Paras Defence IPO: What GMP signals before subscription opening date

Market


Paras Defence IPO (initial public offering) is opening on 21st September 2021 and it will remain open for bidding till 23rd September 2021. Promoters of the company have fixed Paras Defence IPO price band at 165 to 175 per equity share. However, before opening date Paras Defence shares are trading at a premium of 210 in the grey market. According to market observers; small issue size, reasonable valuations and focus on defense sector may generate huge fancy in the IPO.

Paras Defence IPO GMP (grey market premium)

Market observers said that Paras Defence IPO GMP today is 210 — 10 higher from its yesterday’s grey market premium of 200. They said that Paras Defence IPO grey market premium has shot up from 160 to 210 in just three days, which reflects ‘highly bullish’ sentiment for the public issue. They went on to add that the small issue size and attractive valuations may continue to attract grey market attention as the issue opening date is fast approaching.

What this GMP mean

Market observers went on to add that GMP reflects expected listing premium by the grey market. However, they maintained that it’s an unofficial data and it keeps on changing from day to day. As Paras Defence IPO GMP today is 210, this means the grey market is expecting listing of the public issue to be around 385 ( 175 + 210) — 120 per cent higher from its issue price of 165 to 175.

Market observers maintained that if this bullish sentiment in the grey market continues, then we can expect strong response from the bidders on 21st September, when the issue gets opened for subscription. However, they advised the potential bidders to look at the financials of the company as well because GMP should not be the only criteria for subscribing a public issue.

Highlighting the strong fundamentals that may further boost the short-term sentiment in regard to Paras Defence IPO; Abha Doshi, Founder at UnlistedArena.com said, “The company has a strong order book of around 305 crore as on June 30, 2021 with a well diversified product portfolio in defense and space optics, defense electronics, heavy engineering and niche technologies. However, on the operational front, top and bottom line growth seems to be muted. At the upper band of Rs.175, post fresh issue the asking P/E comes around 43x. The government’s focus on ‘Make in India’ and higher budgetary allocation for defense sector may prove beneficial to such companies. Also, liberal policies and PLI scheme for drones will further benefit such companies.” He said that small issue size, reasonable valuations and focus on defense sector may generate huge fancy in IPO.

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