Dalal Street Investment Journal — July 10-23, 2017

48 DALAL STREET INVESTMENT JOURNAL I JULY 10 - 23 , 2017 DSIJ.in^

Special Report

Vaibhav Agrawal Head of Research & ARQ, Angel Broking Pvt Ltd.

How do you think IPOs have

performed in 2017 so far?

We believe that in 2017, the performance

of the IPO market has remained

satisfactory. This year so far, close to

`10,000 crore of funds have been raised

through the primary equity offerings. This

ye ar, `8,200 crore have also been raised by

the Infrastructure Investment Trusts,

which is a new instrument introduced in

the Indian capital markets. These InvITs

have also seen good interest from the

investors. The IPO listings were mostly

satisfactory and we believe that the quality

of IPOs has also been good this year so far.

One of the highlights of this year’s primary

market was listing of Avenue Supermarkets

which gathered huge interest from the

investors during subscription as well as

upon listing. CDSL has also seen huge

subscription. One of the main reasons for

the good performance of IPOs this year

has been ample liquidity and high investor

confidence stemming from the fact the

domestic macros are improving and

economy is expected to do well going

ahead.

Looking at current market

situation, what strategy should

be adopted by the retail

investors for IPOs?

We believe that investors should stick to

the business fundamentals and

valuations rather than getting carried

away by market liquidity, which may lead

to investing in the poor quality IPOs.

One should keep focus on the quality of

the business, financial performance,

scalability of the business model,

promoter’s background and valuation.

Will 2017 be a better year than

2016 for IPO investors? Your

thoughts.

Yes, so far good quality IPOs have raised

money in the markets, and looking by the

trend, we believe that the performance of

the primary market is likely to remain

better this year as investor confidence has

remained very optimistic. If macro data

continues to improve, we expect that the

IPO performance will remain healthy this

ye ar.

India has been particularly strong. The

BSE and NSE and their SME markets as

a whole led EMEIA by deal number.

Indian exchanges saw 57 IPOs raising

US$2.3b in H1 2017, a rise of 50 per cent

and 91 per cent, respectively, compared

with H1 2016. The year kickstarted with

two landmark IPOs: Bombay Stock

Exchange became the first-ever Indian

exchange to list while Housing and

Urban Development Corporation was

hugely oversubscribed, making it one of

the most demanded IPOs in more than

a decade.

• EY Global IPO report.

liquidity in emerging and developed

market is visible and there is a healthy

pipeline of candidates willing to get

listed on major exchanges around the

world, representing various sectors. The

phenomenal performance of IPOs in 2017

has led to positive sentiment amongst the

retail investors and that may lead to

increased participation in H2-2017.

Benign interest rate environment, low

volatility and higher stock market

valuation is proving attractive for the

companies to raise money, hence there is

enough supply of new quality shares in

the markets.

According to the EY Global IPO report,

“In India, IPO appetite for small and

medium enterprises in particular

continues to grow due to strong

valuations and positive returns, with

the SME Board on the Bombay and

National stock exchanges being one of the

fastest growing stock exchanges globally.

Indian exchanges expect the second half

of 2017 to be particularly strong with the

government expected to raise close to

US$3b via former SOE IPOs.” GST

disruptions in near to mid-term along

Source : EY

January 2017 to June 2017

❝ Retail investors are often left with frustration for

not getting allotment in an IPO. However, there is

nothing to lose if one does not get allotment. There

is always a good chance for investor to capitalize on

the listing day. A worthy company usually gets listed

at premium of 30-60 per cent on an average. This

urges marketmen to sell the shares with fear of

limited upside from current price, which gives a

chance to the investor to buy at relative price as

compared to upside potential in future. For instance,

Avenue Supermart was listed at `604 as against the

issue price of `299. Many believed that the upside

will be limited to extent of listing price, and thus

there was a 'sell' call in the market. The stock is

currently trading at `815 which is 35 per cent

upside in less than 4 months. ❞

• Dinesh Rohira, Founder & CEO, 5nance.com