New Delhi: Wealthy investors (HNIs) who invest in Burger King IPO by taking loans can get 16 to 21 percent listing gains. This is indicated by the ongoing premium on Burger King shares in the gray market. Burger King shares will be listed on the stock exchanges on December 14 (Monday).
Gray market dealers say that the premium is currently running at Rs 43-45 on this stock. The company held a price of 59-60 rupees a share in the IPO. The issue was subscribed 354 times in the HNI category.
Before investing in an IPO by taking a loan, rich investors usually see how much they can gain on listing. They also see how many times the IPO is subscribed in the HNI category. They mostly invest in IPOs on the last day. The reason for this is that it has to pay less interest on the loan amount.
The investment period is usually 7 days. The rate of interest on the loan taken for investment in an IPO is generally 6.5 to 7.5 percent. Suppose a rich investor takes a loan at 7 percent interest to invest in an IPO of Burger King. Considering 354 times subscription at the upper price band of Rs 60, the cost of investment in it will come to Rs 25.52 per share.
In this way, the 7 percent interest rate per share spent for 7 days will come to Rs 88.52 (60 + 28.52). If the premium on this share remains Rs 45 in the gray market, then the listing of this share in the stock market can be done at Rs 105 (160 + 45). In this way, rich investors can earn 18.6 percent return from investing in this IPO.
If the loan is taken at 7.5 percent interest, then the cost of the loan will be Rs 30.56. In this way, adding this amount to the share price of Rs 60, the total amount per share will come to Rs 90.56. In such a case, the returns of rich investors from this IPO will be reduced to 15.94 percent.
Gujarat dealer of unlisted shares Abhay Doshi said that the average rate of interest for rich investors in the Burger King case was 6.5 percent.