GNG Electronics IPO sees robust demand on Day 1; subscribed 8.5x, GMP hints at 44% listing gain

GNG Electronics launched its initial public offering (IPO) on Wednesday, attracting substantial attention from investors. The three-day issue, set to close on July 25, has demonstrated robust demand with a subscription rate of 8.52 times so far on its opening day. The IPO offers a fresh issue of equity shares worth Rs 400 crore and an offer for sale of 25.5 lakh shares by promoters, culminating in a total issue size of Rs 460.43 crore. The price band for the IPO is set between Rs 225 and Rs 237 per share.

The IPO aims to raise capital primarily for debt repayment and to bolster working capital. The company, recognised for refurbishing laptops and desktops, operates in multiple regions including India, the US, Europe, Africa and the UAE.

On Day 1 so far, the IPO received bids for approximately 12.08 crore shares, significantly surpassing the 1.41 crore shares available. The non-institutional investors' section saw a subscription of 17.75 times, whereas the retail investors' segment was 8.51 times oversubscribed. Meanwhile, the qualified institutional buyers' (QIB) category was booked 1.54 times.

GNG Electronics IPO was last seen commanding a grey market premium (GMP) of Rs 105. Based on the upper price band of Rs 237, the estimated listing price stands at Rs 342, implying a premium of 43.88 per cent.

"At a higher price band, GNG is demanding a P/E multiple of 39.1x based on FY25 EPS of Rs 6.1 and EV/Sales of 1.9x, these valuations appear to be fully priced. While the company benefits from its partnerships with large-format retailers like Vijay Sales and OEMs such as HP and Lenovo, the sector faces challenges from unorganised players, tightening regulations, and pressure on margins due to the nature of refurbished device pricing. Despite these challenges, GNG's focus on value-added services, tailored ICT solutions, and organized ewaste handling gives it a niche positioning in the market," stated Choice Equity Broking.

"Growth prospects remain healthy with increased demand for affordable digital devices and sustainability-led practices, though margin expansion may remain limited due to competitive pressures and dependency on large clients. Therefore, considering its niche market position, scalable business model, and long-term growth potential, we recommend a 'Subscribe for Long Term' rating for the issue," the domestic brokerage added.

Motilal Oswal Investment Advisors, IIFL Capital Services and JM Financial are acting as the book-running lead managers for the issue, with the tentative listing date set for June 30.