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    ETMarkets Smart Talk: Over 50 companies waiting for right time to launch IPOs: Sameer Kaul

    Synopsis

    "We believe – if the markets were to remain stable – there could be a slew of IPOs. There are over 50 companies that have applied for IPO and are waiting for the right time to go public, hence a tailwind of the pipeline. Some prominent names that are in the pipeline are Oyo, ESDS, Ixigo amongst others. The SME IPO pipeline is very strong, and we have seen good appetite at even higher valuations in the market."

    Sameer Kaul1-1200ETMarkets.com
    “We believe – if the markets were to remain stable – there could be a slew of IPOs. There are over 50 companies that have applied for IPO and are waiting for the right time to go public, hence a tailwind of the pipeline,” says Sameer Kaul, MD & CEO, TrustPlutus Wealth (India) Pvt Ltd.

    In an interview with ETMarkets, Kaul, said: “IPOs saw a sharp slowdown in 1HFY23, fundraising dropped by 32% YoY. This was on account of markets being weak in 1HFY23” Edited excerpts:


    How are earnings likely to pan out in 2023?
    We expect earnings for the Nifty-50 Index in 2023 to be in the range of 11-13%. We see limited scope of earnings upgrades given the backdrop of (1) weaker-than-expected domestic economic recovery in the rural area, (2) slowdown or recession in developed market countries, and (3) higher-than-expected interest rates, which may affect demand.

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    We see downside risks to earnings of domestic cyclical sectors such as automobiles and construction materials sectors from volume and/or profitability disappointments.

    We also see downside risks to earnings of export-oriented sectors such as IT services. However, we would note that several other sectors such as automobiles and capital goods derive a meaningful portion of their revenues and earnings from exports.

    A global slowdown or a recession in developed market (DM) economies may pose downside risks to earnings of global commodity sectors such as metals and mining and oil, gas as well as consumable fuels through lower realization and profitability.

    As we have already hit unchartered territory – what is the kind of fundraising you see for IPO? Do you see more SME IPO to hit the Street?
    The expensive valuation and relatively strong performance of the Indian market would suggest that the market is quite optimistic about India’s short- and medium-term outlook.

    We would broadly agree with the short-term positive factors such as
    (1) ongoing economic recovery and India’s stronger economic growth relative to most other economies and
    (2) likely peaking of inflation and interest rates and medium-term factors such as strong economic growth in the medium term led by a likely multi-year investment cycle.

    However, we see several issues (both short-term and medium-term) that may deflate the market’s expectations.

    The short-term issues include
    (1) weaker-than-expected growth and
    (2) higher-than-assumed interest rates, which could limit earnings surprises.

    IPOs saw a sharp slowdown in 1HFY23, fundraising dropped by 32% YoY. This was on account of markets being weak in 1HFY23.

    We believe – if the markets were to remain stable – there could be a slew of IPOs. There are over 50 companies that have applied for IPO and are waiting for the right time to go public, hence a tailwind of the pipeline.

    Some prominent names that are in the pipeline are Oyo, ESDS, Ixigo amongst others. The SME IPO pipeline is very strong, and we have seen good appetite at even higher valuations in the market.

    There is a huge demand for such IPO’s, we are witnessing over subscriptions, and the post-listing gains are looking strong.

    According to two depositories, NSDL and CDSL, the total number of demat accounts is 9.28 crore as on April 30, 2022. This number is almost three times the number recorded as of March 2020. What is the kind of growth you foresee for retail investors in 2023?
    Despite uncertainty in financial markets, the number of demat accounts crossed the 100mn mark for the first time in August 2022. This is clearly on account of under penetration of equities in Indian households.

    With returns from other financial assets diminishing, equity culture is likely to ramp up further. India is one of the few markets to be in a sweet spot.

    It is doing well economically but is yet to reap its demographic dividend entirely. When India’s average gross domestic product reaches a certain middle-income stage, consumption ramp-up will be very fast.

    The base of equity culture is widening. We are seeing them coming into the equity market, either directly or through mutual funds across the country.

    As we approach the last month of the year 2022 – we have reclaimed all-time highs. Where do you see markets headed in 2023?
    Equity markets have been in consolidation mode for over a year now due to worries around monetary tightening, inflation, geopolitical issues, and supply chain bottlenecks. These pain points have now started reversing and are very much in the price.

    At current levels, the market is fairly valued, and hence upside from here could at best match the earnings growth over the next 12 months presuming no further expansion in valuation multiples.

    The year 2022 was full of volatility and global events which impacted the Indian markets. Will the headwinds of 2022 continue to haunt equity markets in 2023 as well?
    The major headwinds of CY22 whether global or local have now started abating. We believe most of the ruction would not have any major bearing on market performance in CY23.

    The major uncertainty surrounding CY23 relates to global growth rates. This one factor will majorly determine the trajectory of equity markets over the next 12 months.

    Rate continued to rise in 2022 – do you see further rate hikes in the year 2023?
    India’s CPI inflation has recently started showing signs of softening. The probability of a rate hike is likely, but the million-dollar question pertains to the rate of the hike.

    The MPC meeting scheduled in the first week of December’22 is likely to raise rates further in order to bring inflation back within the target range. The recent three rate hikes have each been 50 basis points.

    Given the general opinion of a slowing inflation trajectory, the quantum of rate hikes going into CY23 could be much lower than those seen in CY22.

    Amid rate hikes, global headwinds, and slowdown concerns -- how should one pick stocks in 2023?
    The global growth outlook for CY23 has been dented due to the troika of a) inflation, which remains outside the target range of most central banks, b) rate hikes and c) slowing consumption.

    Investors would be better off focusing on pockets of domestic growth vs. export-driven companies.

    Another interesting theme over the next year could be companies that have strong brands but have seen a decline in margins and are likely to benefit from the ongoing easing in raw material pressure and could thus see decent bottom-line growth going ahead.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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