A Very High Subscription in IPO

In one or my last post I discussed about IPO and why investing in it is profitable. Today one of the IPO's was its last day to apply and thus it was subscribed 300 times overall which is a record on itself.


QIB is financial institutions, Banks etc, NII is high net individuals who have to apply more than 20 lots and then RII like me who applies for 1 lot or more. So for NII to get atleast a single lot they have to apply for 928 lots which will be around 1,38,04,000. For retail it is not guarantee, to get at-least one lot you have a probability of less than 1%.

Now how come this issue is this much over subscribed, this is because it is defense and space related stocks, the issue size is small, and the grey market premium is around 200%. That means if you get allotted then your money will be tripled in just 7-8 days which has driven such a crazy figures.

According to Chiitorgarh.com,

Paras Defence and Space Technologies are primarily engaged in the designing, developing, manufacturing, and testing of a variety of defence and space engineering products and solutions. The company has five major product category offerings - Defence & Space Optics, Defence Electronics, Heavy Engineering, Electromagnetic Pulse Protection Solutions, and Niche Technologies.

Competitive Strengths
Wide range of products and solutions offerings for defence and space applications.
One of the few manufacturers of optics for space and defence application in India.
Companies offerings are aligned with the “Atmanirbhar Bharat” and “Make in India” initiatives by the government.
Strong R&D capabilities with a focus on innovation.
Strong customer relationship with government arms and government organizations.
Strong experienced management.

Looking at the company's details it was going to be good subscription but this crazy subscription was all because of the Grey Market Premium (GMP). The GMP or grey market premium is the rate of secondary market, where people buy shares even before it hit the Sensex or Nifty. So this rate will be almost the rate you get when the issue is listed and thus it plays a very good role for subscription.

I too have applied from 3 accounts and thus waiting for the allotment date to know if I am lucky to get this issue or not. For retails it's all about luck and thus even if you are not lucky in getting the allotment you can always buy it directly on the listing day based on the companies fundamentals, which looks good.

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