HealthCare Global (HCG) IPO, which opens today for subscription, is not finding enough buyers in grey market. HCG grey market premium started at INR25-30 per share after the company announced IPO price band but has fallen in recent days to INR10-15 per share. A corresponding reduction in trading activity is also observed in recent days indicating that the IPO may struggle. Activity has declined significantly in key grey markets of Rajkot, Ahmadabad, and Jaipur and several brokers, otherwise active in the trade, are no longer taking pre-IPO applications.
Although HCG placed 1.34 crore shares with 11 anchor investors at INR218 per share aggregating to INR292.34 crore, weak demand in the grey market may impact subscription levels in the retail category. International Finance Corporation (IFC), Sabre Partners Trust, BNP Paribas Trust Services Singapore Limited as trustee of Nikko Am Asia Health Care Fund, Citigroup Global Markets Mauritius Private Limited, Chennai 2007 C/O Harvard Management Co. Inc and Neptune Investment Funds Neptune India Fund were among the anchor investors.
Investors desirous to invest in IPOs keenly keep an eye on this parallel market for early indications of listing price. Although grey market is an informal setup aimed at high networth individual (HNI) investors, it has proved to be an accurate mechanism for retail investors in the recent past. Among recent IPOs, grey market correctly sensed the eventual listing premiums for TeamLease, Dr Lal Path Labs, and Alkem Laboratories while declining premiums for Precision Camshafts indicated weak listing.
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Despite the weak HCG grey market premium, the offer may sail through as the company is offering only 10% of the net offer to retail investors. As a result, IPO subscription will be guided by QIB and HNI categories.