IPO Subscription of JSW Cement Spikes, but Guaranteed Minimum Price Plunges: Uncover 5 Crucial Points before Allotment
The much-anticipated Initial Public Offering (IPO) of JSW Cement has seen strong demand from investors, with the bidding window closing today, August 11. The IPO, worth Rs 3,600 crore, consists of a fresh issue of Rs 1,600 crore and an offer for sale of Rs 2,000 crore by existing shareholders.
By the morning of today, the IPO was subscribed 74% overall. Non-Institutional Investors have received a 93% subscription, while Retail Investors have bid for 94% of the shares reserved for them. The basis of allotment for the IPO is expected to be finalized on August 12.
Despite the strong demand, the Grey Market Premium (GMP) for JSW Cement's IPO has dropped significantly. The GMP, which was around Rs 19 per share before the IPO opened, has now slipped to just Rs 4. This drop in GMP occurred because the initial speculative premium moderated as allotment and price discovery progressed, aligning the GMP with a realistic listing gain.
The current GMP implies a listing price of about Rs 151, just 2.7% above the upper price band of Rs 147. Shares from JSW Cement's IPO are scheduled to list on both NSE and BSE on August 14.
The price band for JSW Cement's IPO has been fixed at Rs 139 to Rs 147 per share. Another Rs 520 crore from the fresh issue proceeds is earmarked for repaying or prepaying certain borrowings. The remaining funds will be used for general corporate purposes.
JSW Cement plans to use about Rs 800 crore from the fresh issue proceeds to part-fund a new integrated cement unit at Nagaur, Rajasthan. Investors can track their allotment via KFin Technologies, NSE, or BSE's allotment status portals by entering their PAN, application number, or demat details.
In summary, the significant drop in GMP occurred because the initial speculative premium moderated as allotment and price discovery progressed, aligning the GMP with a realistic listing gain, despite the IPO’s strong underlying demand and oversubscription. This suggests that while demand was strong, market participants adjusted their expectations closer to the actual IPO price range and listing prospects, limiting speculative premiums.
- The drop in Grey Market Premium (GMP) for JSW Cement's IPO could indicate a shift in investor sentiment, with market participants adjusting their expectations closer to the actual IPO price range and listing prospects, limiting speculative premiums.
- Investors looking to track their allotment status can do so via KFin Technologies, NSE, or BSE's allotment status portals, using their PAN, application number, or demat details.
- As part of its business strategy, JSW Cement plans to use a portion of the funds raised from the IPO, approximately Rs 800 crore, to part-fund a new integrated cement unit at Nagaur, Rajasthan, while the remaining funds will be used for general corporate purposes and repaying or prepaying certain borrowings.
