UTI AMC grey market premium slips, Mazagon Dock gains; two issues oversubscribed by retail investors

IPO market is again in a busy week, with three initial public offerings having opened for subscription today. These are UTI Asset Management Company; Mazagon Dock Shipbuilders Limited; and Likhitha Infrastructure. All three issues will remain open till Thursday for subscription. In the recent weeks, primary markets have witnessed a rush of IPOs which have been received well by investors across the board. Retail investors have oversubscribed all the issues so far this month. However, after the recent surge of public issues, and run up in stock markets the grey market premiums have been dwindling.

Grey market premium update

“The grey market premium for Mazagon Dock Shipbuilders is at Rs 125 per share while UTI AMC is at Rs 40-50 per share,” said Sandip Ginodia, CEO, Abhishek Securities — which deals in pre-IPO shares. Ginodia added that the premium for UTI AMC has fallen in recent days. Among the three issues that opened for subscription today, UTI AMC’s Rs 2,160-crore issue is the largest. The issue includes only an offer for sale (OFS) by existing investors  State Bank of India, Life Insurance Corporation, Bank of Baroda, Punjab National Bank, and TRP. The issue will make up for 30.75% of the post-issue share capital. Yesterday, in the anchor book allocation UTI AMC allocated 1,16,36,124 equity shares at the upper price band of Rs 554 to 67 anchor investors aggregating to Rs 644.64 crore.

UTI premium slips, Mazagon Docks gains in grey market

Premiums in the grey market have been slipping for UTI AMC but that is not the case for Mazagon Dock Shipbuilders. The state-owned company is available for subscription at Rs 135-145 per share, with a minimum bid lot size of 103 shares and in multiples thereof. “Mazagon Dock shares are trading at a premium of Rs 120-130 per share in the grey market,” Narottam Dharawat, founder, Dharawat Securities told Financial Express Online. The Rs 444 crore issue also consists of only an OFS and no fresh issue. The key competitive advantage for the firm lies in its ability as the only public sector defence shipyard constructing conventional submarines. “At the higher price band of Rs. 145 per share, MDSL’s share is demanding a P/E multiple of 6.1x (to its FY20 EPS of Rs. 23.7), which is at discount to the peer average of 9.3x,” said a report by Choice Broking.

Subscription update

So far the UTI AMC IPO has been subscribed 11% with retail investors subscribing to 20% of their quota. On the other hand Mazagon Dock IPO was oversubscribed by retail investors with the total subscription at 72% of the issue. The Likhitha Infrastructure issue was subscribed 38% in the initial hours with retail investors oversubscribing the issue.