What GMP is signaling about the public issue

Car Trade IPO: The public issue of Car Trade Tech is available for subscription till 11th August 2021. The public issue worth 2,998.51 crore got subscribed 0.99 times by day two of bidding. But, market observers are expecting it to pick up further as there is still one day left for bidding. Market observers said that when the IPO was about to open for subscription, Car Trade shares were trading at a high premium of 450 per equity share in the grey market. But, it has been trading at 225 to 250 per share premium for the last three days, indicating stability in the grey market in regard to Car Trade shares. Car Trade IPO GMP today is 255, 10 up from its previous day’s premium of 245. This means, grey market is expecting around 15 per cent listing gain from the public issue. Market observers went on to add that first two days subscription status and grey market together indicates that the issue will have moderate to reasonable listing gain.

Car Trade IPO grey market premium

Market observers were of the opinion that Car Trade stocks have become stable in the grey market at around 225 to 250. Since, it has happened when its bidding is still going on, we can expect reasonable listing gain from this public issue as Car Trade IPO grey market premium today is indicating around 15 per cent listing gain from the public issue.

What this GMP means?

As per the market observers, GMP of an IPO means expected listing gain from the IPO after listing. Since, Car Trade IPO GMP today is 255, it simply means grey market is expecting Car Trade share listing at around 1873 ( 1618 + 255) — around 15 per cent higher from its issue price of 1585 to 1618 per equity share.

Speaking on why Car Trade IPO may deliver moderate listing gains; Avinash Gorakshkar, Head of Research at Profitmart Securities said, “Whole money coming from the IPO is going into the pockets of the promoters as it is completely an Offer for Sale (OFS). So, there will be neither any monetary gain nor any monetary loss for the company from this public issue.” He said that grey market is also having noticed that and probably that could be the reason for Car Trade GMP coming down to 225 to 250 range after opening at robust 450 levels.

Highlighting the fundamentals favouring Car Trade IPO; Saurabh Joshi, Research Analyst at Marwadi Shares and Finance said, “Considering the FY-21 adjusted EPS of 22.06 on a post-issue basis, the company is going to list at a P/E of 73.35 with a market cap of 7,416 crore. There are no listed companies in India that engage in a business similar to that of the Company. Accordingly, it is not possible to provide an industry comparison in relation to the Company. We assign subscribe rating to this IPO as the company has a profitable and scalable business model with a focus on data science to provide superior solutions and is well-positioned to benefit from the growth of the automotive sector and digitalization.”

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