 IPO outlook: How are the new listings faring?Published on Thu, Sep 28, 2006 at 12:17 | Source : Moneycontrol.com Updated at Thu, Sep 28, 2006 at 21:34 25368 Investors following Tech Mahindra. Share this News with them.
Q: How do you gauge appetite and interest at this point toward these IPOs? Is that low or are the offerings just not as hot perhaps as they were a couple of months back? A: Institutions have burned their fingers in a couple of IPOs in the past. But they have also made good money on some of these IPOs. The indications that we are getting from the market is that quality issues will continue to sell. Valuations are becoming very critical. Even with quality issues, if the valuations are not right or are expensive, people are not whole-heartedly coming out and investing in those stocks. So the response is muted to those kinds of issues. But if you have a good company at a good price, I think the response is phenomenal.
We have seen that in the case of Tech Mahindra and probably Action Construction Equipment also where the pricing was right, the sector was right and the valuations were pretty decent, so the gains have been quite strong.
Q: What would you do with an Action Construction now at Rs 218, because it has had a good run? A: It has a good run. It is currently trading at a market cap of about Rs 320-330 crore. The outlook on that sector is good. Manufacturing of cranes and other construction equipments will continue to boost as long as the construction business and the infrastructure business continues to grow. With strong order pipelines for these companies, there is a significant amount of upside still left in ACE. It is one of the better bets in the market right now. Q: There are a couple of offerings open right now as well, anything that you like?
A: I have personally looked at Hanung Toys and Development Credit Bank. Hanung Toys has a mix of two businesses. One is the soft toys business, which is a fairly niche segment. This is a segment where they have some advantages in terms of branding, customer profile and the client base that they have. The home textile business that they are getting into is very competitive. So while the future growth hinges on the home textiles business, I think valuations are moderate to reasonable. So there could be some upside on the IPO of Hanung Toys. DCB has not done well in the past. But the management has changed, and the outlook for banking is looking good right now. The bank itself has a good brand name, it has got good distribution reach and a presence. People would need to take a call on those aspects more than the historical numbers, and play on the future for the bank. Q: Purely as a reference point for the primary market, how do you play the secondary market action right now? At these kinds of levels, what would you expect to see the secondary market do over the next 1-2 months? A: I would believe that the secondary market outlook is pretty strong. The market is trading close to the peak which it reached in May. I would think there would be very little resistance to the market after today's triple witching. My expectation is that the markets should have a fairly smooth ride up from here all the way up for the next 2-3 months. I don't see any problems in the market. There is enough money coming in. The interest rates have now begun to thankfully stabilize a little. There is ample liquidity in the system, so I guess the markets will continue to roll.
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