grey market: Demand soars for unlisted stocks of select IPO hopefuls

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MUMBAI: PharmEasy, Bikaji Foods and Tata Technologies are among the companies that have a huge demand for their stocks, although they are not listed. Those shares are changing hands or are being offered at a minimum 32% premium over their previous trades, dealers said.

IIFL Securities has sold over Rs 100 crore worth of PharmEasy stock to wealthy individuals at Rs 103 a share. Those shares traded at Rs 78 earlier when promoters did not release much stock. PharmEasy is estimated to be valued at $7.5 billion going by scientific calculation, said a dealer.

“This year’s select blockbuster IPOs triggered more interest in unlisted shares where investors are seeking early windfall gains,” said Tushar Bopche, cofounder of BrainStation India, a startup incubator involved in the financial markets. “In the past few weeks, there have been some block transactions with institutions selling shares to wealthy individuals at a high premium.”

Promoters of companies generally release shares to asset management companies, which in turn sell them down booking profits. Otherwise, business owners sometimes issue shares to brokerages in smaller quantities.

Tata Technologies shares have more than doubled in the past year. Those are now trading in the range of Rs 5,200-5,300 apiece.

“There has been phenomenal growth in the company,” said Rahul Thalia, Director, Sarffin Financial Advisors. “They have been posting very positive quarterly results and the future looks very bright. Big institutional buyers are in the unlisted market for this, and the valuation is fully priced in.”

European aerospace major Airbus selected global engineering and product development digital services firm Tata Technologies as a strategic supplier two weeks ago. That has burnished the allure of the stock, which will likely be listed later.

However, investors should be cautious of a few factors before buying into unlisted shares. The Right of First Refusal (RoFR) and non-RoFR are among those. An investor should convert RoFR into non-RoFR through a formal procedure with the company secretary. Without such conversion, an investor will find it difficult to exit the investment.

Bikaji shares are on offer for Rs 450 apiece. A local brokerage, which may have acquired those shares at about Rs 310 per share, intends to sell those at higher prices.

“Bikaji, known for Indian snacks, will likely have enough listing gains whenever it happens,” said a senior executive from the brokerage.

Availability of Bikaji shares appears to be tight. Dealers expect the floating stock to rise in the coming days. Many brokerages are approaching the company promoters with a proposal to buy those unlisted shares. The proposed initial public offer (IPO) may be launched soon as the company is reportedly seeking a valuation of $1 billion.

Unlisted shares are also called pre-IPO shares as listing happens over a period of time although the exact date is not yet announced. Once the date is announced, shares start trading in the grey market.

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