Sidhartha Shukla Moneyontrol News
With the results of state elections and an interest rate hike by the US Federal Reserve around the corner, Radhakishan Damani-promoted Avenue Supermarts Ltd, parent of D-Mart is set to launch its initial public offering (IPO).
Priced in the Rs 295-299 band, the issue opens for bidding today and hopes to collect Rs 1870 crore at the upper end of the price end.
Purely in terms of size, the D-Mart IPO does not match up to some of the big offerings in the recent past. But given its credible business model and strong operating ratios, not to mention Radhakishan Damani's stature as an investor and entrepreneur, there is a lot of excitement about the IPO.
The offer also comes at time when benchmark Indian equity indices -- Sensex and Nifty -- have been flirting with their all-time highs but not been able to breach them for the past few trading sessions.
Market experts are unsure about the near term trend as liquidity continues to drive stock prices higher even as fundamentals do not support the high valuations.
And some veteran brokers are wondering if the much talked about D-Mart IPO could signal a near term market top. In the past, stock markets in India and abroad have fallen soon after the listing of a high profile initial public offering.
For instance, back in February 2008, the listing of the much hyped Reliance Power IPO coincided with the stock market slipping into a long term bear phase.
The issue itself bombed on listing day, despite the huge premium it was commanding in the grey market ahead of the listing.
In November 2010, there was a similar frenzy around the Coal India IPO. The IPO listed a hefty premium to the issue price of Rs 245. But four days after the Coal India listing, the Sensex and Nifty hit a peak that would be surpassed only three years later.
In global markets, a more recent example is of Alibaba, the biggest IPO in the history of the world.
On September 19, 2014 when the Chinese giant listed on US bourses, the S&P stock index reached its all-time high and then sharply dipped.
A similar pattern was observed with AT&T wireless back in 2000 and with Visa in 2008. Both the massive IPOs coincided with a top in the equity market.
It is not just the size but the hype behind a deal that also indicates a market top.
Many market experts have said some of the most significant market tops in history have been accompanied by high profile events which make a regular investor to overlook any negative criticism.
The IPO of D-Mart is a high profile one, as the supermarket chain of stores is under the leadership of veteran investor Radhakishan S Damani. It has also outperformed its peers by quite some margin and has an earnings growth rate of 30 percent plus compounded.
With geopolitical uncertainty still prevailing and market eyeing key events like the state elections and US Fed meet, one cannot rule out that this event might ring the bell when the market tops.
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