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Nykaa sees higher GMP than Paytm

Employees apply make-up as they prepare for work at a Nykaa store in New Delhi, India. File photo (Bloomberg) — Employees apply make-up as they prepare for work at a Nykaa store in New Delhi, India. File photo **(Bloomberg)**

2 min read . Updated: 02 Nov 2021, 11:32 PM IST Ravindra N. Sonavane

Paytm trades at a premium of ₹100 in the grey market against its upper price band of ₹2,150, two dealers said on condition of anonymity.

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Tech unicorns Nykaa and PolicyBazaar are commanding higher grey market premiums (GMP) than One97 Communications Ltd, which runs Paytm, in the ongoing initial public offering (IPO) frenzy. The ₹18,300 crore Paytm IPO will open for subscription on 8 November and close on 10 November. Currently, Paytm trades at a premium of ₹100 in the grey market against its upper price band of ₹2,150, two dealers said on condition of anonymity. Policybazaar parent PB Fintech Pvt. Ltd trades at ₹140 premium from its issue price, while SJS Enterprises Ltd trades at ₹23 premium against its issue price.

Nykaa owners FSN E-Commerce Ventures’ IPO, which closed on Monday, trades at ₹649 premium against issue price of ₹1,125. Sigachi Industries trades between ₹75-95 premium. Nykaa’s IPO closed on Monday with 82 times subscription, while PolicyBazaar’s IPO closes on Wednesday. The grey market is an unofficial market to trade securities of firms that are conducting an IPO. Investors use this off-exchange market to acquire shares over and above the typical allocation limits in an IPO, especially when they are bullish on making a strong listing day gain. While market participants often use grey market premiums as a measure of IPO demand and an indicator of listing day performance, many experts believe these to be a vanity metric, given the off-exchange over the counter nature of the market, which can distort price discovery. “GMP is a vanity figure and doesn’t mean anything. But for the sake of discussion, it seems as if the Paytm model is not understandable to anyone with so many businesses, with none of them making money. Only Paytm Payments Bank makes money and Paytm just owns 49% of that. Definitely, the market turbulence and the issue size of the highest IPO ever are adding more concerns to the same,’’ a dealer said on condition of anonymity.

Grey market premiums are also a function of supply, and generally, much-anticipated IPOs of smaller sizes tend to see high premiums. Given the record-setting ₹18,300 crore issue size of the Paytm IPO, the supply of shares available to high net-worth individuals and retail investors within the IPO itself are high enough to dampen demand in the grey market.

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