Gland Pharma's grey market premium soars ahead of Friday's debut

The retail and HNI portion of the IPO were subscribed just 51 per cent and 24 per cent, respectively

Gland Pharma shares are in demand in the grey market. Ahead of its listing, the grey market premium (GMP) has soared from Rs 10 to Rs 140 a share — an indication that the stock could do well in the secondary market.

At the time of its initial public offering (IPO), however, there was hardly any demand. This discouraged many retail and high networth individuals (HNIs), who subsequently gave the IPO a miss. The retail and HNI portions were subscribed just 51 per cent and 24 per cent. The Rs 6,480-crore IPO managed to sail through solely on the back of institutional investor demand.

Market players said the episode underscores why investors should not entirely place their bets based on grey market activity. “GMP is never the right metric to apply in an IPO. First, it is illegal and not Sebi-regulated; second, it is prone to manipulation, and third, it is volatile. Investors must study the firm’s fundamentals and issue pricing before applying,” said Geetanjali Kedia, senior research analyst, SP Tulsian Investment Advisory Services.

In Gland Pharma's case, the GMP at one point was Rs 200, which later fell to Rs 10.

The price band was set at Rs 1,490-1,500 per share. At the top end, the firm has a market cap of Rs 24,500 crore. It is set for its debut on Friday.