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“I see 20% upside, but 60% downside potential for Zomato”: Jhunjhunwala

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Zomato’s recently-concluded IPO can be surmised to be a resounding success, given that the ₹9,375 crore IPO was oversubscribed by 40 times on the last day of subscription, but billionaire investor Rakesh Jhunjhunwala is no fan of these new-age IPOs, saying, “This party (of new-age IPOs) will pop sometime”.

Speaking at Motilal Oswal AMC’s recently organised Global Partner Summit, India’s Warren Buffett said that he believes he can make more money ​​investing in shares of metal producers and banks than on new-age technology companies that are swarming the Indian primary market currently. Whilst stating that he sees 20% upside, but 60% downside potential for the company, he attributed this to be “driven by discounting the next 15 years”, adding that, “It is not my party, I do not go there. This party will get spooked at some stage”.

A market divided

Markets are taking to India’s unicorns and startups with great gusto. Earlier this week, tech heavyweights Paytm filed its draft red herring prospectus for an IPO, mirroring the moves of its digital brethren such as Mobikwik, Zomato, and PolicyBazaar.

While the market has feasted on Zomato’s IPO, often looking for seconds and thirds, it has sparked a sharp divide in the Indian investment community between the old-school and the new-age. On the one hand, naysayers have raised alarm bells over its supposedly exorbitant valuations and pointed to its track record as a loss making entity, while others have justified past valuations given its limitless growth runway and upside.

For his part, Jhunjhunwala has been stoically old-school, often airing his skepticism of the valuations of India’s myriad tech startups, which are largely bankrolled by limitless venture capital money chasing the proverbial pot of gold at the end of the rainbow, but stopped short of casting questions on the underlying business model. 

While tech companies rule the roost globally and indeed even on Wall Street, the billionaire investor said that Indian companies are yet to gain such a foothold. “These (US technology) companies have built valuations over time. Amazon took 25 years to reach this stage…Except for new-age companies and cryptos, everything else is good (in this market)”.

Bullish on India

While speaking about the ongoing bull run of Indian markets, the ace investor professed that the bourses are structurally strong, unlike the 1990s, which bodes well for the coming decades. “India’s fundamental story today is far stronger than it was in 1991. Today, we are starting as a well-established country in the software space. Software exports will touch $400 billion in the next 4-5 years. We are positioned to be the pharma capital of the world. We have had reforms such as GST. Economically, India is in a position that is better than ever”.

Big Bull’s confidence in the India growth story is as strong as ever, and it is a sentiment that is largely shared by the cadre of Indian investors. Be it tech, metal, or BFSI, it seems the party isn’t going to stop anytime soon on Dalal Street.

BFSI

Paytm celebrates SEBIs nod for India’s largest IPO

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Paytm-IPO

It’s raining IPOs across India, and one of the biggest fintech players has now joined the party. Fintech company Paytm recently received the nod from the Securities and Exchange Board of India (SEBI) for its upcoming Rs. 16,600 crore IPO.

The company is expected to list on the Indian bourses ahead of Diwali. Reports suggest that the company could list by the end of October, as it plans to skip the pre-IPO share sale rounds to fast-track listing.

Ant Group, SoftBank’s Vision Fund, and Berkshire Hathaway are among the company’s supporters. Its operational loss reduced to Rs. 16.55 billion ($221.00 million) in the fiscal year that ended in March 2021, from Rs. 24.68 billion a year earlier. In July, a source told Reuters that Paytm would likely break even in 18 months.

Paytm is aiming for a valuation of Rs 1.47-1.78 lakh crore in its upcoming IPO. Previously, Aswath Damodaran, a US-based valuation specialist who is also a finance professor at New York University’s Stern School of Business, valued the firm’s unlisted shares at Rs 2,950 each.

Several first-generation Indian businesses are planning to list on local stock exchanges, following in the footsteps of food delivery company Zomato, which made a successful stock market debut in July and is backed by China’s Ant Group.

Launched a decade ago as a platform for mobile recharging, Paytm grew quickly after ride-hailing firm Uber listed it as a quick payment option. Its use swelled further in 2016 when a ban on high-value currency banknotes boosted digital payments.

Paytm has since branched out into services including insurance and gold sales, movie and flight ticketing, and bank deposits and remittances.

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After Zomato, six more companies eye IPO

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As many as six companies—Nykaa, Adani Wilmar and Star Health & Allied Insurance, Penna Cement Industries, Latent View Analytics and Sigachi Industries—have received clearance from the Securities and Exchange Board of India (SEBI) to launch Initial Public Offerings (IPOs).

According to a Monday update from the capital markets regulator, these six companies submitted preliminary IPO papers with SEBI between May and August and received its “observations” or approval to float the IPOs between October 11 and October 14.

FSN E-Commerce Ventures Ltd’s IPO, which runs Nykaa, includes a fresh issue of equity shares worth Rs. 525 crore and an Offer For Sale (OFS) of 43,111,670 equity shares by a promoter and existing shareholders.

The promoter and promoter group Safecrop Investments India LLP, Konark Trust, MMPL Trust, and existing investors Apis Growth 6 Ltd, Mio IV Star, University of Notre Dame Du Lac, Mio Star, ROC Capital Pty Ltd, Venkatasamy Jagannathan, Sai Satish, and Berjis Minoo Desai are among those selling shares through the offer for sale.

Star Health, the country’s largest private health insurance, is owned by a group of investors led by Westbridge Capital and Rakesh Jhunjhunwala.

According to the Draft Red Herring Prospectus (DRHP), Penna Cement’s IPO will include a fresh offering of equity shares totaling Rs. 1,300 crore and a promoter offer for sale of up to Rs. 250 crore. The IPO of Latent View Analytics also includes a new issue of equity shares at Rs. 474 crore. It also has a promoter and current owners offering to sell equity shares for Rs. 126 crore.

Adugudi Viswanathan Venkatraman, the company’s promoter, will sell shares worth Rs. 60.14 crore, Ramesh Hariharan, a shareholder, will sell shares worth Rs. 35 crore, and Gopinath Koteeswaran, a shareholder, will shelve off shares worth Rs. 23.52 crore, among others.

Sigachi Industries, a cellulose-based excipient company, will see its IPO sell up to 76.95 lakh equity shares.

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Cryptocurrency: increasingly the currency of choice for new India

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Cryptocurrencies took the world by storm when they first emerged in 2009. With no government backing these digital currencies, and no single user having complete authority over them, Crypto has seen a decent rise in the number of its owners. From Elon Musk to Bill Gates, all have spoken about the ‘future’ of currency.  

Recently, BrokerChoose, a broker discovery and comparison website stated in its annual proliferation index that India has the biggest number of cryptocurrency users in the world, with 10.07 crore users. The United States is next, with 2.74 million crypto owners, followed by Russia (1.74 million), and Nigeria (1.30 million).  

The increasing trade volumes and valuations of Crypto exchanges in India is another testimonial to the exponential rise of this virtual currency in the country. The report by Mint states that the Crypto exchange platform CoinSwitch Kuber has 11 million users, whereas WazirX stands at 8.3 million. Within one year of its incorporation in June 2020, CoinSwitch Kuber entered the unicorn club with a valuation of $1.9 billion. Prior to this, just two months earlier, crypto exchange platform CoinDCX became the first crypto unicorn in India with a valuation of $1.1 billion.  

Despite the country’s uncertain future, the cryptocurrency fever continues to grow among the public. The Reserve Bank of India banned cryptocurrency trading in 2018, but the prohibition was eventually overturned by the Supreme Court. In February of this year, the Indian government proposed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which would prohibit the use of private cryptocurrencies in the country. However, the bill has yet to be introduced in Parliament. 

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