The ‘grey’ market, the unofficial one, for initial public offers (IPOs) is witnessing a flurry of activity in small towns of Gujarat and Rajasthan and also in cities like Mumbai and Kolkata.
The IPO grey market, which had gone into a tailspin after the debacle of Reliance Power’s IPO in 2008, has revived after punters tasted success in listing of some small IPOs recently.
If fact, unlike the earlier word-of-mouth method, operators are now using websites to announce premiums for IPOs and also executing large deals through the internet.
According to grey market players, every new IPO is generating nearly Rs 5 crore turnover from a single centre and in the past couple of months, the market has witnessed a turnover of over Rs 50 crore.
“The grey market is bustling with activity as two new issues are opening every week. After Reliance Power’s IPO, the grey market was dead, as debts piled up on punters after shares listed at a huge discount. However, volumes have picked up in the past couple of months and the grey market is eagerly awaiting the IPOs of real estate companies which have filed their prospectus with the regulator, as realty stocks are (now the) favourite among punters," said a top grey market operator from Gujarat. Among the ongoing IPOs, the issue of Persistent Systems, having a price band of Rs 290-310, is having a grey market premium of Rs 150-200. IL&FS Transportation has a premium of around Rs 50 on the price band of Rs 242-258. Pradip Overseas was quoted at a premium of Rs 18 on the price band of Rs 100-110 and United Bank of India was quoted at a premium of Rs 10 in the grey market on the issue price of Rs 66.
Lodha Developers, Ambiance, Emaar MGF and Nitesh Estates are the leading realty companies yet to open their books for subscription despite regulatory approval. Together, these four companies are looking to mop up around Rs 8,000 crore through their IPOs.
Others who have filed a prospectus with the Securities and Exchange Board of India include Sahara Prime City, Jaypee Infratech and the Prestige Group.
The players in this market include big brokers, high net worth individuals (HNIs) and also merchant bankers, in some cases. To get an IPO subscribed, often brokers and merchant bankers rig the premium in the grey market to attract investors. Once the issue is listed, punters buy the share on the exchanges at a higher price to settle their grey market trades, which is why share prices witness sharp rises after listing.
Recently, Man Infraconstruction Ltd, ARSS Infrastructure, Syncom Healthcare and Jubilant Foodworks listed at a healthy premium to their issue prices. ARSS Infrastructure was listed at Rs 630, a 40 per cent premium to the issue price, whereas Jubilant Foods doubled within a few trading sessions.
