eMudhra IPO: GMP and Other Important Details

Since the beginning of 2022, equity markets have been volatile. Investment in stocks these days seems like there's a good chance you'll lose money rather than make some quick bucks.

What's the next option? Investing in IPOs.

But even investing in IPOs has resulted in losses. The chief reason people invest in IPOs is to earn profit from the listing gains.

Recently, IPOs of trusted companies like Life Insurance Corp (LIC), Prudent Corporate, etc. have made losses on listing.

In this scenario, it's important to have a detailed study of the IPO.

This study will help you understand whether you should hold the IPO or sell it at Grey Market Premium (GMP).

It will also help you understand whether you should hold or sell the shares once they are listed.

Read on as we take you through the GMP and other important details of eMudhra IPO.

#1 Grey Market Premium (GMP)

Grey market premium (GMP) is the price over and above the normal price at which the shares offered in IPO are traded.

It's a critical aspect of the IPO punting business that really gets people going on what's happening "outside" the legit markets.

The grey market is an unofficial market that exists in parallel with the official market. In the context of IPOs, the grey market is where unlisted IPO shares are traded.

It is here, at least in some portion, that the IPO punters get their kicks. And they get it by tracking what's called the IPO GMP.

According to market observes in the unlisted space, shares of eMudhra are currently trading at a discount of Rs 10 in the grey market, below the upper end price of Rs 256.

What this means is shares of eMudhra are expected to make a tepid debut on listing.

While there is no surety in this, the GMP does give a sense of listing. The premium or discount fluctuates based on the market sentiment and demand for shares.

#2 About the company

eMudhra started issuing digital signatures in 2008. It is a licensed certifying authority established under the Information Technology Act of India.

If you go to a bank, a manager will authorise your signature. eMudhra is this manager in the case of digital signatures. It verifies the credentials of the person and then issues a digital certificate.

It offers services to individuals, corporates, banks, government organisations, and several small and medium businesses.

It also offers a variety of services like tax filing services, digital signing solutions, digital certificate authentication systems, and trusted time-stamping services.

#3 Financial position

The pandemic had an impact on all kinds of businesses. Businesses were not functioning normally. Hence the need for digital signatures was also less.

This impacted eMudhra's business. While the sales had increased in fiscal 2019-20 net profit and return on net worth had decreased.

However, the business started picking up after the pandemic period. There has been an increase in net profit, return on net worth, and earnings per share.

eMudhra - Financial Snapshot

Particulars (Rs m)	31-Mar-21	31-Mar-20	31-Mar-19
Revenues	1,324.50	1,167.90	1,016.80
Revenue Growth (%)	13.4	14.9
Expenditure Before Tax	1,012.70	937.8	781.3
% of Total Income	76.4	80.3	76.8
Net Profit	253.6	184.2	174.4
Net Profit Margin (%)	19.1	15.8	17.2
Net Worth	1,166.80	930.8	756.4
Return on Net Worth (%)	21.7	19.8	23.1
Basic Earnings per share (EPS)	2.5	2.4	2.5

Data Source: Company's Red Herring Prospectus (RHP)

#4 Peer comparison

There are no listed peers for eMudhra.

Investment takeaway

2022 has been the year of volatility. It is extremely unpredictable. Companies with sound financials have also faced a downfall. Bluechip stocks are trading at their 52-week lows and at a huge discount from their highs.

eMudhra has sound financials and has no listed peers. This might make eMudhra an attractive bet. But this does not mean that the IPO might result in profits.

Even as it has no peers to compete with (for now), it was only subscribed 2.72 times overall with retail investors leading the charge.

Not to forget that eMudhra is a tech company. Lately, all tech companies have been taken to the cleaners.

Investors had high expectations from tech stocks like Zomato, Paytm, etc. But all these stocks have largely disappointed shareholders.

Hence it would not be an exaggeration to say that no matter how strong, how popular, or how financially strong the company, all have been knocked out clean by the punch of the global downfall.

The growth graph of eMudhra is impressive but we'll have to wait and see if it results in impressive IPO listing.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...