Grey Market sees Strong Performance as Diffusion Engineers Limited IPO witnesses High Demand

Diffusion Engineers Limited, a firm which is known in the sectors of heavy engineering machinery and welding consumables, wear plates, has floated its Initial Public Offering (IPO) that opened on 26 September 2024. The IPO was priced in the band of ₹159 to ₹168 per equity share. It is set to close on September 30, 2024.

IPO Subscription Diffusion Engineers saw strong demand from the very first day of opening of the IPO. It was subscribed more than seven times on the first day it opened with a highest subscription in retail being 33.91 times while Non-Institutional Investors (NIIs) subscribed a voracious 47.08 times. However, qualified institutional buyers remained worryingly less aggressive with a subscription level of just 0.28 times.

Grey Market Premium (GMP): Grey market, being considered as a precursor to the IPO performance before listing, had very good interest in the shares of Diffusion Engineers. By the second day of the IPO, the GMP reached ₹90, which meant close to 53.57% listing gain from the upper price band of ₹168. The movement of GMP shows that the participants of the unlisted market are highly sanguine about the post-listing performance of the stock.
Market Sentiment and Analysts’ Views: Market observers and analysts are mostly positive about the IPO. Optimism apart, market watchers and analysts may have felt a need to be sanguine as the company did fairly well on all financial fronts during FY24, with consolidated revenues growing by a high 10% over the previous year to ₹285 crore. Despite the issue being priced at what some analysts consider fully valued, the long-term investment potential due to the company’s niche market and expansion plans has led to a general “subscribe” recommendation from market experts.
Objective of the Offer and Going Concern Prospects: The proceeds of the issue are to be used as capital expenditure. Suggested sources of finance have been goaded into expansion of present manufacturing facilities and establishment of a new one. This strategic exercise is to increase production capacity and has the prospect of enhancing market share in the specific sectors it serves.

Listing and Beyond Now that the expectations are high, Diffusion Engineers is ready and all set for listing of its shares on both BSE and NSE on October 4, 2024. Subscription rates are healthy, and grey market premiums are quite good, but investors must be reminded that market conditions can change overnight, and those grey market premiums do not guarantee listing gains.

The euphoria surrounding the IPO by Diffusion Engineers Limited is not only about the company’s excellent performance or its market positioning but also investor confidence in its future growth trajectory as underpinned by how the IPO proceeds are strategically aligned to expand. As with all investments, while the initial signs are promising, market dynamics post-listing will ultimately determine the stock’s performance.