Another exciting week is in store for investors in the primary markets as four initial public offerings worth more than Rs 3,600 crore open for subscription on August 4 and close on August 6 – Devyani International, Windlas Biotech, Exxaro Tiles and Krsnaa Diagnostics.
Devyani International, which operates KFC and Pizza Hut in India, and Krsnaa Diagnostics, a chain benefitting from COVID-19 testing, each expect to raise more than Rs 1,000 crore.
Experts recommend investing in Krsnaa Diagnostics and Devyani International shares because both could make listing gains and are also good long-term bets.
Devyani International shares will be offered at Rs 86-90 apiece, while Krsnaa Diagnostics has priced its shares at Rs 933-954 each.
“With IPOs witnessing huge subscription and impressive listing gains, a number of new investors who have joined the race in the last six to eight months are rushing for quick money,” said Prashanth Tapse, VP research, at Mehta Equities. “Looking at fundamentals as well as the flavour of the street at first glance, retail investors can bet on QSR (quick service restaurant) story Devyani International and Krsnaa Diagnostics for listing gains as well as long-term wealth-building stories.”
Windlas Biotech can be considered for listing gains as of now and the offer from Exxaro Tiles can be subscribed with caution of risk at this juncture, Tapse said.
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Companies have sold shares worth more than Rs 50,000 crore in the primary market in the January-July period this year, and that list continues to grow.
Six companies including Zomato, the biggest among them, raised Rs 14,629.5 crore in July, taking the total to over Rs 53,000 crore so far in 2021.
“CY21 has been lucrative for retail investors, with the majority of companies listed in the secondary market trading in the green and most IPOs listing at a premium,” said Gaurav Garg, head of research at CapitalVia Global Research. “All the four companies are majorly diversified into different sectors. With the current economic conditions, the Krsnaa Diagnostics may have an added advantage” as the others struggle with the pandemic continuing globally.
Garg added that as a result of COVID-19, Krsnaa Diagnostics has seen increased demand for testing, which has boosted its overall testing volumes.
There is a different type of bull run in the primary market and retail investors aren’t shying away from taking risks or investing in companies with unconventional businesses.
At the National Institute of Securities Markets’ second annual capital markets conference recently, Ajay Tyagi, chairman of the Securities and Exchange Board of India, said retail investor interest in the securities market has increased from 2020-21.
The number of dematerialised trading accounts increased to 55 million at the end of FY21 from 41 million at the beginning of FY21, an increase of 34.7 percent, data from SEBI showed.
On average, about 1.2 million new demat accounts were opened every month in 2020-21 compared with 420,000 per month during the preceding financial year.
Evaluating IPOs for investment
“I think the bull run in the secondary market is largely because of high liquidity in the economy and decent valuations, leaving something on the table for new investors. Low investment (Rs 15,000 is the minimum for retail investors) with high return expectations and the low returns in other asset classes are a few of the factors pushing retail investors to rush for IPOs,” said Tapse of Mehta Equities.
A few years ago, investing in IPOs was difficult due to the lack of information on a company and its business model and ambiguity over its prospects, experts said.
Things have changed now and the new-age investor is more informed. The traditional method of valuing IPOs may not work, especially when a company like Zomato that’s making losses was still able to get its offer subscribed 30 times and listed with a 53 percent premium on the secondary market.
“Competitive advantages of the business, the quality of its management, financials, ratios, industry prospects and pricing of the stock against its already listed peers are all factors to consider when evaluating a company,” Garg of CapitalVia Global said. “It is recommended that retailers read the DHRP (draft red herring prospectus) to learn more about the company's peer analysis. In a nutshell, all the above factors should be considered before subscribing to any IPO.”Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.