Result of Sanima Mai IPO investment on Loan - A Forecast

It is not a good idea to invest in Sanima Mai Hydropower Company Limited's IPO by taking loan at such a high rate (24% annually) as the size of the IPO is not that big and it is expected to be over-subscribed by many folds and consequently that allotment is going to be very low both for the big and small investors.

For example you have loaned Rs.1,000,000
from a friend at 24% annually. Suppose the allotment is done on the 40th day and you are allotted a total of 300 units i.e. 3% as you have applied as small investor. Now the total cost would be as follows:

Interest Amount:24% * 1000000= 240000/12*45/30=Rs.30,000.

Since you have been allotted share worth Rs.30,000 you will get a refund of Rs.970,000 with interest say Rs.1,000.

You total cost would be Rs.59000 i.e.30000+30000-1000 (cost of allotted share+Interest Amount-Interest received for non-allotted share).

Therefore the cost per share would be 59000/300=Rs.196.67.

I have not calculated the capital gain tax and the indirect cost, both of which will increase the cost per share. I think SMHCL's listing price will be around Rs.180-200 and if you are planning to sell immediately after listing then I would not recommend you to invest with loaned amount @ 24%.


Note: The above calculations are tentative and is based on assumptions so I request to consult with others before investing.
-FrEaK_MoNeY