Shares of Gland Pharma traded at a Rs 140-150 premium in the grey market, the unofficial market for trading in unlisted shares, on Tuesday. The premium had diminished gradually prior to Diwali.
From the announcement of the IPO price band in first week of November till Diwali, grey market premium of the stock shrank to Rs 20 from Rs 200 per share.
A higher-than-expected price band, anti-China sentiment and tepid response from individual investors are the main reasons for the contraction in Gland Pharma’s grey market premium. However, the scrip is gaining momentum now, dealers said.
Dinesh Gupta, Co-founder, UnlistedZone, said there has been heavy short covering in grey market, as there are a lot of buyers but no seller in the grey market.
“The company has very sound fundamentals, but the buzz has been sentiment driven,” he said. “The broader market has been roaring to new highs. This is paving the way for decent listing.”
There is also a market buzz that some ultra HNIs and a big name from Dalal Street have made heavy bids for the IPO, which has also led to a surge in interest in the stock. ETmarkets.com could not verify that piece of information.
Gland Pharma’s IPO, the biggest-ever offering from the Indian pharmaceutical sector, was subscribed 2.06 times. The IPO will fetch Rs 6,480 crore at the upper end of the price band Rs 1,490-1,500 per share.
Abhay Doshi, a Gujarat-based independent dealer of unlisted shares, said the price band was higher than expected, leading to a drop in grey market premium. Also, the Chinese ownership of the company remains an overhang.
“The backing by QIBs has wiped off the anti-China sentiment. Retail investors are viewing it as a missed opportunity. Also, the uncertainty of US elections have been cleared now,” said Doshi.
The Shanghai Fosun Pharma-owned company’s IPO was a mix of a fresh issue of Rs 1,250 crore worth of shares and an offer for sale of up to 3.49 crore shares. The scrip is likely make its debut on Dalal Street on Friday, November 20.
The grey market is full of herd mentality. Investors more often than not punt on rumours. Narottam Dharawat of Dharawat Securities said conservative bids from investors and sectoral euphoria are adding to the buzz.
“All retail investors have got full allotment. Not much of selling pressure is anticipated on the script,” he said. “Also, pharma has been the flavour of the season. These factors are likely to add to demand for the stock.”