What's behind falling grey market premiums? After Sula Vineyards, GMP of Landmark Cars turns negative

After Sula Vineyards, the grey market premium (GMP) of Landmark Cars has eroded fully, with the issue commanding a discount of Rs 5 over the upper end of the IPO price band at Rs 506. The Rs 552 crore IPO did not breach the half way mark till 11.30 pm.

Landmark Cars was commanding a GMP of Rs 54 last week, but last heard that has fallen into the red territory (down Rs 5) today. The IPO commanded a GMP of Rs 7 on Wednesday, Rs 11 on Tuesday and Rs 30 on Monday. 

Abhay Doshi, Founder at UnlistedArena.com, who also tracks grey market trends, said: "The response to the recent listings such as Dharmaj Crop Guard and Uniparts India came in lower than Street expectations. Mostly IPOs that are underway these days are OFSes; they are either no unique businesses and/or have no strong revenue growth visibility. Add to that is the volatile global scenario."

At the upper end of the price band Rs 481-506, Landmark Cars IPO is asking a valuation of 28 times FY22 earnings per share. Analysts said the IPO is a play on premium, luxury car sales in the domestic market. Religare Securities is neutral on the IPO, Canara Bank Securities has an avoid rating on the issue, Anand Rathi Securities finds it a long-term subscribe. Choice Broking has 'Subscribe with Caution' on the issue. 

"At higher price band, the company is demanding an price to sales multiple of 0.7 time, which seems to be significantly higher than the international peers having almost similar business profile. Thus we assign a “Subscribe with Caution” rating for the issue," Choice Broking said.

Arihant Capital said Landmark Cars has demonstrated stellar revenue growth at 52.17 per cent last year. It is well placed in its target markets with little threat from bigger players, Arihant Capital said.

"Considering its strategies to gain from entire customer value chain, entering the EV segment and plans for growing presence in after sales segment, the company is well poised to grow its market share in the years to come. We recommend that investors subscribe for listing gains," it said.

Sula Vineyards, whose IPO closed on Wednesday, now trade at a Rs 7 discount to its upper end of the price band at Rs 350.  This was the second day when Sula's GMP was in the red.  The IPO was subscribed 2.33 times in its 3-day bidding process.

Meanwhile, Abans Holdings, whose IPO would conclude today, was commanding a thin premium of Rs 2 per share from a high of Rs 21 recently. This IPO was subscribed 54 per cent so far.

Also Read: Landmark IPO subscribed 43% on Day 3 so far; grey market trend turns weak