Pentagon Rubber Ltd SME-IPO lists at 85.7% premium, ends slightly lower

Pentagon Rubber Ltd had a strong listing on 07th July 2023, listing at a sharp premium of 85.7%, but subsequently gave up gains to close lower for the day compared to the listing price. One can almost say that the stock had select a wrong day to list as the Nifty was down 166 points and the Sensex was down nearly 505 points on Friday. While the stock did show some bouts of volatility during the day after a very strong listing, it closed marginally below the listing price on the first day of trading on the NSE. In fact, it closed at the 5% lower circuit filter calculated on the listing price. However, the stock closed comfortably above the IPO price. With subscription of about 106.20X  overall and QIB subscription at 27.62X, the listing was expected to be very strong, at the very minimum. Here is the Pentagon Rubber Ltd listing story on 07th July 2023.

The stock of Pentagon Rubber Ltd did show a lot of strength during the day, and closed well above the IPO price, although below the listing price on the NSE. Being an NSE SME IPO, it is only traded on the SME segment of NSE. Pentagon Rubber Ltd opened 85.7% higher and the opening price turned out to be the high price for the day. With subscription of 130.70X for the retail portion, 153.33X for the HNI / NII portion and 27.62X for the QIB portion; the overall subscription was also quite healthy at 106.20X. The subscription numbers were so strong that it allowed the stock to list at a huge premium, although the premium did not sustain at close due to the sharp correction in the market.

The SME IPO of Pentagon Rubber Ltd was priced in the IPO price band of ₹65 to ₹70 with the IPO price being eventually discovered at ₹70. The issue was a book building issue. On 07th July 2023, the stock of Pentagon Rubber Ltd listed on the NSE at a price of ₹130, a premium of 85.7% on the IPO issue price of ₹70. However, the stock faced pressure at higher levels and eventually closed the day at a price of ₹123.50, which is 76.4% above the IPO price and 5% below the listing price of the stock on the first day of listing. In a nutshell, the stock of Pentagon Rubber Ltd  had closed the day exactly at the lower circuit price for the stock of 5% with only sellers and no buyers . The lower circuit price on listing day is calculated on the listing price and not on the IPO price for the SME listed stocks on NSE. The opening price actually turned out to be the high price of the day.

On Day-1 of listing i.e., on 07th July 2023, Pentagon Rubber Ltd touched a high of ₹130 on the NSE and a low of ₹123.50 per share. The opening price turned out to be the high point while the stock closed at the low point of the day. Incidentally, the closing price also represented the 5% lower circuit price of the stock for the day, which is the maximum that the SME IPO stock is allowed to move in the day. What is truly appreciable is that the stock closed strong despite the overall Nifty facing some psychological resistance at the 19,500 levels. The stock closed at the 5% lower circuit with 4,000 sell quantity and no buyers. For the SME IPOs, 5% is the lower limit on the listing price on the day of listing. Here is the gist of the price discovery for Pentagon Rubber Ltd in the pre-open session of the day.

Data Source: NSE

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Pentagon Rubber Ltd stock traded a total of 8.08 lakh shares on NSE SME segment amounting to value of ₹1,028.26 lakhs on the first day.  The order book during the day showed a lot of buying with the buy orders consistently exceeding the sell orders at any point of time. However, selling pressure was witnessed in the second half of the trading session. That also led the stock to close at the lower end of the circuit filter. It must be noted here that Pentagon Rubber 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, Pentagon Rubber Ltd had a market capitalization of ₹95.21 crore. It has a total of 77.10 lakh shares as the issued capital of the company. As stated earlier, since the trading is on the T2T segment, the entire volume of 8.08 lakh shares during the day is accounted for only by delivery trades.
Here is a quick background about the company in question. Pentagon Rubber Ltd, is an SME IPO on the NSE which had opened for subscription on 26th June 2023. The company, Pentagon Rubber Ltd, was incorporated in the year 2004 and it manufactures rubber conveyor belts, transmission belts, rubber sheets and elevator belts. These are advanced precision rubber products requiring a high degree of technological finesse. The manufacturing plant of Pentagon Rubber Ltd is located in Dera Bassi in the state of Punjab. It is roughly 25 KM away from the city cum state of Chandigarh.

Pentagon Rubber has one of the longest conveyor belting presses in India with a production capacity of 21 metres in a single stroke. The unit has a total production capacity of more than 300 square KM of rubber belts on an annual basis. To boost its R&D efforts, the company also has modern laboratory that can produce conveyor belts as per most of the global standards.  Pentagon Rubber Ltd has a fairly large domestic and global export market and has received several accolades in India and abroad.