Some of the new age technology companies like Policybazaar as well as MapMyIndia are taking a small step forward now. After the beating all of these stocks took earlier in the year, does it make sense to take a fresh look at them?
I do not think so. I was on your show before the launch of each of these IPOs and for all of them I said this is a horrible idea and I’ll tell you why I said it. Zomato may be an exception. I’m not going to say that Zomato is a bad company just because the stock is down, but other than that, look
. Where do they really get their income from? I know it’s a brand with identity and everyone has it on their phones and I guess that’s why everyone wanted to have a piece of it.
But what is the revenue really and how do they plan to increase it? They’re doing a lot of things that a lot of other companies do better and the only fundamental thing they do is help people transfer money because their UPI codes are everywhere and that’s not a great reason to invest in a company. It’s a great product and one can use it, but why should the company generate more revenue or indeed any revenue at all?
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I can still understand Policybazaar. That at least you have a part of the insurance premium when they sell insurance. But that’s not true for most other stocks. I have no idea why a lot of people were so excited and why these IPOs were oversubscribed. My point of view hasn’t changed at all on any of these.
This week we had some of the listings as well as IPOs for the opening of Delhivery, Venus Pipes. We also have LIC’s IPO number. What would be your suggestion for people who have the LIC IPO assignment? Are you looking at any pop listings there? As far as Delhivery is concerned, would you recommend subscribing?
The only IPO of recent times that I have liked is the IPO of Campus Footwear. She was looking at her accounts and his books. It looks exciting.
But aside from that, we’re talking about LIC. I think it makes sense for retail investors to sell it if they get a quote at a premium, meaning they get a pretty good discount on the price band the company offers. Having said that, if you get the company listed at a premium, you should sell it and get out of it. If you don’t, then the company opens at a discount and you should think about why you wanted to apply for this in the first place.
This is a company that does not need money. The government wanted to meet its divestment goals and that’s why it went public. They are constantly losing market share to HDFC, ICICI. We have a financial distribution service in my own company and I see a lot of people interested in buying
ICICI policies and policies because the products are better, their IRRs are high. LIC is taking a back seat. If you don’t want to buy a product from a company, why should you want to be a shareholder in that company? It doesn’t make sense and I really didn’t understand why you expect the company to open at a premium because they have three times as many subscriptions and they have offered a good discount. But yeah, after it opens at a premium, ideally you just take the profit and get out of it.
Let’s talk about ICT. The recovery has been evident, but what is your perspective when it comes to individual businesses?
I think the company will do quite well in the future and the reason is simple. Like I said, I like companies that are cash rich, don’t have any debt on their books, and don’t make mistakes. Cigarettes are still their biggest business and I think cigarettes as a business had a lot of problems until about four years ago because there was a constant upward revision in excise taxes on tobacco and then there were two years when we had Covid and a lot of people realized defeated. about smoking during those years.
Many people quit smoking at that time because cigarettes were not available or were sold on the black market. But none of that reaches the company. I am convinced that as the world opens up, cigarette volumes and sales will increase in the future and that is the bulk of their business. By buying this stock right now for someone like me who first looks for security of principal and reasonable return on money invested, you are getting the stock with a 4.5% dividend yield. if it goes down more
I am convinced that this action will do very well in the future. In terms of non-cigarette verticals, its non-cigarette FMCG business is finally showing promise. Hotels are struggling and will continue to struggle, but that has never been a big deal for ITC. It’s more of a responsibility. I think at some point, they should seriously consider listing it separately. But we haven’t really looked at this aspect of ITC’s wheat sales in Middle East countries because of the crisis between Russia and Ukraine. I don’t think that is a reason why I am going to consider buying ITC as things keep happening from time to time and they are not going to last forever.
The big story remains in tobacco and cigarettes and would recover substantially in the future.
Do you think that once the LIC is over, some of the subscription money will go back into the market or not, and by then do you think you’ll see some relief across the board?
That depends on how LIC’s initial public offering plays out. If you open at a premium and then drop in price, some of this money may come back into the market. In the past, we’ve seen that during these biggest IPOs in India with the really famous brands and companies getting listed, money is taken out of other stocks and stock markets in general and put into that, but that money never really comes back.
So even before the IPO, there was a lot of news about a lot of money being pulled out of the markets because a lot of people were trying to lock up money for the LIC IPO. I don’t think that really happens. It is more likely that this money will disappear permanently and LIC will benefit because essentially this money is what is invested in LIC. The company takes the profits and what is left are the people who trade the shares that are listed on the stock exchange.
After it is listed, some would want to sell their shares and buy something else at the same time, there would be someone else who would buy those shares. Then the money will continue to move between the shares. An IPO is a perfect mechanism for money to go out entirely or be invested in companies. I don’t think people are going to sell off and rally or that will drive markets higher.