By Dilip Davda
The week under report was the seventh negative week in a row for the secondary market, as geopolitical tension kept rising. The US-Iran and Russia-Ukraine flare-ups pushed crude to a fresh historic high, while the dollar firmed up on reports of a US Fed rate hike. Fear of higher US inflation weighed on global sentiment, and we felt the impact of costlier crude and a stronger dollar here at home. India imports a large share of its crude, so its economy remains closely tied to the price of this one commodity.
FIIs turned net buyers only for a mid-week session, which helped that day close in the green, while DIIs stayed net buyers all week. But Thursday’s heavy loss kept the week in the red. Benchmarks see-sawed throughout, and market breadth stayed negative except on Wednesday and Friday. The slide can be traced to the benchmark heavyweights slipping.
A mad, mad, mad, mad world in the primary market
Against this backdrop, the primary market is in a mad, mad, mad, mad world. Last week brought 30 primary issues: 11 mainboard, 17 SME, one NCD and one rights issue. This week, the first three days alone have 22 issues: four mainboard, 16 SME and two rights issues.
The rush has a simple reason. Most SMEs that went ahead on March numbers must bring their IPOs before September 30, or else reapply for permission. To avoid that trouble, they have all come in a hurry, and the hurry shows in the offer documents, which carry noticeably thin information, particularly on the SME side.
Of last week’s 11 mainboard issues, a handful did well. Adroit Industries, Moneyview, Swastika Infra and Elevate Campuses caught the attention of investors and the market, performing well beyond expectations.
NSE lists at a premium and does no damage
The big event was NSE, which opened on the 17th, closed on the 21st and then listed. Fortunately, it did no damage to the market. Against the issue price of Rs 1,785, it opened around Rs 1,800, touched a high of Rs 1,880 and a low of Rs 1,800, and closed near Rs 1,817. Even today, it is quoting above the offer price.
That is what companies with strong techno-fundamentals do: they don’t let investors down. NSE was criticised as a highly priced issue with a hefty market cap. But look at the reward BSE, India’s oldest exchange, has given its investors. NSE, which has overshot BSE on many counts, should bring good returns over the next two to three years. We will have to wait and watch. It has also paid good dividends before going public, and investors hope that trend continues. Note that this was a 100% OFS, with no fresh capital raised by the company.
This week’s four mainboard IPOs
Four mainboard IPOs open this week: Nityas Gems & Jewellery, Vishal Nirmiti, SRIT India and Shah Investor’s Home. In my view, Vishal Nirmiti tops the lot this week. If you have surplus funds, then in order of preference, go for Shah Investor’s Home, then Nityas Gems, and SRIT India as last option.
SME: aggressive pricing, and a numbers problem
The SME side has about 16 IPOs this week, and many are priced very aggressively, which makes any prediction difficult. These companies have rushed in with March results, and we simply don’t know how they have fared over the last six months. That is where the key lies.
In many SME cases, we have seen bumper results and profits in the pre-IPO period, only for the numbers to decline once fresh results come out after listing. That is why several of these counters listed at a bumper price and then slid below the issue price. Investors must be very choosy, do their own due diligence and consult their financial advisor before taking a final call.
The primary market has no track record as a listed entity, so we have to give these companies time. Rome was not built in a day. How the better performers keep performing over the next few quarters will decide their future trend. By September 30, I expect much more clarity on these IPOs.
Jio: the mega IPO waits outÂ
The biggest IPO of all, about Rs 37,000 crore from Jio Platforms, could come at any moment. But the inauspicious fortnight began yesterday, and I think the company will prefer to move only after it ends. With Navratri and Diwali ahead, activity is likely to start around November, and they would like to go public right before Diwali. Until then, the market can easily overlook a formal announcement.
NSE’s listing at a premium has definitely lifted sentiment for this mega issue. Now I keep my fingers crossed and wait for the main matter: pricing. Because this is a mega issue, if nothing is left on the table for new investors, Jio may not fare well.
Do your own due diligence, consult your financial advisor, and remember that every investment in the securities market carries an element of market-related risk. Stay alert and invest wisely.
