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Good morning. India’s initial public offering (IPO) euphoria saw another day of surprises with the investor response to Bajaj Housing Finance's IPO listing at a premium of 114%. This positivity is prompting even foreign companies to think of listing in India. But how long till there is a turning point? Read on to know more. 

In other news, the Securities and Exchange Board of India (SEBI) withdrew a controversial statement on employee protests. Elsewhere in Tamil Nadu, protesting Samsung workers were detained.

THE TAKE

To Invest Or Not To Invest In This (IPO) Market Euphoria

“What should you do now?” asked a financial newspaper last evening. It seemed like the end of the world and one had to make tough choices about life and about investing. Given the euphoria that drove the Bajaj Housing Finance IPO and then the subsequent listing bump, perhaps the question was quite accurate in its framing. What indeed would you do now?

But why are people asking this question? The stock was listed at a premium of 114% on Monday and then rose close to another 10%. It is perhaps the biggest existential question in recent trading days, should one invest now or should they not? 

Bajaj Housing Finance, a subsidiary of Bajaj Finance, came out with a roughly Rs 6,500 crore public issue and was subscribed nearly 64 times in three days. That amount added up to Rs 3.2 lakh crore. The company provides home loans, loans against property, lease rental discounting and developer financing.

Remember another well-known non-bank finance company did the same thing. That was HDFC which then merged into HDFC Bank in July 2023 because it's more efficient to be a bank than a non-bank finance company in the housing business.

Among other things, banks can access funds at a lower cost. This is not to say there is no market opportunity. But there is no rocket science, just a strong track record and the Bajaj brand name. But some are saying that there are better bets in the market. Chakri Lokapriya, a veteran Dalal Street investor, told The Economic Times that apart from the rate of loan and quality of service, housing finance is a commoditised business. 

“So I would rather buy the other housing companies — PNB Housing, LIC Housing — rather than try to buy now. If you are lucky enough to have gotten the IPO, then I would be a seller on the listing," Lokapriya said.

Another expert said that conservative investors should sell as the listing gain was over and above expectations. They said that long-term investors could continue holding for long-term growth as the sector outlook remains optimistic given the company's well-positioned business model. 

The other question is: Are investors paying attention to the details or are they jumping blindly on every IPO that hits the market? Remember, the IPO of a two-wheeler showroom was oversubscribed 400 times. 

Such euphoria is precisely the green light that companies have been waiting for. Including those who didn’t have such near-term fundraising plans. More and more large-cap IPOs are lining up. The latest news is that LG Electronics is looking at an IPO for its India arm, on the heels of another Korean giant Hyundai. These are companies that have been in India for several years and run mostly profitable businesses. But no one ever thought they would go for an IPO in India. 

Remember, it is rare to see multinationals list in India in recent decades. Jumping onto the bandwagon are obviously the tech IPOs which are mostly loss-making but will ride the frenzy nevertheless and thus provide far quicker exits for their investors and founders than surely they would have imagined.

Where does this leave small Indian investors who are rushing in today is a little difficult to say right now. Most are betting on short-term returns. But not all get allotments and those who do will not succeed every time. At some point, the musical chair will slow down. Particularly, when stocks of many such companies start quoting below the IPO price, as many previous examples have shown.

It is tough to predict the turning point. One indication of its arrival is when investors start moping about a lost IPO and wondering if they will ever get such an opportunity again.

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CO:RELATION

Picking IT right

With the US economy picking up momentum and the US Federal Reserve on the verge of bringing down borrowing rates, there is excitement about companies in the IT services sector. However, average valuations of major companies like Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro and others are already well above their 10-year averages. Most analysts are recommending stock picking. But doing that is easier said than done. You need someone to tell you about the client mix of these firms from a revenue standpoint. 

Analysts see a pickup in the US manufacturing sector as interest rates decrease. IT companies with a slightly larger exposure to such a sector could find favour among investors. TCS and HCL Technologies have an edge regarding the extent of such diversification. The Nifty IT index has outperformed the Nifty 50 recently in anticipation.HCL Technologies stood out from others in 2024.

CORE NUMBER

Rs 573 crores

This is how much Stree 2 the Hindi horror film starring Shraddha Kapoor and Rajkummar Rao has made so far, a boon for multiplex chain PVR Inox. This has reflected positively in the markets too, with its shares rising 10%.  While the coming quarter shows hope, PVR Inox has struggled for a while to make money from movies. A merger between PVR Cinemas and Inox, two of India’s biggest multiplex chains, PVR Inox is India’s largest movie exhibitor. 

FROM THE PERIPHERY

—📃 The Securities and Exchange Board of India (SEBI) retracted its earlier statement which had blamed ‘external elements’ for employees protesting over the regulator’s work culture and demanding the removal of chief Madhabi Puri Buch. The retraction came over a week after several SEBI employees protested outside the regulator’s headquarters in Mumbai over the statement. SEBI has now said that it addresses employee related matters “through appropriate internal mechanisms” and will address all concerns “amicably”. 

—☀️ Union renewable energy minister Prahlad Joshi said on Monday that financial companies have pledged $386 billion to help India meet its target 500 gigawatt (GW) of clean energy by 2030. At the same time, conglomerates Reliance and Adani Group have committed 100 GW and 38.8 GW of additional renewable capacity respectively. In FY24, India added over 18 GW of renewable energy capacity, taking its total to 153 GW. This fiscal year, analysts expect the country to add 25 GW. 

—🚫 Over 100 protesting workers of the Samsung home appliances factory in Tamil Nadu were detained by the state’s police as they planned to march on Monday. The workers have been demanding better wages and working conditions and have been protesting for over a week. Reuters reported while they had been protesting in a makeshift tent near the plant, they had planned a protest march. The police claimed that they were not given permission as there are hospitals and schools in the area.  

—🔌 Electric vehicle maker JSW MG Motor India is venturing into the luxury segment. The joint venture between steel giant JSW and China’s SAIC Motor was first announced in December last year. The JV announced a high-end automobile brand called ‘MG Select’ under which the first luxury cars will be launched next year. The manufacturer is hoping to establish its presence across segments. Recently MG Motor announced a battery rental plan for its current EV offerings, to lower upfront costs and cater to more budget-friendly users. 

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