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Stock Analysis, IPO, Mutual Funds, Bonds & More

Demand for niche stocks see IPOs triple benchmark gains

10 entrants are trading above their offer prices and have given returns of up to 176 per cent.

Bloomberg|
Updated: Nov 08, 2019, 11.46 AM IST
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A gauge of newly public companies is beating the nation’s benchmark index by the most in at least a decade, as investors chase companies running niche businesses.
By Ravil Shirodkar and Nupur Acharya

Indian stocks may be trading at record highs, but investors backing youth in the $2.1 trillion market are sitting on even bigger gains.

A gauge of newly public companies is beating the nation’s benchmark index by the most in at least a decade, as investors chase companies running niche businesses. The S&P BSE IPO Index, a gauge of shares in their first two years of trading, has risen more than three times the amount of the S&P BSE Sensex Index this year.

An online marketplace, a railway monopoly, a diagnostics chain and a micro-finance lender are among 11 companies that went public this year. Ten entrants are trading above their offer prices, and have given returns of up to 176 per cent. In comparison, it has been a rough ride for the Sensex, which hit a six-month low in mid-September amid a slowing economy before rebounding to a new peak.

“The amounts raised by these companies were small and they offered a unique business proposition for which a like-for-like comparison in the listed space was rare or absent,” said Sameer Kalra, President Research at Mumbai-based Target Investing.

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State-run Indian Railway Catering & Tourism Corp. more than doubled on its debut last month, the best listing in two years. Investors offered to buy the entire firm 14 times over, lured by its monopoly over the ticketing, catering and supply of packaged drinking water to Indian Railways, Asia’s largest rail network.

Company
Issue Price (Rs.) Offer to Date gain(%)
IRCTC 320 176
Affle (India) 745 84
IndiaMart 973 78
Neogen Chemicals 215 76
Metropolis Healthcare 880 60
Polycab India 538 59
Spandana Sphoorty Fin 856 53
Rail Vikas Nigam 19 25
Chalet Hotels 280 18

IndiaMart InterMesh, the country’s largest online platform for businesses, is trading 78 per cent higher than its July IPO. Metropolis Healthcare, an operator of medical diagnostic centers backed by Carlyle Group, has soared more than 60 per cent from its offer price in April.

“These companies are professionally run, are cash positive and carry almost no debt,” Kalra said. “The near-monopolistic and unique businesses won the favor of investors.”
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