Indian Stock Market Tips|Opinion|HDFC AMC public issue proves Warren Buffett right – IPOs are lotteries
Only a handful of companies raising money from the primary markets give spectacular returns but are enough to keep investor interest alive
Initial Public Offering (IPO) of big companies are often indicators of market strength. Big IPOs have been notorious for coming near market tops and money is raised from gullible investors at ridiculous valuations. In fact, these are a big giveaway of market strength.
Given this, HDFC Asset Management Co’s IPO which was subscribed 83.06 times the shares on offer was not costly. It was issued at a marginal premium to Reliance Nippon Asset Management Co, the other asset manager listed on the bourses. It is only after the opening day pop of 65 percent, HDFC AMC’s valuation widened over its rival.
Still, HDFC AMC’s IPO and the size of oversubscription highlights the market appetite for a good paper. It also shows that there is a lack of quality issues. This appetite for IPOs has been exploited by many companies.
Indian exchanges have seen 90 IPOs in the first half of 2018 raising $3.9 billion, the highest activity in terms of the number of deals anywhere in the world, according to EY India IPO Readiness Survey Report. Indian public issues market accounted for 16 percent of the total issues globally. However, in terms of proceeds, the market share was only 5 percent, highlighting the increasing number of smaller sized issues.
In fact, only 19 companies of the 90 that tapped the market raised more than Rs 100 crore. The bigger story, however, is the post-listing performance.
The 19 companies that raised at least Rs 100 crore in 2018 have seen their cumulative market capitalization rise 15 percent. This performance might look impressive given the 8.59 percent return for the Nifty. But the devil is in the detail and in this case it is an ugly one.
This week's best Offer in Stock Cash clicks here or see Indian Stock Market Tips, Live Call, our Demo call benefits, services.
0 comments
Note: only a member of this blog may post a comment.