2 weeks Ago
Mumbai: Family offices, institutional investors and portfolio managers are flocking to unlisted shares of companies that may be headed to the bourses in their quest for superior returns. “Over the past year, volumes in the unlisted space have seen significant growth, particularly in IPO (initial public offering)-bound companies like NSE, Swiggy, HDB Financial, Waaree Energies, Vikram Solar, OYO, Hero Fincorp, and Manjushree Technopack," said Krishna Patwari, founder of Wealth Wisdom of India, an online platform that facilitates trading in unlisted, pre-IPO, and delisted shares. While money managers say there are still opportunities in listed equities to generate alpha (benchmark-beating) returns, it has become increasingly challenging.
“Whenever the market shows buoyancy, there's a noticeable increase in traction within the IPO and pre-IPO space," said Vikas Khemani, founder of Carnelian Asset Management & Advisors. Khemani added that India presents one of the broadest such opportunities, with many new businesses scaling rapidly and contributing to higher availability of pre-IPO investments. Also Read: Investor fervour is evident from the fact that the share prices of more than 50 companies in the unlisted market hit lifetime highs in August, indicating solid demand and consistent performance, Patwari added.
Nirav Karkera, head of research at Fisdom, explained that the potential for significant returns from value unlocking when a company goes for an initial share sale has fuelled interest in pre-IPO opportunities trading over the counter. Limited supply, relative exclusivity in access, and typically low trading volumes contribute to lower price volatility than listed equities, he said. Not just that, most companies debuting in the primary market lately have posted stellar day-one gains, leading investors to believe in bumper listings for upcoming IPOs.
Companies such as Ola Electric Mobility Ltd, Indegene Ltd, Brainbees Solutions Ltd, TBO Tek Ltd, Le Travenues Technology Ltd, Unicommerce eSolutions Ltd, BLS E-Services Ltd, and Vibhor Steel Tubes Ltd have made impressive debuts, with gains ranging from 20% to 193%. “Investors with an aggressive risk appetite, the ability to hold for longer periods, and a deep understanding of the market are now considering allocating additional funds to these pre-IPO opportunities, attracted by their limited volatility and strong growth potential," according to Karkera. Even when the timelines for the listing of these companies are blurry and can be delayed, there is high demand for unlisted stocks such as HDFC Securities, CSK, Tata Capital, Bira, Pharmeasy, Care Health Insurance, and SBI AMC from investors seeking to capitalise on pre-IPO opportunities.
Also Read: In the past six months, Tata Capital rose from 790 to 900, SBI AMC from 1,650 to 2,300 and Nayara Energy from 415 to 700, Patwari said, highlighting data from Wealth Wisdom of India's website. “The PRIMEX 40 Private Market Index of India has gained almost 65% in a year, compared to a 26% increase in the S&P BSE Sensex and 30% in the Nifty 50 as of 29 August," he said. PRIMEX 40 is Wealth Wisdom's proprietary index, which includes companies in the private market that are leaders in their respective sectors.
The most recent was NSE’s unlisted stock soaring to over 5,500 from 3,200 in February this year primarily due to limited supply and a scarcity of sellers. The board of directors of NSE recently approved a proposal to seek a no-objection certificate from market regulator Securities and Exchange Board of India (Sebi), marking a significant step towards an IPO. “So, it’s not just NSE, but the primary interest is in pre-IPO opportunities, and there certainly is a money-making opportunity there," said Manish Sonthalia, director and chief investment officer at Emkay Investment Managers.
Also Read: He said family offices and alternative investment funds are increasingly looking to invest in private equity, pre-IPOs and startups. Ultra-high-net-worth individuals and portfolio managers, with their growing risk appetite, are also showing significant interest in the unlisted space. “Out of the 10,500 family offices globally, around 300 are in India and about 10% of these Indian family offices invest about 53% of their capital in startups," said Vikaas M.
Sachdeva, managing director of Sundaram Alternate Assets Ltd. He said family offices have an affinity to invest in financial services and technology companies in the public markets. Recent activity in the startup landscape has attracted attention, with Bollywood legend Amitabh Bachchan's family office acquiring a stake in IPO-bound Swiggy.
Motilal Oswal Financial Services chairman Raamdeo Agrawal also invested in the food-delivery giant, while expanding his portfolio to include a stake in quick commerce startup Zepto..
