ₹108. The stock had an upper circuit limit of ₹113.40 for the day and a lower circuit limit of ₹102.60 for the day. In the midst of the volatility in trading during the day, the stock managed to hit the upper circuit and also almost hit the lower circuit before eventually closing the day exactly at the lowest point of the day 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 tepid subscription at 3.91X for the IPO actually made the difference and put pressure on the stock on listing day.

Being an SME IPO on the NSE, the stock of Shanthala FMCG Products 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 hit the upper circuit and got very close to the lower circuit but the close was exactly at the lowest point of the day, which was just marginally away from the lower circuit of the day. On the NSE, the stock of Shanthala FMCG Products 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 Shanthala FMCG Products IPO on listing day?

On Day-1 of listing i.e., on 03rd November 2023, Shanthala FMCG Products Ltd touched a high of ₹113.40 on the NSE and a low of ₹103 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 exactly at the closing price of the day and just marginally above the lower circuit price of the day. Between these two extreme prices, the stock was extremely volatile and eventually closed very near to 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 Shanthala FMCG Products Ltd had an upper circuit filter limit of ₹113.40 and a lower circuit band limit of ₹102.60. The stock closed the day 13.19% above the IPO issue price of ₹91 per share but it also closed -4.63% below the listing price of the day at ₹108 per share. During the day, the stock of Shanthala FMCG Products Ltd hit the upper circuit and almost hit the lower circuit before closing exactly at the lowest point of the day. The stock closed with pending sell orders substantially higher than the buy orders for the day, indicating that pressure should stay. 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 Shanthala FMCG Products IPO on listing day?

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Shanthala FMCG Products Ltd stock traded a total of 4.39 lakh shares on NSE SME segment amounting to trading value (turnover) of ₹476.71 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 and that was also the trend of pending orders at close. That also led the stock to close with pending sell orders at the end of the trading session, although the price was volatile during the day. It must be noted here that Shanthala FMCG Products 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, Shanthala FMCG Products Ltd had a market capitalization of ₹68.99 crore with free-float market cap of ₹29.65 crore. It has a total of 66.98 lakh shares as the issued capital of the company. As stated earlier, since the trading is on the T2T segment, the entire volume of 4.39 lakh shares during the day is accounted by delivery trades only, barring some market trade exceptions in the market.