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Grey Market Premium and IPO Listing Gain
1.
International Research Journal
of Engineering and Technology (IRJET) e-ISSN: 2395-0056 Volume: 09 Issue: 04 | Apr 2022 www.irjet.net p-ISSN: 2395-0072 © 2022, IRJET | Impact Factor value: 7.529 | ISO 9001:2008 Certified Journal | Page 3244 Grey Market Premium and IPO Listing Gain Pinki1, Aryan2 1Assistant Professor & Department of Commerce, B.P.R College, Kurukshetra, Haryana 2Student & Department of Commerce, B.P.R College, Kurukshetra, Haryana ---------------------------------------------------------------------***--------------------------------------------------------------------- Abstract - Demand for Initial Public Offering ( IPO ) has been very high in the Indian market in 2021. Here retail investors have shown their great interest; the quota of retail investors is first oversubscribed on the very first day of an IPO. It is the right thing that people are investing their money in. But the thing to be seen is that the money people areinvesting, are they looking at the performance of the company or are they investing money by looking at some other thing? In this article, we will know what is an IPO in the primary market. When a new issue comes onto the market. So what is the problem in front of him? We are also a descriptive study of will, the grey market. Whatispremiumand whetherthelisting price of IPO is known correctly from GMP or not? In this, we will study all the IPOs that have come from 1 November 2021 to 28 February 2022. India's market is an emerging one. There are still many opportunities to invest here. In 2021, we saw that retail investors have invested money here. Be it the IPO of any company, first of all, the retail section is full. From our research paper, it will be helpful to know whether listing can be gained by looking at the grey market. Does the price of the grey market affect the listing price of the IPO? Key Words: Grey Market Premium, Meaning of IPO, Listing Gain, Impact on Listing Gain, Cut-Off Price,Retail Investor View 1. INTRODUCTION The capital market of India is an emerging market. We divide the capital market into two parts, a primary market, and a secondary market. When a company issues its shares in the market for the first time. So we call it the primary market. Within this, the company's shares are traded in the market for the first time. When the company raises funds, this offer is called an initial public offering.Therewasa flood of IPO in India in 2021. To invest in an IPO, up to 15000 is needed. That's why retail investors invest a lot of money in this. The second biggest reason is, listing gain, all the people in the market today, just want to earnalistinggain.Itdoes not matter to any investor, what the company does,and what is the management of the company. The investor just means by listing gain, he does not get any interest in the company. When the company issues an IPO, itdecidesthepricebandof the IPO itself. Now the company can keep it for more thanits value and also less. A range of price bands is kept. which max. There is a price; we call it the cut-offprice. WhenanIPO is oversubscribed, all apply at the cut-off price. If the company keeps a higher price band, then investors are less attracted to it. Since the lot size will be less than the higher price band, if the lot size is less, then the number of shares will be less. Due to this, the opportunities for listing gainwill also be reduced. Retail investors just need to gain a listing in the IPO market in India. Now the question is whether we can first find out which IPO listing will give us a gain or not. By the way, if you see it right, GMP is illegal. GMP is such a market where, before the arrival of the IPO, its buying and selling starts. All this happens on trust and this price is updated on different websites like chittorgarh.com, www.ipowatch.in, etc. This rate changes every day according to the trade and as long as it keeps on changing, the listing of the IPO is completed. According to Investopedia 1. An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. An IPO allows a company to raise capital from public investors. The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes a share premium for current private investors. Meanwhile, it also allows public investors to participate in the offering. According to edelweiss 2. An initial public offering (IPO) is the first time a company issues shares to the public. This is when a private company decides to go ‘public’. In other words, a company that was privately-owned until then becomes a publicly-traded company. Before the IPO, a company has very few shareholders. This includes the founders, angel investors, andventurecapitalists.Butduring an IPO, the company opens its shares for sale to the public. As an investor, you can buy shares directly from the company and become a shareholder. According to Bankrate.com 3. Ownership of a company is determined by stock. As a private company, the stock is owned by a small group of shareholders and is not offered to anyone else outside the company. In an IPO, those shares are either sold to the public or more shares are added for that purpose, which is called dilution. If more shares are
2.
International Research Journal
of Engineering and Technology (IRJET) e-ISSN: 2395-0056 Volume: 09 Issue: 04 | Apr 2022 www.irjet.net p-ISSN: 2395-0072 © 2022, IRJET | Impact Factor value: 7.529 | ISO 9001:2008 Certified Journal | Page 3245 added, suddenly the original owners own a smaller proportion of the company, with the public making up the difference. An investment bank determines the value of the company by purchasing the shares to be publicly traded first, assuming the risk. The company itself has already authorized the number of shares it has, so the valuation is divided up over the number of those shares. But once the stock goes to market, buyers and sellers determine the actual value, and the investment bank will attempt to sell what it can. This might result in a windfall for the company, but it could also lose value. IPOs are sought to help grow the company, when the company’s funds aren’t enough to do it on their own, or investors may push for an IPO in order to convert their shares into cash. Sometimes a company isn’t worth anything in liquid cash before the IPO, which is common for tech startups that run on venture capital. In that case, the IPO is a way for the investors to recoup their investments in the absence of revenue. Because filing an IPO requires revealing everything about a company’s finances, it may resist going public if it doesn’t want to disclose certain information. The company’s profitability might hinge on assumptions about its output and efficiency that it isn’t required to report as a private company. There are also expensive fees involved — upwards of millions of dollars. And the negative press from a poor showing can compound to hurt a company even more. 2. LITERATURE REVIEW Chandrasekhar Krishnamurti et. all. 4. According to these, listing gain can be detected from GMP. GMP is an important factor. S Neupane 5. They believe that retail investors come to IPO from big investors. 3. OBJECTIVES 1. To know the meaning of GMP. 2. Factor affecting IPO s listing gain. 3. To know the GMP Impact on listing gain. 4. RESEARCH METHODOLOGY In this paper, we will see whether the GMP of the IPO affects its listing or not. We have taken the history of IPO from websites like money control etc. As we know that there is no official source of GMP, we have taken it from different websites like CHHITOGARH and IPOWATCH from all these sites. Then we will arrange all the data in the form of a table. Then we will find out only after seeing that the listing of the IPO which had GMP has also been done at the same price. 5. MEANING OF GMP Gray market premium is such a market, which does notexist in a formal form. This is a market where the listing premium of an IPO is known even before its listing. This pricedepends on the demand and supply. Many people have described GMP in many different ways. which is like this. According to Investopedia 6. A gray market is an unofficial market for financial securities. Gray (or “grey”) market trading generally occurs when a stock has been suspended from trades of the market, or when new securities are bought and sold before official trading begins. The gray market enables the issuer and underwriters to gauge demand for a new offering because it is a “when- issued” market (i.e., it trades securitiesthatwill beoffered in the very near future). The gray market is an unofficial one but is not illegal. According to Nirmal bang broking 7. grey Market IPO is an unofficial market where individuals buy/sell IPO shares or applications before theyare officiallylaunchedfortradingon the stock exchange. As it is an unofficial over-the-counter market, there are no regulations around it. All transactions are done in cash on a personal basis. Any 3rd partyfirmslike SEBI, Stock Exchange, or Brokers are not involved or back this transaction. Grey market trading is done among a small set of people as there is no official platform or rules defined for this trading. 6. FACTORS AFFECTING IPO ‘S LISTING 6.1 Issue Size- When the company issues its IPO. So the size of the IPO also affects its listing price. So the company will have to face a lot of problems in filling it. If it is less subscribed. Then we will get to see less listing gain on it. 6.2 Company’s Financial Position-The financial position of any company also affects the listing price of its IPO. If the company has a good position, then investors will invest good money in it. So we can say that this factor also affects the listing price. 6.3 Price Band-The price band is the range in which the shares of the IPO are bid. We call that range the price band. If the company keeps this more. So the investment might be less. So the price band also affects the listing. 6.4 GMP-GMP is an informal market. If the IPO price is not doing well in this, then it will also affect the listing. If it is good then investors will invest more.
3.
International Research Journal
of Engineering and Technology (IRJET) e-ISSN: 2395-0056 Volume: 09 Issue: 04 | Apr 2022 www.irjet.net p-ISSN: 2395-0072 © 2022, IRJET | Impact Factor value: 7.529 | ISO 9001:2008 Certified Journal | Page 3246 6.5 Time-It isalso very important. IftheIPOofacompanyis coming when the market is not doing well. Even if that company is not profitable, its listing price will be affected. IPO HISTORY Date IPO Name Cut off Price Listing Price Lot Size GMP 16/02/22 Vedant Fashions 866 950 17 -12 08/02/22 Adani Wilmar 230 274 65 23 31/01/22 AGS Transact 175 176 85 -6 31/12/21 Cms Info 216 242.95 69 -8 28/12/21 Supriya Life sci 274 425 54 130 27/12/21 HP Adhesive 274 319 50 80 24/12/21 Data Pattern 585 864 25 320 22/12/21 Metro Brands 500 436 30 20 21/12/21 CE Info 1033 1581 14 700 20/12/21 Shriram Prop. 118 94 125 -15 17/12/21 RateGain Travel 425 364.80 35 10 14/12/21 Anand Rathi 550 584.45 27 50 13/12/21 Tega Industries 453 753 33 300 10/12/21 Star Health 900 903 16 -15 26/11/21 Tarsons Product 662 700 22 180 23/11/21 Latent View 197 530 76 300 18/11/21 One 97 Paytm 2150 1955 6 -30 18/11/21 Sapphire Foods 1180 1311 12 130 15/11/21 Sigachi Ind. 163 575 90 200 15/11/21 SJS Enterprises 542 514 27 69 15/11/21 PB Fintech 980 1444 15 16 12/11/21 Fino Payment 577 548 25 0 10/11/21 FSN E-co Nykaa 1125 2001 12 750 7. FINDINGS In this study, when we look at the table andfindandfindthat the GMP of whichever IPO was more than the cut off price. Its listing was above and whose GMP was low or was in minus, its listing is below. 7.1 GMP can be found out how much gain/loss the IPO will give. 7.2 This affects the subscription of IPO. 8. CONCLUSIONS We have learned here what is the primary market. This is the market where the company issues its shares for the first time. We also saw that we can make a lot of money from this small amount. But there is also a risk factor here. Retail investor shows great interest here. Then we saw what is GMP? GMP is an informal market. This is illegal by SEBI. But this update happens on the internet. The listing price of the IPO can be ascertained in advance. Whose GMP is HIGH. His listing is also up and the low one, his listing is below. So by doing this study wefoundthatwith GMP we can already estimate the listing price of IPO. Now investors have startedlookingatGMPandnotthecompany's work before investing money in an IPO. Now we are getting to see that people just want listing gain from IPO. They want to get out of it only on the day of listing. REFERENCES [1] https://www.investopedia.com/terms/i/ipo.asp [2] https://www.edelweiss.in/investology/introduction-to- primary-market-79a025/what-is-an-ipo-initial-public- offering-6a7c32 [3] https://www.bankrate.com/glossary/i/ipo-initial- public-offering/ [4] Krishnamurti, C., Thong, T. Y., & Ramanna, V. (2011, August). Grey market for Indian IPOs: Investor sentiment and after-market performance. In 2012 Financial Markets & Corporate Governance Conference. [5] Neupane, S., Paudyal, K., & Thapa,C.(2014).Firmquality or market sentiment: What matters more for IPO investors?. Journal of banking & Finance, 44, 207-218. [6] https://www.investopedia.com/terms/g/graymarket.as p [7] https://www.nirmalbang.com/knowledge- center/guide-on-grey-market-ipo.
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International Research Journal
of Engineering and Technology (IRJET) e-ISSN: 2395-0056 Volume: 09 Issue: 04 | Apr 2022 www.irjet.net p-ISSN: 2395-0072 © 2022, IRJET | Impact Factor value: 7.529 | ISO 9001:2008 Certified Journal | Page 3247 [8] https://www.moneycontrol.com/ipo/ipo-historic- table?classic=true [9] https://www.ipowatch.in/p/ipo-grey-market-premium- latest-ipo-grey.html BIOGRAPHIES Pinki. Being Assistant Professor I am working for my students to boost their knowledge to make them prepare for the future. I believe that Teaching is not just profession. It is divine responsibility to guide and enlighten others which will serve as a small or big path in the life. My self Aryan, I am a student of M.Com. I want to become a professor. Apart from this, I also have good knowledge of the stock market. Here I came as a trader. But when I tradedfor a year, I became interested in brokerage, so I tried to know this market deeply, I found that there is more profit in brokerage than trading, So I tried to became a sub-broker with Upstox. Now along with my studies, I am also managing my brokerage firm. But I have to become a permanentgoal teacher. 2nd Author Photo 1’st Author Photo
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