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market | IST

IPO boom: Experts suggest what to buy, avoid and sell

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In 2021 so far, a lot has happened. As many as 46 companies floated IPOs to raise a total of over Rs 80,000 crore. Experts believe that this year could close with Rs 1 lakh crore of primary market fundraising. In CNBC-TV18’s special show, Smart Money, Bharat Lahoti, co-head and fund manager at Edelweiss AMC and Deepak Shenoy, founder at Capitalmind, discussed which IPOs to buy, which ones to avoid, and which ones to sell post listing.

This week was by far the most hectic week in the primary markets. Nykaa saw a big bang listing hitting a Rs 1 lakh crore market cap value on listing day, India’s biggest initial public offering (IPO) so far, Paytm also opened for subscription this week, however, the issue saw muted subscription. 
In 2021 so far, a lot has happened. As many as 46 companies floated IPOs to raise a total of over Rs 80,000 crore. Experts believe that this year could close with Rs 1 lakh crore of primary market fundraising.
This week itself three IPOsPaytm, Sapphire Foods India and Latent View Analyticsopened for subscription.
In CNBC-TV18’s special show, Smart Money, Bharat Lahoti, co-head and fund manager at Edelweiss AMC and Deepak Shenoy, founder at Capitalmind, discussed which IPOs to buy, which ones to avoid, and which ones to sell post listing.
According to Lahoti, apart from easy money, there is also buoyancy in the market that has led to this IPO market. There is a structural reason, which is leading for IPO companies to come in.
“Over last few years, because of reforms, financialisation of savings, formalisation of economy, rising per capita income, changing preferences in the way we buy goods and services, has led to many private equity venture capital firms investing in many emerging ideas. These private equity venture capital firms in our opinion – when mature – tend to sell some of their best-investing companies and these companies are now coming for IPOs,” he said.
Shenoy would want to build up a position in Nykaa over a period of time and add as and when the company shows fundamental increases.
“The profit is likely to double from here in the near future. I do expect the growth to come in but I do think that price will also probably correct and they will be volatile over time, so it is better to spread in investment rather than get all in right now,” he explained.
Lahoti, on the other hand, believes one should participate through funds for retail investing.
According to Shenoy, the world is going to move into more types of insurance. There will be online purchase and management of insurance and more group plans and term plans, which is what PolicyBazaar sells the most, he said.
“So the PolicyBazaar business is exciting. I think we are paying an extremely high price for it, 40 odd times sales, so if this were to go to 80 times if the stock market were to double its price or even if it were to remain at the same price, it is a pretty high price to pay for a company where technology is not the primary driver of revenue. I would give it a little bit of less of criteria, however, if you like the space, if they perform, if they do some acquisitions, longer-term this will be a good play but then again build a position over time. Patience is key here and we will have to wait for the business to perform,” he explained.
For the entire discussion, watch the accompanying video.
To watch other videos in this series, click on the Smart Money tab below.