Some food for thought
"The Siren waits thee, singing song for song."
—Walter Savage Landor (English Poet, 1775-1864)
Word for the day
Bootstrap (v)
To help (oneself) without the aid of others
First thought this morning
Universal Basic Income, Quota for Women, Restructuring of GST,
Youthful look for Congress Party, accepting abuses and criticism with smile and
humility — so far Rahul Gandhi has played a Pujara like inning. The opponents
(primarily NDA parties) are naturally flabbergasted and trying aggressive
bouncers. Ducking all the bouncers calmly, he is certainly gaining on
popularity charts.
The BJP must be feeling like a smart stock trader who made a
classical "pair trade" a couple of years back, i.e., Long ITC and
Short HUL, or worst Long BHEL and Short L&T. The long trade has fallen and
short trade has risen sharply. The trader is smarting under huge losses failing
to understand how both trades in the pair are going wrong.
To undermine the impact of opposition unity, BJP tried its best
to make 2019 election primarily a Modi vs. Rahul contest (Modi Long and Rahul
Short). Palpably, the idea was to smartly limit the choice of voters to two
national leaders, especially in states where Congress is not principal
opposition. Given Congress is not a party of choice in states like UP, WB, AP,
Telangana, Odisha, Jharkhand etc., the strategy must have been to distract
voters from the dominant regional party and choose between Modi and Rahul (not
even BJP and Congress).
The trend so far, it seems, is that the stronger regional
parties are getting stronger (Modi down) and in BJP vs. Congress states
(Punjab, Rajasthan, Gujarat, MP, Chhattisgarh, Uttrakhand, Himachal), Rahul has
gained in popularity (Rahul up).
Would be interesting to see if BJP changes his strategy in next
few weeks! If it does not, the elections results may surprise most
psephologists.
Chart of Day
Best and Worst performing IPOs
Analyzing the market activity in past three years, I noted some
broader market trends earlier this week. (see
here)
Continuing with the exercise, I noticed some key trends in new
listings in past few years. During 2015-2018, 111 companies made initial public
offerings, out of which 109 were successful. Through 109 successful offerings
close to Rs1.5trn were raised from investors. Out of this 50% of the money was
raised in 2017 alone through 38 offerings; with 6 insurance offerings alone
accounting for over Rs400bn.
I would like to bring the following trends to the notice of
readers.
1. Like NFOs of
mutual funds, more than half of the new listing resulted in loss for investors.
2. The worst 25 new
listings resulted in loss for the original allottees as well as those who
bought the stock on listing from secondary market.
3. Out of the best
25 listings, about 23 resulted in better than market returns for the original
allottees. Whereas only 15 (out of 25) have resulted in better than Nifty
returns for the investors who bought these stocks on listing from secondary
market.
4. Only 2 out of 9
PSU stocks are trading above the issue price, whereas 3 out of 9 appear in the
worst 25 listings.
5. A significant
number of new offerings were made to provide exit to the existing shareholders
(private equity and venture capital). Many of these stocks have witnessed
significant volatility and/or fall in stock prices post listing. I am not
competent enough to investigate the matter in depth, but intuitively I do smell
a dead rat here. The regulator and investigative journalists may like to pursue
this matter a little further.
6. Unfortunately,
the government made an IPO of Hindustan Aeronautics Limited (HAL), in March
2018. The offer documents states how this is a great company that has done some
pioneer work in the field of aeronautics. However, some recent remarks from the
central ministers (in context of Rafael controversy) have casted dark shadows
on the competence of HAL. The stock is down ~45% from offer price. The
regulator may want to investigate this matter too.
7. Only 2 out of 6
insurance listings are trading above their issue price.
The worst performing 25 IPOs (2015-2018)
Performance by issue price
Performance by listing price
The best performing 25 IPOs (2015-2018)
Performance by issue price
Performance by listing price