JOIN USInvestors throng unlisted firms ahead of IPO
Looking to buy shares in Paytm ahead of its IPO? You can get them at Rs 22,000 to Rs 24,000 a share in the grey market, where unlisted companies are traded.
Paytm is one of the many unlisted companies that have been witnessing huge investor interest in the grey market. Before the IPO news broke, Paytm traded at Rs 12,500.
Some of the widely traded companies include Chennai Super Kings, National Stock Exchange (NSE), Tata Technologies, Reliance Retail, Ramco group companies, and Sterlite Power. Brokers say many companies trading in the unlisted market, like Nazara Technologies and UTI AMC, tend to do better in the grey market than on the stock exchanges once they are listed.
“In an IPO, we may or may not be allotted shares. Why live with that uncertainty? That’s why I invested in Catholic Syrian Bank before the IPO,” Rina Pabari, director at CR Forex told DH.
Brokers say people show interest in these companies when there is a news trigger. Dinesh Gupta, co-founder of UnlistedZone.com, recalls the same happening when gaming platform Nazara Technologies was IPO-bound. The share price rocketed from Rs 600 to Rs 1,600 recalls Gupta. It was listed in March 2021.
“In this market, share prices are influenced by news triggers and the current relevance of the company. For instance, lakhs of people trade in Chennai Super Kings (CSK) during the IPL season but the volumes come down in the non-IPL season,” says Sunil Chandak from Gennext Investrade, a firm dealing in unlisted stocks.
Estimates are that CSK is trading only 10-15 per cent of the volume traded during the IPL.
Subsidiaries of conglomerates like the Tata group and Reliance Industries are also being traded and in some companies like Reliance Retail, the price band at which shares are traded is at par with the parent company.
Reliance Retail is traded between Rs 1,990 and 2,025 while the parent company Reliance Industries was trading at Rs 2,225.05 on Friday.
Gupta says this is because of the demand and supply. “Unlisted market doesn’t work based on company fundamentals. Equity is limited which is why it all depends on the demand,” he says.
Tata Technologies is another company that has caught investor interest of late, says Chandak. Trading around Rs 1,800, shares of this company were at Rs 1,000 six months ago, Chandak points out.
Firms like Electrosteel Steel was delisted after the insolvency resolution process is also being bought. Gupta says Electrosteel Steel was trading at Rs 15 when the company declared its last results and now trading at over Rs 40.
Premiums are just high in the unlisted market as compared to listed exchanges. UTI AMC was traded at around Rs 950 in the unlisted market but got listed on the bourses at around Rs 500.
While the grey market gives investors heavy returns, brokers caution investors that the price band can be quite wide like in the case of Merino Industries that has a band of Rs 2,600 to Rs 2,900.