The year 2021 has witnessed a spate of initial public offerings (IPOs) by diverse companies and the list doesn't seem to stop anytime soon. The primary market saw five public offerings - FSN E-Commerce Ventures that operates Nykaa, PB Fintech (Policy Bazaar), Fino Payments Bank, SJS Enterprises, and Sigachi Industries in the week gone by while the coming week will see share sale by One97 Communications, the owner of Paytm and Sapphire Foods India, the operator of Pizza Hut and KFC chain of restaurants.
One97 Communications will be launching its IPO on November 8 to mop up Rs 18,300 crore from the primary market. The price band fixed by the company is Rs 2,080 – Rs 2,150 and will be the biggest IPO in the country till date.
Sapphire Foods’ public offering would open for subscription on November 9 with a price band of Rs 1,120 – Rs 1,180 and with a target to collect Rs 2,073 crore.
Which of the two can give you better returns?
Experts are of the opinion that given the current bull phase in the Indian stock markets, investors who are looking for some quick money can subscribe to both issues to reap the benefits of listing gains. However, there is a word of caution too.
“Paytm's IPO might be a blockbuster for primary markets and is going to be the largest the country has seen so far after Coal India, Reliance Power and GIC”, says Gaurav Garg, Head of Research at CapitalVia Global Research. “I will recommend going for Paytm as I am expecting decent listing gains in Paytm compared to Sapphire Foods IPO,” he suggests.
Paytm is a digital wallet-based platform offering services like lending, banking, money transfer, insurance, wealth advisory, e-commerce, travel and event bookings, gaming, and obviously recharge and bill payments. It also offers software and cloud services to merchants.
“Its deep penetration in India might turn out to be a sustainable business,” feels Garg.
It may be noted here that both Paytm and Sapphire foods have reported losses as per their latest filings, though both are very big names in their respective area of business.
Santosh Meena, Head of Research, Swastika Investmart says, “Paytm is a new-age fintech company where it is difficult to value such kind of business as of now because we don't have listed peers to compare and the market is betting on future expectations.”
Meena adds, “We are going to have lots of new-age businesses in coming years but only a few of them will emerge as a leader and those may create big wealth for the investors but many of them can destroy the wealth of investors.”
The market analyst is of the opinion that only very aggressive investors should apply to Paytm IPO for the long term.
Though Sapphire Foods is a loss-making company, there have been successful companies in the market from similar spaces. Its brands have a strong presence and customer recognition. Meena adds, “If we talk about the valuations then Sapphire Foods is coming out with 7x FY21 sales while recently listed Devyani International is trading at 14x FY21. Therefore, it is coming out with attractive valuations compared to its peers.”
He opines that only aggressive investors can hold this company from a long-term perspective while others can apply in this IPO for listing gains.
As per Vinod Nair, Head of Research at Geojit Financial Services, both are very expensive and loss-making companies and it is expected to continue at least in the medium-term. Nair is of the opinion that both the offers are aggressively priced and they are great brands with a positive outlook on a long-term basis. He suggests, “A short-term investor may take a chance with a target only on listing gains.”
IPO investing has become the buzzword in the last one year and many investors continue to apply for most of the IPOs as they look at it more from the short-term listing gain perspective or fear of missing out (FOMO).
Harshad Chetanwala, Co-Founder of, Mywealthgrowth.com has a word of caution for investors during this deluge of IPOs. He says, “Retail investors should follow a cautious approach particularly for IPO investing and if possible try to stay away from the noise.”
For the two companies in consideration here, he adds, “though both the companies offer unique propositions and have a strong business case in India, one has to evaluate multiple aspects like the prospect and strengths of the business, plans of promoters after IPO, utilisation of capital and valuations of the IPO before deciding on their investment in IPO.”
It would be prudent for investors to look at some of these factors and then decide on which IPO may suit their profile and work for them in the future.
Latent View Analytics is also slated to enter the IPO market on November 10 and has fixed a price band of Rs 190 - Rs 197 per share.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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