Grey Market Premium of Paytm IPO

The Rs.18.300 crore IPO of One97 Communications (Paytm) consisted of a fresh issue of Rs.8,300 crore and an offer for sale of Rs.10,000 crore. The issue had been priced in the band of Rs.2,080 to Rs.2,150 per share and the price has been discovered at Rs.2,150. The issue had closed for subscription on 10-Nov and the basis of allotment had been finalized on 15-Nov.

Shareholders are expected to get their refunds on 16-Nov and their demat credits by 17-Nov and the stock is likely to list on Thursday 18th November. Ahead of listing, one of the key parameters for evaluating the potential listing is the GMP or the grey market price.

A word of caution here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has proved to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance would be.

While the GMP is just an informal approximation, it has been generally seen to be a good mirror of the real story. More than the actual price, it is the GMP trend over time that really gives the insights about the stock being upgraded or downgraded.

One of the key factors that impacts the GMP in most cases, is the extent of oversubscription. Now, Paytm IPO was oversubscribed just about 1.89 times overall. On a granular basis, it was the QIB segment that led the way with 2.79X subscription while HNIs were just 0.24X and Retail was 1.66X. That has led to the GMP premiums tapering in the last few days since the start of November.

As per updates coming in on Tuesday, 16-Nov, the One97 Communications (Paytm) IPO is commanding a premium of just about Rs.30 over the issue price in the grey market. The GMP has retraced sharply from a high of Rs.150 on 07 November to Rs.70 on 09 November and down to just Rs.30 in the last 2 days, indicating a listing close to the issue price.

Check - Paytm IPO - Subscription Day 3

The current GMP of Rs.30 for One97 Communications (Paytm) translates into a mere 1.40% premium over the discovered price of Rs.2,150. It also hints at a listing price of approximately Rs.2,180 when the stock lists on Thursday 18-Nov.

Of course, subsequent price performance will depend on HNI selling as well as institutional interest in the stock, but prima facie it does indicate a tepid listing for One97 Communications (Paytm).

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