Silkflex Polymers IPO Listed 15.38% Higher, but Closes Lower

Positive listing for Silkflex Polymers (India) IPO, then trends lower

Silkflex Polymers (India) Ltd had a positive listing on the NSE, listing at ₹60 per share; a premium of 15.38% to the issue price of ₹52 per share on 15th May 2024. However, after a positive opening, the stock struggled under selling pressure and closed the day at a discount of -2.58% to the listing price. However, despite the weak close, the stock of Silkflex Polymers (India) Ltd still closed at ₹58.45 per share, a premium of 12.40% over the IPO issue price of ₹52 per share, although it did close at a discount of -2.58% to the listing price of ₹60 per share.

Despite the positive listing, the pressure was all about the marginal weakness in the Nifty and the Sensex on the trading day. As a result, the stock of Silkflex Polymers (India) Ltd still closed lower on 15th May 2024. It must be noted here that the Nifty and Sensex were marginally in the negative on Wednesday; with the Nifty losing -17 points in the day and the Sensex losing about -118 points in the day. During the day, the Nifty and the Sensex were volatile with a sharp downward bias, and hence managed to close with losses for the day. As a result, the stock of Silkflex Polymers (India) Ltd, after a relatively positive listing, ended up closing at the lower circuit of the day.

Subscription levels and listing impact on Silkflex Polymers (India) IPO

Let us now turn to the subscription story of Silkflex Polymers India IPO. With subscription of 35.97X for the retail portion, and 36.59X for the non-retail HNI / NII portion; the overall subscription was robust at 36.28X. The IPO was a fixed price issue with the IPO price fixed at ₹52 per share. Being a fixed price issue, the question of price discover did not arise at all. The stock listed with gains of 15.38% on the NSE. However, subsequently, due to the stock opening higher than the issue price and due to the general bearishness in the markets overall, the stock of Silkflex Polymers (India) Ltd went on to close lower by -2.58% on the listing price on 15th May 2024.

This was reflective of pressure on the stock at higher levels, on a day when overall market sentiments were moderately weak. The subscription normally impacts the price discovery in fixed price issues in two ways since the price discovery impact is not there in fixed price issues. The relatively good subscription levels had a positive impact on the stock in terms of its listing premium. However, these gains could not be sustained and the stock closed at a small discount to the listing price on the day. On the day of listing, the stock managed to get a opening of 15.38% over the IPO issue price of ₹52 per share. However, eventually, the stock went on to close the day -2.58% lower on the listing price of ₹60 per share. The stock closed the day at ₹58.45 per share.

Stock closes Day-1 lower, after a relatively strong listing

Here is the pre-open price discovery for the SME IPO of Silkflex Polymers (India) Ltd on the NSE.

Data Source: NSE

The SME IPO of Silkflex Polymers (India) Ltd was a fixed price issue priced at ₹52 per share. On 15th May 2024, the stock of Silkflex Polymers (India) Ltd listed on the NSE at a price of ₹60 per share, which is a premium of 15.38% over the IPO price. However, amidst a volatile day post listing on 15th May 2024, the stock of Silkflex Polymers (India) Ltd closed lower at ₹58.45 per share. The stock had an upper circuit limit of ₹63 per share for the day and a lower circuit limit of ₹57 per share for the day of listing i.e., 15th May 2024.

In the midst of the volatility in trading during the day, the stock price did manage to go above the listing price. In fact, during the trading session on 15th May 2024, the stock touched the upper circuit and also touched the lower circuit, before closing slightly below the listing price for the day. The closing price reflects a mixed day of trading, because it closed lower after a relatively strong opening for the day and after staying below the listing price and also above the listing price for good periods of the trading session. However, this lower closing comes after a strong listing on a day when the Nifty and the Sensex closed with losses of -17 points and -118 points respectively.

Trade to Trade (ST) category SME listing

Being an SME IPO on the NSE, the stock of Silkflex Polymers (India) Ltd was subjected to 5% circuit filter either side on listing day and was also placed in the ST (trade to trade) segment, specifically for SME stocks. 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 at a premium of 15.38% over the issue price of ₹52 per share. During the day, the stock was volatile at opening but never really seriously got to stay above the listing price and remained under that price, eventually closing the day below the listing price. In fact, the stock touched the upper circuit and also the lower circuit on 15th May 2024. On the NSE, the stock of Silkflex Polymers (India) 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. This is specifically to contain the risk on listing day on these SME stocks.

How prices traversed for Silkflex Polymers (India) IPO on listing day

On Day-1 of listing i.e., on 15th May 2024, Silkflex Polymers (India) Ltd touched a high of ₹63 per share on the NSE and a low of ₹57 per share. The high price of the day was exactly the upper circuit price of the day while the low price of the day was exactly the lower circuit price of the day. The stock gyrated sharply between these two levels with a strong negative bias through most part of the day. In terms of the circuit filter limits, the stock of Silkflex Polymers (India) Ltd had an upper circuit filter limit of ₹63 and a lower circuit band limit of ₹57 per share.

The stock closed the day 12.40% above the IPO issue price of ₹52 per share but the stock also closed -2.58% below the listing price of the day of ₹60 per share. While the stock touched the upper circuit and the lower circuit for the day, it did not stick to either of the circuit filters and spent most of the time gyrating in between. The stock closed under pressure at the close of the day with sell offer of shares and no buyers in the counter on the NSE. For the SME IPOs, it may be recollected, that 5% is the upper limit and also the lower circuit limit on the listing price on the day of listing. This circuit is not contingent on the issue price in any way.

Robust volumes for Silkflex Polymers (India) Ltd on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Silkflex Polymers (India) Ltd stock traded a total of 21.46 lakh shares on NSE SME segment amounting to trading value (turnover) of ₹1,287 lakhs on the first day. The order book during the day showed a lot of volatility with the sell orders consistently exceeding the buy orders at any point of time post the bumper listing. That also led the stock to close at the lower circuit of the day with pending sell orders at the end of the trading session, although the price was fairly volatile during the day. It must be noted here that Silkflex Polymers (India) 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, Silkflex Polymers (India) Ltd had a market capitalization of ₹67.84 crore with free-float market cap of ₹20.43 crore. It has a market lot size of 2,000 shares, which is a restriction applicable to all SME stocks. The face value of the company stands at ₹10 per share. As stated earlier, since the trading is on the T2T segment, the entire volume of 21.46 lakh shares during the day is accounted by delivery trades only, barring some market error trade exceptions in the market. The stock trades on the NSE SME segment under the trading code (SILKFLEX) and will be available in the demat account under ISIN code (INE0STN01015).

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. Silkflex Polymers (India) Ltd had a market cap of ₹67.84 crore and the issue size was ₹18.11 crore. Therefore, the Market cap contribution ratio of the IPO works out to a tepid 3.75 times, which is sharply lower 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.