Interview with Money9- What is grey market and grey market premium?
Money9 spoke to grey market tracker Abhay Doshi, who is the founder of UnlistedArena.com, which deals in pre-IPO and unlisted shares, to understand the basics of grey market and unlisted market.
Q) How is the grey market different from unlisted market?
Doshi: Grey Market is an unofficial market for IPOs. It is an over-the-counter market where IPO applications and IPO shares are traded before they get listed on stock exchanges. These are not actual shares of the IPO but something like unofficial futures/forwards of the shares. There is no actual delivery of shares before the listing. All transactions are done in cash on a personal basis where Sebi, stock exchanges do not regulate or support it.
On the other hand, the unlisted market, also known as the pre-IPO market, is quite different from the grey market in many aspects. In unlisted market too, the dealings take place before the IPO but here actual delivery of shares takes place. The payments are usually made through the bank and the shares are transferred in demat account. The dealings between two parties are made on mutual trust. Dealing in an unlisted(Pre-IPO) market is legal.
Grey market is speculative and just a short term play for momentum players while unlisted market gives an opportunity to an investor to participate in the growth stage of the company even many years before the company goes for an IPO just like private equity funds. Usually, investors take grey markets and unlisted markets in the same meaning but both are different in many ways.
Q) What is grey market premium and how is it calculated?
Doshi: The grey market premium (GMP) is the additional value of the shares over the issue price at which the shares are traded in the grey market. If the amount is positive it is called as premium while if it is negative, it is called a discount.
For example, X company brings IPO at Rs 100. If the grey market premium is Rs 10. It implies that the shares are trading in the grey market at Rs 110.
There is no definite way to calculate the grey market premium. It depends on many factors like the valuations at which the listed peers are trading, subscription figures, HNI costing for IPO applications (applications in HNI category is mainly done by borrowed funds. Hence, the grey market premium up to some extent is connected to the interest cost per share for the borrowed funds).
Q) How can GMP help in decision-making while investing in IPOs?
I personally feel that the fundamentals of the company are important more than anything else. However, tracking the grey market can give some indications to the IPO applicants as to where the shares are expected to list on their listing debut.
It should only be taken as one of the indicators for applying in an IPO and no decisions should be made solely on grey market premium as the listing of shares may vary from the rates prevalent in grey market.
Q: How can investors buy or sell shares in the grey as well as unlisted markets?
Doshi: There are no official or registered brokers for grey market deals. I think the deals are made purely on a word of mouth basis.
As far as unlisted (pre-IPO) markets are concerned, there is a significant rise in awareness amongst the investors regarding this space. Investors can connect with dealers to buy such shares. However, utmost safety and precaution should be taken before dealing as dealings take place on a trust basis. So, the first priority of the investors should be the trustworthiness and reputation of the dealer with whom they are trading. Competitive pricing also matters here as the rates are not listed.
Featured in Money9- Rakesh Jhunjhunwala-backed Nazara Technologies IPO opens March 17
“A strong fancy may be seen in this counter as it will be the first gaming company to list in India. Such companies cannot be valued traditionally and will get premium valuations. Its shares were traded in the range of Rs 400-800 in the unlisted market (Pre-IPO) last year,” commented grey market tracker Abhay Doshi, Founder, UnlistedArena.com.
Featured in Financial Express- Anupam Rasayan IPO opens Mar 12; grey market premium soars 58% on price band announcement; check details
Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online, at the price of Rs 555, the annualised PE based on 9MFY21 EPS comes to 69, which looks fully priced. “On the financial front, the company has performed exceptionally well as the total revenue increased at a CAGR of 24.29% from fiscal 2018-2020. At the same time robust growth in the export segment is being witnessed with a CAGR of 32.94%. The operational margins are healthy and rapidly growing,” Doshi said.
Abhay Doshi said that the China+1 strategy is likely to be adopted by global players, which should further fuel the exports. “So, even though the issue is fully priced, we expect the IPO to get huge fancy owing to its robust growth,” he added.
Featured in Financial Express- Laxmi Organic IPO opens March 15, grey market premium zooms 100%; subscribe for long-term or listing gains?
Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online that the expected price band of the issue is Rs 130 per share. Doshi said in the grey market, Laxmi Organic shares were seen trading at Rs 260, over the predicted issue price of Rs 130 apiece, implying a premium of 100 per cent.
Featured in LiveMint- Easy Trip Planners IPO subscribed 160 times. Grey market premium, other details
"Easy Trip Planners majority of revenue comes from Airline ticket booking. They work on differentiated model were they provide customers an option to buy tickets without convenience fees. The CAGR growth of gross booking from revenue in fiscal 2018-2020 stands to be at 47% which is highest among competitors. Covid19 pandemic has dented travel and tourism industry but bullish market sentiment and digital theme playing out, Easy Trip Planners will attract investors," he added.
Featured in Financial Express- MTAR Tech, Easy Trip, Laxmi Organic, Anupam Rasayan IPOs: Grey market premiums zoom; should you buy?
Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online, that MTAR Technologies shares are expected to list around Rs 1,050 apiece. “We are expecting a very good listing for MTAR Tech on account of bullish sentiment and dream run in the primary market,” Doshi said.
Featured in Financial Express- Suryoday Small Finance Bank IPO opens March 17; check issue size, price band, bid details
Suryoday Small Finance Bank issue price inline with unlisted market
This year has been very difficult for the financial sector, especially for SFBs due to the pandemic-COVID-19, says Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares. However, Suryoday is amongst the leading SFBs in India in terms of NIMs, RoA, yields and deposit growth and the lowest cost-to-income ratio. Abhay Doshi told Financial Express Online that the issue looks reasonably priced. The P/BV was 2.28 which seems to be reasonable with respect to its peers on the basis of data as on Dec, 2020. The management quality of the company is very good and it also has good backing from institutional investors. The issue price is almost in-line with the unlisted (Pre-IPO) market.
Featured in Economic Times- MTAR Tech allotment status: Strong listing gains likely; have you got the shares? Read more at:
Abhay Doshi, founder at Gujarat-based at UnlistedArena.com, who also tracks grey market, said the stock was commanding Rs 485-490 premium in the grey market. “Volatility is one reason for the slight easing of grey market premium. The premiums looked stretched in all recent IPOs due to market frenzy and so they are cooling off a bit,” Doshi said
Featured in Money9- Anupam Rasayan IPO opens on March 12: grey market premium & brokerage view
“Current IPOs are aggressively priced, and soon after Heranba listing the stock came bit down cooling off sentiments in the primary market,” said grey market tracker Abhay Doshi, Founder of Unlisted Arena.com
Featured in LiveMint- Anupam Rasayan IPO: Grey market premium, other details in 10 points
"The recent IPOs are aggressively priced but owing to the bullish sentiments in primary market it seems that the issue will get a good response," says Abhay Doshi, who is the founder of UnlistedArena.com, which deals in pre-IPO and unlisted shares.