Hey there, we are back with another wrap of the stock markets last week.
The Indian stock markets experienced a festive fervor with an extended Diwali, witnessing a remarkable shift from a volatile phase. The benchmark Sensex and Nifty, inching up towards all-time highs, may finally get stirred to create new records. The catalyst? A powerful mix of brand Tata and the tech spark, showcased in the much-anticipated Tata Technologies IPO.
But that wasn’t the sole offering in the great Indian Diwali IPO thali. The five-course menu included Indian Renewable Energy Development Agency (IREDA), a clean energy PSU, Gandhar Oil Refinery (India), a specialty oils company, Flair Writing Industries, your everyday stationery and pen manufacturer, and Fedbank Financial Services, an NBFC, collectively issuing shares worth around ₹7,400 ₹crore.
Astonishingly, investor bids surpassed ₹2.5 lakh crore, underscoring robust appetites for promising companies.
Tata Tech leads as 5 IPOs hit the market
The hype surrounding Tata Tech reached a crescendo with bids surging close to ₹1.5 lakh crore, a testament to its irresistible appeal. The market’s reverberation echoed the commanding stature of the 'Tata' brand as the ₹3,042-crore IPO got fully subscribed within minutes after its launch on November 22.
Marking the first IPO of a Tata company in nearly two decades since Tata Consultancy Services (TCS) debuted in 2004, both retail and institutional investors clamored for a stake in Tata Tech. Setting new benchmarks, the IPO received a staggering number of applications, scaling new heights in private company IPO history in India. According to industry estimates, an unprecedented 73 lakh applications were received for the IPO.
The participation by domestic mutual funds in the anchor round of Tata Tech IPO was among the highest in the recent past. As many as 17 domestic mutual fund houses picked shares of the company worth ₹355 crore through 39 schemes.
The Tata group has undergone a remarkable transformation. Once hailed for its ‘trust’ factor, today, the 'T' in Tata resonates with something entirely different: technology.
TCS and Tata Elxsi have emerged as the shining stars within the Tata constellation, not just in terms of scale but also in return on investment. The staggering market cap of ₹12.84 lakh crore for TCS alone eclipses the combined value of all other Tata group stocks, including giants like Tata Motors, Tata Steel, Titan, Trent, Tata Consumer Products, and Tata Power, among others.
Tata Elxsi, closest sibling of Tata Technologies within Tata empire, has outshone, boasting a 52% compound annual growth rate in stock price over the past decade, compared to the group’s average of 24%. This has created a perception that if it’s a tech business from the house of Tatas, exponential growth can be expected.
But, was it just the brand power that made investors rush for the issue? Not really. A combination of important factors came into play, one being the correct pricing maths.
The price band of ₹475-500 values Tata Technologies at around $2.5 billion, or at around 32 times its earnings per share (EPS) in FY 2022-23. This made the company look relatively cheaper than most other companies in the space like KPIT Technologies, L&T Technology Services, and Tata Elxsi.
Tata Tech is also a pure play on automotive-focussed engineering research and development (R&D) which offers tremendous growth opportunities at a time when automakers around the world are transitioning to electric vehicles and automation.
Investors made a bet on Tata Tech despite knowing that the fresh capital will not be invested in the company’s future growth. It’s all going into the bank accounts of the existing shareholders and promoters, as the IPO is purely an offer for sale (OFS).
However, none of it matters when you are looking at almost 80% gains on the listing day itself – at least that is what the grey market premium for the issue suggests. The GMP, or the unofficial indicator of the listing gains, for Tata Technologies shares was on Friday hovering around ₹400.
The investor gaze was not just on this mega IPO. The initial share sale by IREDA, a government of India enterprise under the Ministry of New and Renewable Energy, was oversubscribed by a huge 38.8 times after the three-day bidding window ended on Thursday.
Along with that, Fedbank Financial Services Ltd (Fedfina), the non-banking lending subsidiary of Federal Bank, along with Flair Writing Industries and Gandhar Oil Refinery all attracted immense investor interest and were oversubscribed in almost all categories.
With so much money flowing in the primary markets, scope of major movements in the secondary stock markets was limited, especially amid lack of any major trigger during the week.
The Mamaearth Surprise
However, some specific stocks like Honasa Consumer made an impact by showing a strong turnaround. The parent of the Mamaearth brand, which got listed earlier this month and had a volatile run beginning, saw its share price surging over 38% this week after the company said its net profit doubled to ₹30 crore during the September quarter. After Honasa announced its Q2 earnings, global brokerage house Jefferies also reiterated its ‘buy’ rating on the stock, while raising its target price to ₹530 from ₹520 earlier.
Titan shares hit fresh 52-week highs this week with the company’s market cap crossing ₹3 lakh crore – only the 17th company in India that can boast of hitting the milestone.
According to the data available, like Titan, more than half of the Nifty 50 stocks have hit 52-week highs in the past one month even as the benchmark index has moved only around 1% during this period. This proves that investors are currently focusing on individual stocks and sectors.
What Lies Ahead
The coming week would be crucial as all eyes would be on the five new listings and how they affect the market sentiment. Expiry of the monthly November series, along with global factors like crude oil prices, are also some other key factors one should look out for before making fresh bets in the stock market.
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