Find out how the Tamilnad Mercantile Bank IPO is faring in grey markets

The Rs.831.60 crore IPO of Tamilnad Mercantile Bank Ltd consists entirely of a fresh issue of 158.40 lakh shares. The IPO size is calculated at the upper band of Rs525 but could change depending on the final discovered price. The issue has been priced in the band of Rs.500 to Rs.525 per share and the IPO allotment price will be discovered post the book building. 

The issue opened for subscription on 05th September 2022 and closes for subscription on 07th September 2022. The stock is scheduled to list on 15th September 2022. The GMP trading normally starts about 3-4 days prior to IPO opening and continues till the listing date. In the case of TMB, there is GMP data available from 02nd September onwards.

There are 2 factors that affect the GMP. Firstly, the market conditions have a deep impact on the GMP. Secondly, the extent of subscription or oversubscription of the segments also has a deep impact on the GMP as it is indicative of investor interest in the stock.

There is one small point to remember 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 can eventually turn out.

While the GMP is just an informal approximation, it has been observed to be a good mirror of the real story. More than the actual price, it is the GMP trend over time that really gives insights about which direction the wind is blowing. Here is a quick GMP summary for Tamilnad Mercantile Bank Ltd over the last few days for which GMP is available.

In the above case, the GMP trend shows a sharp fall in the grey market premium from Rs35 per share to Rs15 and the general trend has been edging lower. There is a specific reason for this sharp fall in the GMP. The anchor placement of shares was done at Rs510 against the upper price band of Rs525. The normal practice has been that companies allot anchor shares at the upper end of the price band. This decision brought down GMP sharply.

Of course, we have to await for the actual subscription numbers to flow in as that would have a deep impact on the GMP. The GMP would also depend on how the subscription numbers pan out for the issue over the 3 days of the issue. If the subscription numbers are very strong, one can expect a surge in the GMP.

Since the anchor allotment has been done at Rs510, we will consider the price of Rs510 as the benchmark evaluation price rather than the upper band. If you consider Rs510 as the indicative price, then the likely listing price is being signalled at around Rs.525 per share. One data point to track will be the subscription update on the stock as that would chart the GMP course from here.

The GMP of Rs.15 on a likely anchor-based pricing of Rs.510 indicates a listing premium of just about 2.94% over the listing price. That presupposes a listing price of approximately Rs.525 per share, when Tamilnad Mercantile Bank Ltd lists on 15th September 2022. 

GMP is an important informal indicator of likely listing price, although it tends to be quite dynamic and changes direction with the flow of news. However, investors must note that this is just an informal indication and has no official sanction.