Syrma SGS Technology IPO subscribed 0

Syrma SGS Technology IPO subscribed 0.85% so far on day 2, GMP steady; should you bid?

Syrma SGS Technology IPO opened for subscription last week on Friday and garnered a decent response on the very first day. On the secondary day of the subscription window, the issue has been subscribed a total of 0.85 times with retail investors leading the charge. The Rs 840-crore public issue is still open for subscription for investors till Thursday, August 18 and investors can bid for the shares of the engineering and design company in the fixed price band of Rs 209-220 per share. Ahead of its listing, the shares of the company are trading at a premium of Rs 15 per share in the unlisted space. The grey market premium has held steady since the IPO opened. Retail investors lead bidding

Retail investors have subscribed to 2,05,79,180 equity shares of Syrma SGS Technology against the 1.4 crore on offer for the category at the market closing on Tuesday. This is 0.1.47 times the portion reserved for them. Non-Institutional Investors (NII) have subscribed to the issue 0.63 times with bids coming in for 37,91,952 equity shares against the 60,03,012 shares on offer for NIIs. Qualified Institutional Buyers (QIB) are yet to enter the primary market for Syrma SGS Technology shares in significant numbers bids received for just 952 shares. 50% of the issue is reserved for QIBs while 15% is for non-institutional investors and 35% for retail investors. Shares of the company are likely to list on the stock exchanges on August 26. 

The IPO of SGS Technology is a mix of a fresh issue of equity shares and an offer for sale (OFS) by existing investors of the company. Of the Rs 840 crore issue, Rs 766 crore is a fresh issue of equity and Rs 74 crore is an offer for sale (OFS). The company has said that of the amount raised, it will utilize Rs 132 crore for working capital and Rs 403 crore will be deployed for capacity expansion at its Chennai plant. Promoter’s shareholding will be cut to 47.42% post issue while public shareholding will increase to 52.58%.

Should you subscribe?

Analysts at Geojit Financial services have a ‘Subscribe’ rating on the issue. They said that at the upper price band of Rs 220, SGS Technology is available at a P/E of 50.7x (FY22), which is available at a discount to its peers. “Considering its good peer financial performance, strong focus on R&D, capacity expansion plans, positive industry outlook with government support through PLI schemes and China plus one strategy of multinational companies, we assign a “Subscribe” rating for the issue on a medium to long term basis,” analysts said.

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Ventura Securities valued the IPO at FY22 P/E of 50.7X, which is lower than its peers Amber Enterprises at 69.9X and Dixon Technologies at 121.2X. “Considering the sector tailwinds and strong fundamentals of SYRMA, we recommend a SUBSCRIBE rating,” the brokerage firm said.