CarTrade IPO: Grey market premium on shares declines significantly ahead of listing

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CarTrade IPO: Grey market premium on shares declines significantly ahead of listingCarTrade Tech shares, trading at a premium in the grey market, have been falling significantly since the opening of the public issue for subscription last week. It was trading at a premium of around 10 percent over the issue price on Thursday morning, ahead of its listing on Friday (August 20).

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The IPO of the leading multi-channel auto platform has received an overwhelming response from investors.

What is the official price and grey market premium?

Shares were available at a premium of Rs 150-170, or 9.3-10.5 percent, in the grey market, IPO Watch and IPO Central data showed. This resulted in a trading price of Rs 1,768-1,788 per share, against the upper band of Rs 1,618. The price band of the issue is Rs 1,518 – 1,618.

When the IPO opened on August 9, the grey market premium was Rs 400 or 24.7 percent, over the issue price. Since then, it has been volatile and consistently falling.

Why is it falling?

“Due to the disappointing listing of Krsnaa Diagnostics and Windlas Biotech, the overheated IPO fever, aggressive pricing and increasing financing cost, investors are cautious, leading to the fall in grey market premium,” Prashanth Tapse, VP Research, Mehta Equities, told Moneycontrol.

The IPO was subscribed 20.29 times during August 9-11 as institutional and non-institutional investors provided strong support.

The reserved portion of qualified institutional buyers (QIBs) was subscribed 35.45 times and that of non-institutional investors 41 times. The retail portion was booked 2.75 times.

“As per our expectation, the IPO got oversubscribed, mainly due to the strong brand, better technology platforms, and a profitable and scalable business model. Further, in terms of valuations, the post-issue FY2021 PE works out to 73.4x (at the upper end of the issue price band). There are no listed peers for comparison. However, the company is doing better, compared to its unlisted peers in terms of financials,” said Amarjeet Maurya, AVP, Mid Caps, Angel Broking.

CarTrade IPO: has, so far, mopped up Rs 2,998.51 crore. it’s totally an offer for sale (OFS) by existing shareholders.

CarTrade, a multi-channel auto platform, covers all vehicle types and value-added services, and operates under several brands namely CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz.

The company enables new and used automobile customers, vehicle dealerships, vehicle OEMs and other businesses to buy and sell their vehicles, through these brands.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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