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Analysis Of Grey Market Premium (GMP) In India: With Special Reference To Tatva Chintan Intial Public Offering (IPO)

Investment is a business way of assets in which later form as a generating income or appreciation. Appreciation means increase of asset value over a time, grey market were also known as parallel market where the commodity distribute through different channel but didn't comes as authorized by the original manufacturer or trade mark proprietor. But this does not considered illegal.

Many where misconception about grey market are like black market or white market but grey market is totally different from black market and white market. White market is a open market which goes according to rules and regulations., in same way black market is a illegal market where goods trader by smuggler into the country. So grey market is something which doesn't comes under an illegal trade or authorized one to follow rules and regulation.

Grey Market:

Grey market is a market is a market place where a goods or financial securities being distributed in unofficial manner but does not count under illegal trade. All transaction are in cash terms without any regulatory or governing authority.

Initial Public Offering (Ipo) Under Grey Market:

An IPO grey market where share are being bid and offered by traders unofficially without any legal authorization. This IPO grey market begins before issue of shares by the company as IPO.

This is an unofficial market where there are no rules and regulations should be following. Market regulators like SEBI (securities and exchange board of India) are not involved in business transactions. The regulator doesn't endorse this either.

Grey markets are generally run by a small set of individuals. Also all deals are based on mutual trust.

Grey Market Premium:

The Grey Market Premium is an unofficial market. Here the new shares or share of the company bringing the IPO are bought and sold even before their listing on any of the exchange procedure.

Grey market premium helps in price discovery of a stock- furthermore; the premium can be negative or positive depending on the demand and supply of shares. This concept of the grey market premium is for smart investors.

Tatva Chintan Pharma IPO:

They are a specialty chemicals manufacturing company engaged in the manufacture of a diverse portfolio of structure-directing agents (SDA), phase transfer catalysts (PTC), electrolyte salts for super capacitor batteries and pharmaceutical and agrochemical intermediates, and other specialty chemicals (PASC).

Their Company is the largest and only commercial manufacturer of SDAs for zeolites in India. It also enjoys the second-largest position globally

Example Of Grey Market Premium -Tatva Chintan IPO:

Specialty chemical manufacturer TATVA CHINTAN pharma chemical is expected to make it stock market debut on Thursday i.e., July 29.2021. Its issue price was fixed at rupees 1,073-1,083 apices. The share allotment of the initial public offering (IPO), which had opened for subscribing on July 20, was finalized on Wednesday.

The rupee 500 core IPO subscribed nearly 180 times on the final day with the retail segment subscribed 35 times, institutional segment 186 times and non-institutional 516times.

A day prior to its listing on the leading Indian stock exchanges BSE and NSE, tatva chemical shares are available at the premium (GMP) of rupees 1,130 in the grey market, market observers noted, which they said indicates a strong listing on the bourses.

Incorporated in 1996, the company is engaged in the manufacture of a diverse portfolio of structure directing agents (SDAs), phase transfer catalysts (PTCs), electrolyte salts for super capacitor batteries and pharmaceutical and agrochemical intermediates and other specialty chemicals (PASC). The company operates through two manufacturing facilities situated at Ankleshwar and Dahej in Gujarat.

Many brokerages had recommended 'Subscribe' rating to the issue. Motilal Oswal in a note said, ''We like TCPCL due its leadership position, wide product portfolio, strong client relationship and high entry barriers. The company is expected to witness strong growth for next 2-3 years given its expansion plans. It is well placed to tap opportunity in the fast growing specialty chemical space with increasing focus on green chemistry by leveraging its strong R&D capabilities. The issue is valued at 45.9x FY21 P/E on post issue basis, which appears reasonable compared to peers (avg. P/E of 59x), as it enjoys higher earnings growth (62% CAGR vs. avg. 38% CAGR for peers over FY18-21).''

TCPCL is the largest and the only manufacturer of SDAs (40% of revenue) for Zeolites in India while it is the 2nd largest globally. In case of PTC (27%), it is the largest producer in India and one of the global leaders.

Another domestic brokerage firm HDFC Securities noted that the company is led by a well � qualified and experienced management team, which has demonstrated its ability to manage and grow its operations and has substantial experience in the sectors in which it operates. ''Its SDA and PTC products have various applications in green chemistry, which is pertinent considering the growing focus on green and sustainable technologies. The company has accordingly, undertaken various 'green' chemistry processes such as electrolysis,'' it said.

''The company focuses on new products either through backward/forward integration, strong customer and opportunities on account China issues will benefit the company in the medium term. Considering positive momentum in the chemical sector. We are positive on the long-term prospects of the Company,'' Anand Rathi said in a note.

Grey markets are basically unauthorized investment market. So investment on grey market premium is unguaranteed as it is outside SEBI. In this market they won't provide real shares to traders and investors.

The premise of the contract is the trust and a slip of paper. Many expect are advised that investing in grey market are too risky as it is outside SEIB. Also as a investor he/she must be well aware of the risk and procedure of grey market investment.

It also states that smart investors are the right candidate for the investing on grey market. Newbie for investment are told to not invest in grey market as they are new to the investment and share market. So it can be easily made them fool.


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