Nowadays we all know that whenever we talk about share market, one point which comes to mind is “IPO GMP”. The full form of IPO is “Initial Public Offering”, which is the first step of any company in the share market. But “GMP” means Grey Market Premium which is also an important part of the IPO process for shares, which indicates the interest of investors and the profit performance of the IPO. In this article, we will understand the theory of IPO GMP and will know about its use in the market.
IPO GMP:What is this theory?
IPO GMP means “Grey Market Premium” – unlisted shares which are premium which trade in the grey market before the IPO comes to the share market or before its listing. In simple words, from IPO GMP we can find out how much demand is there for the shares of a company and how much interest people have in the IPO that is going to come in the market and if the GMP of any IPO is good or high, it means that there is excitement among the people to buy that IPO. Therefore, if the GMP of an IPO is low, it means that the interest of the people is low or the share market view is weak.
What is the investor impact of IPO GMP?
The effects of IPO GMP depend a lot on the thinking of the investors. When investors apply for any IPO, they expect gains at the time of listing. Listing gains means that when the IPO is listed in the share market, its price should be higher than the issue price. IPO GMP gives investors an idea of the listing price and how much profit it can give them.
Suppose, a company’s IPO is coming at Rs 200 per share, and its GMP in the grey market is Rs 100. So investors think that the listing price of that IPO can be up to Rs 250. In which IPO GMP is an important part which forces investors to think whether it will be safe to invest in the IPO or not.
IPO GMP And Grey Market ?
The grey market is a casual market in which shares trade before the official listing of the IPO. This market is not under the purview of regulatory authorities like SEBI and hence it is an unofficial market. Still, in the grey market, shares are bought and sold quite quickly after checking the IPO GMP. Trading in the grey market is quite risky but it is a place where IPO GMP is estimated.
Understanding the grey market can be a little difficult but understanding the concept of IPO GMP is also important. When there is high demand for an IPO, then the GMP of that IPO is also high and there is a lot of trade in the Grey market premium.
How to Predict IPO GMP?
Predicting IPO GMP is like telling a lie, because first of all, it is better to look at the business model and financial condition of the company. If the company is financially strong and its business model is reliable, then there are chances of IPO GMP being higher. The second factor is market sentiment. If the sentiment of the overall market is positive, then investors show more interest in investing in IPOs, which boosts the IPO GMP.
Investors should invest after looking at IPO GMP and where the IPO GMP is coming from. Many times, there is an estimation behind IPO GMP and investors invest by looking at it blindly. It is important that investors do not just buy on GMP but also look at the fundamentals of the company.
Relation between IPO GMP and Listing Gains
IPO GMP and listing gains have a natural relationship. Listing gains means the value of IPO shares which is higher than the issue price on the day of listing. IPO GMP is an indication of how the northward movement of shares could be on the day of listing. But it is not guaranteed that IPO GMP will be accurate every time. Many times IPO GMP is high but when the shares are listed in the market, then the price comes down. This depends on the market conditions and investors’ sentiments.
For example Paytm IPO, whose GMP was a bit speculative, could not list at that good price on the day of listing.
How to Use IPO GMP?
IPO GMP should be used wisely. If you are a new investor in the market, then look at IPO GMP only as an indicator and do not take a final decision to buy the IPO. IPO GMP reflects the direction of the market, but the final decision should always be made after looking at the business and financial condition of the company before buying.
If IPO GMP is high, it does not mean that the company is successful, but it can be a signal that the investor sentiment in the market at that time is positive about that IPO. Similarly, low GMP also does not always mean negative, rather it sometimes happens that people are just in wait and watch mode.
Latest Update of Waaree Energies Ltd. IPO GMP:
Waaree Energies IPO
IPO Details
Bidding Dates – 21 Oct 24’ – 23 Oct 24’
Min. investment – ₹12843/9 shares
Price Range –₹1427 – ₹1503
Lot Size – 9
Issue Size – 4321.44 Cr
Application Details – For Waaree Energies IPO, eligible investors can apply as Regular & Employee.
Apply as Regular – Price is: Rs.1427.0 – 1503.0. Apply Up to ₹2,00,000
Apply as Employee – Price is: Rs. 1427.0 – 1503.0 . Apply Up to ₹5,00,000
Apply as High NetWorth Individual – Price is: Rs.1427.0 – 1503.0. Apply between ₹2,00,000 – ₹5,00,000
About Company
Founded In – 1990
Managing Director – Mr. Hitesh Chimanlal Doshi.
Waaree Energies is a manufacturer of solar photovoltaic (PV) modules based in India. The company’s product portfolio includes various types of PV modules, such as multicrystalline, monocrystalline, and Topcon modules, which include flexible, bifacial (Mono PERC), both framed and unframed, as well as building-integrated photovoltaic(BIPV) modules.
Waaree Energies operates five manufacturer facilities across India. Four of these are located in Gujarat, at Surat, Tumb, Nandigram, and Chikhli. The company’s fifth unit – the indosolar facility – is in Noida
Financials –
Conclusion
Do not buy an IPO after looking at GMP, because it is possible that its GMP may be high before the shares are listed in the market, but also look at its financial and business fundamentals. Buy it only after that, the market sentiments also depend on GMP. Waaree Energies Ltd IPO is a very good IPO. This is the IPO of a company which is engaged in solar energy. The company’s financials, revenue and profit are very good.
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