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Never mind, rally in midcaps rings in good news for IPO mart The Economic Times
Missed DMart windfall? Never mind, rally in midcaps rings in
good news for IPO mart
By Amit Mudgill, ETMarkets.com | Updated: Mar 23, 2017, 12.33 PM IST Post a Comment
NEW DELHI: The ongoing rally in midcap space has lifted a dozen stocks over 100 per cent in
RELATED COMPANIES EXPAND
last one year, making largecap investors turn green in envy. That said, the midcap rally can
actually throw up opportunities somewhere else. nakshatra
Top analysts on Dalal Street will not forget the 114 per cent listing gain recorded by Avenue Tax planning:
Supermarts on Tuesday. That could be a oneoff case. But indications are that investors may How to complete all tax work before March 31
soon be left spoilt for choice in the primary market. Here's how!
Market watchers say midcap stocks’ rising premium over largecaps is a lead indicator that a
flurry of IPOs is in the offing.
Foreign brokerage BofAML in a recent note said higher midcap valuations have often acted as a lead indicator to rising primary
issuances. This can absorb the strong domestic flow, it said. (See table)
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3/23/2017 Sensex today India: Missed DMart windfall? Never mind, rally in midcaps rings in good news for IPO mart The Economic Times
The BSE Midcap index currently trades at 30.38 times its trailing 12month EPS, which is at a 35 per cent premium over 22.54 times
valuation that the market is assigning to largecap benchmark Sensex. A rally in midcap stocks raises confidence among aspirational
smallcap and midcap companies that they too may get good valuation riding on investor appetite for such papers.
Sebi’s latest communication suggests draft offer documents of 14 firms are under evaluation. The list includes NSE, Gitanjali Gems’
Nakshatra World, buildoperatetransfer firm Bharat Road Network, TV and broadband internet services provider Hathway Cable’s arm
GTPL Hathway and telecom gear maker Tejas Networks.
“Many aspirational companies, which are small and have great market opportunities, would want to tap the market when the momentum is
strong and when, they believe, they can get the true potential value. The caveat from the investor’s point of view is that they have to be
wary of companies they invest in, because not all the companies hitting the market will have a strong track record,” Hitesh Agrawal, EVP &
Head for Retail Research, Religare Securities, told ETMarkets.com
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3/23/2017 Sensex today India: Missed DMart windfall? Never mind, rally in midcaps rings in good news for IPO mart The Economic Times
Amarjeet Maurya, Senior Research Analyst for midcaps at Angel Broking, believes high midcap valuations might lure many small and
midsized companies to hit the capital market.
“If a power or capital goods company is waiting to hit the market with an IPO, what could be a better time for it than this point when
sectoral valuations have expanded considerably? Whenever the market grows stronger, the possibility of an IPO rush is high.”
There is also a good correlation (about 70 per cent) between a year of strong stock market returns and a followup jump in the number of
initial public offerings (IPOs) hitting the market. The Sensex has risen 16 per cent in last one year, while the BSE Midcap index has gained
24 per cent in the same time.
“IPOs are all about discovering value of a company. They bring companies into investors’ notice. They can also help companies raise
capital for further expansion,” Agrawal said.
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