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With BSE IPO opening for subscription on Monday, 23 January 2017, activity in grey market has picked up after staying dull in December. The IPO, priced in the range of INR805 – 806 per share, is attracting strong demand from HNI clients and brokers in traditional centers like Ahmedabad, Mumbai, Rajkot, and Jaipur. BSE IPO GMP (Grey Market Premium) has shot up lately to INR750 – 800 per application (aka kostak) after anchor allocation list was out. GMP per share is now at nearly 130, marking an increase from the earlier 115 per share when the exchange filed its red herring prospectus (RHP). BSE IPO GMP indicates the shares are likely to list above INR950 -1,000 on 3 February.
In a statement, the exchange said it has allotted 4,628,158 shares to anchor investors at the upper end of the price band. The anchor list included global institutions like Smallcap World Fund, Goldman Sachs, Kuwait Investment Authority, apart from several domestic mutual funds such as ICICI Prudential, DSP Blackrock, SBI Mutual Fund, and Sundaram Mutual Fund.
The IPO of BSE – Asia’s oldest stock exchange – comes after a gap of over a month from the previous public offer. The last mainboard equity IPO in India was of Laurus Labs which closed on 8 December. Meanwhile, activity in the grey market was also affected as a result of demonetization of INR1,000 and INR500 currency notes.
The surge in BSE IPO GMP is an indication of a revival in the informal and parallel market which is not recognized by stock exchanges. Activity in this market is purely on the basis of trust between the parties which are IPO investors and brokers who work on behalf of high net-worth individual (HNI) investors.
It is not really surprising to see BSE IPO GMP rates firming up since most brokerage houses have given positive recommendations to the offer.