"IPOs of Policybazaar, Zomato, Paytm Look Interesting": Deven Choksey
What do you think are the major reasons for the spurt in primary markets?
The secondary market, when it starts creating wealth, it starts attracting most of the other entrepreneurs to come for listing and that’s when the primary market starts to buzz. It's a combination of two factors, one factor is the buoyant secondary market and availability of money with investors, and the second is the newer ideas wanting to enter into the market into the listed space, for both of them put together, creating a situation of new primary market or buzz in the primary market.
How significantly has SEBI contributed to the IPO process?
Operationally, they've simplified the process quite significantly and the regulators did a good job in getting the company listed within seven days after the IPO is done and it's a good job that they have done from that perspective. The other important aspect where the regulator has possibly not paid enough amount of attention is kind of rigged up prices of IPOs by companies and bankers, which are happening into the system. Secondly, the majority of the time the IPOs are funded through leveraged funds, and the current system is prone to manipulation, they are giving the allotment based on the proportionate bidding quantity or the size of the subscription received and as a result of which the manipulation takes place in the market. Those who don’t have even 5% of the subscription amount, end up borrowing 95% from lenders and ultimately, they walk away by taking an Iron Chef, which otherwise would not have been made possible for them.
What is your take on short-term exits of investors post listing?
It boils down to the leverage funds that you've taken, suppose if investors funded the IPO through leveraged funds, obviously to him, there is a cost of funds attached to it and the sooner he gets the exit out of it, he would be in a position to rotate his money. Currently, where you practically have an IPO coming every 15 days into the market, an investor would like to rotate the money as much as he can because he's on a leveraged fund, so obviously this is the trend that we are seeing on leveraged funds when an investor finds momentum he will trade maximum in the market, to service the leverage.
What lies ahead with companies like Zomato, LIC, Paytm queuing up for IPOs?
It's a pretty exciting period, the names which are being queued up for the IPO are some of the newer businesses that are coming up for the first time in the listed market. The likes of Policybazaar, the likes of Zomato and Paytm, are new generations of businesses and have a lot of abilities to do a business in a very significant manner. To an extent, they are also disruptive businesses. An investor would have an appetite for such kinds of businesses. However, there is a risk element involved in some of these businesses, they are not profitable but that is one part of it, we'll have to see how exactly the potential of these businesses is emerging. Some of these businesses are thriving on supernatural growth in business they do, call it the result of deceptive trade practices they are operating, that is quite beneficial to the customers.
Can you give us a sense of the prominence and trend of the grey market lately?
A price discovery, whether it is in a listed market or an unlisted market condition, is a reality. When the company is about to get listed, some people like to see the discovery which is a very natural process. I would go a step forward in asking about the price discovery taking place on the exchange platform itself. Let the regulation, be evolved for allowing the price discovery on the exchange platform itself and if that mechanism can be built-in, probably we will do away with the grey markets and this will give a more transparent process to the primary markets.
What are your top picks from the upcoming IPOs?
I'm pretty excited with LIC, as I mentioned it remains one of my favorites because the size itself is very attractive and the kind of business that they have carried out in last whatever 40-60 years, we have something extraordinary. For such organizations coming into the listing market, it is always a privilege to buy into the company. The second most important aspect is the newer generation of businesses which are happening, they are equally interesting like Policybazaar and even Zomato, Paytm. I feel that some of these businesses are attractive and I'm very positive about these companies coming into the markets for the first time.
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