Knowledge Faqs with Gaurav Jain (Knowledge Yagya-06)4 min read
Here are some questions asked by the viewers in the Yagya dated 10th August 2021. These questions can provide you insights on some grounds. Please read these questions for knowledge purposes only and make any investment decisions only based on your research or the advice of your financial advisor.
• Currently, there are a lot of IPOs going on but there is less allotment.
• History has not been kind to the IPO, most of the people have not made money in the IPO.
• There are 8 factors to look for in the IPO.
o Company Business:
Need to understand about the company business.
How unique is the business model?
Need to understand growth rate expectations.
o Offer for Sale and Fresh Issue:
Need to understand how many existing investors are selling their stakes.
The amount raised from the fresh issue means the amount will be invested in the company for various purposes.
Promoter stake is also an important need to check. If the offer for sale is more, Then there are chances of investors exiting the company, which means it is an Exit Strategy for these investors. And whether the Promoter is also participating in Exit Strategy.
o Comparison with Peers:
Need to check the profit margins of the peers and the company.
EBITA margins & Growth of the company with the peers.
If there is no company for comparison then It is difficult to analyze.
o Risk Factors:
Need to check the Red Herring Prospectus (RHP) in that we can see the risk factors.
Peer comparison needs to make in this.
Need to check the exact valuation. Need to do PE analysis.
o Anchor investors:
Need to check whether anchor investors like DIIs, FIIs, Insurance companies, and others are investing or not.
High Anchor Investor Participation generally shows that IPO is of good quality. But one should not blindly invest based on Anchor Investor Participation
o Do you need to invest in IPO?
• While applying for an IPO one should ask himself/herself that whether there is a need to apply in the particular IPO?
• As there is less information is available in the market about the company at the time of IPO and the majority of information is with the company itself.
• One needs to analyze more about the company which is best possible after analyzing at least 6-8 quarterly results of the company post-listing.
o Grey Market Premium:
Currently, the investment in IPO is happening looking are the grey market premium. As the liquidity is very high in the market.
Investors looking for Listing Gain in the IPO should watch Grey Market Premium as well.
• The main issue of Exide is lithium-ion batteries which they are doing but the main problem is no clarity about how this company will play role in the Electric Vehicle Environment as most of the car manufacturers are planning to produce Lithium-Ion batteries.
• Maruti, Tata Motors, and Mahindra, these big names are already planning to do it as well.
• As it is said the 30% to 40% car cost is on batteries.
• But it is a good company it is not just about the EVs but it is doing well in the telecom industries.
• Good for Conservative and Moderate Industries.
• The company is working on a solar ecosystem as well.
• The current battery business is also not going to fade away in the near time.
• Exide is having a good distribution channel also they are having a good OEM network
• There is only one way to be rational by managing the asset allocation properly.
• For eg if there is a 50% allocation in the equity and the current allocation is 55% then you have to remove it. It does not matter whether the market is up or down.
• Need to follow the asset allocation.
• There is a challenge with Hero Moto Corp. The CEO of Hero Moto Corp is Dr. Pawan Munjal.
• Hero Electric is owned by Mr. Gunjal, Brother of Pawan Munjal.
• Hero Moto Corp cannot use the name of Hero Electric for its EV business.
• Hero Electric is currently a big entity in an electric scooters.
• Currently, a lot of competitors are coming into the market.
• As new competitors are coming so there is a risk factor associated with it.
• Compared to others, Hero electric is a bit slow.
• The problem with Colgate is all about the expectation of growth.
• The company is good. ROCE and ROE levels are also good.
• The investors are investing money is invested on the expectation of growth. PE of 100 means there is a lot of expectation from the company’s growth.
• This company is still good for conservative investors.