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Imagine a bustling jewellery market teeming with diamonds and gold. Amidst this glittering chaos, a small stall is trying to sell handcrafted gemstones. Even as newer and shinier outlets keep cropping up, all vying for attention, this gemstone store offers some of the oldest yet valuable jewels at a discount. Though they lack immediate sparkle, these rare gems reveal their value to the discerning buyer. This is how South Korea appears for many experts in global capital markets: a trove of undervalued gems, overshadowed by brighter, more aggressively marketed investment options. This undervaluation, known as the "<keyword id="24399183" type="General" weightage="20" keywordseo="korean-discount" source="keywords">Korean Discount</keyword>," reflects how South Korean companies are priced much lower than their global peers despite robust fundamentals — strong financial performance and consistent profitability. Contributing factors are many, ranging from opaque governance structures to geopolitical risks. But the fact stays, if you are a seasoned conglomerate listed in South Korea, you are likely undervalued. <keyword id="19906087" type="General" weightage="20" keywordseo="hyundai" source="keywords">Hyundai</keyword> Motor India Ltd. (HMIL), a subsidiary of the Korean giant Hyundai Motor Company (HMC), recently sought to escape this valuation trap by listing in India, a market where investor optimism commands premium pricing. But its valuation raised many eyebrows! Now that a month and a half has gone by since its listing, time is apt to examine if this gamble paid off. Will <keyword id="93460" type="General" weightage="100" keywordseo="hyundai-india" source="Orion">Hyundai India</keyword> justify its high valuation? Or does the listing highlight broader questions about the overheated valuation dynamics of Indian markets? A record-breaking <keyword id="19898327" type="General" weightage="20" keywordseo="ipo" source="keywords">IPO</keyword> but questions remain Hyundai Motor India’s mega Initial Public Offering (IPO), launched in October 2024, broke records by raising ₹27,870 crore, making it India’s largest-ever IPO. The offer was oversubscribed by 2.37 times, highlighting robust demand. But many investors remained sceptical: was this IPO an honest attempt to expand Hyundai’s footprint in India or was it trying to offer a way to cashout for existing investors and promoters? Or perhaps, is it an attempt by the Korean chaebol — a large family-owned business conglomerate — to break free from the aforementioned “Korean Discount”? When shares listed on October 22, these concerns seemingly weighed on the minds of most investors and the stock promptly dipped 5% below the issue price on the day. A tepid grey market performance had already foreshadowed this muted debut in the Indian markets. Now, after almost 35 trading sessions on Indian market, the stock remains almost exactly at price it listed on October 22 at Rs 1820—no gain, no loss. <h3>The gamble of hyper-valuation</h3>Much of this hesitation stemmed from Hyundai’s valuation. On listing, Hyundai was valued at $18 billion, positioning it as one of India’s most valuable automotive companies. However, such high valuations often temper investor enthusiasm, resulting in more cautious short-term outcomes. For most investors, the Price-to-Earnings (P/E) ratio is the most preferred parameter to gauge if a company is overvalued or undervalued. With a P/E ratio of 26.3, HMIL was priced significantly above the Indian automotive industry average of 24.4. Globally, automotive companies operate with much lower P/E ratios, reflecting mature market conditions and slower growth trajectories. HMIL’s South Korean parent Hyundai Motor Company (HMC) trades at a meagre 3.07, believe it or not! For Indian investors, the high premium hinted at overvaluation despite Hyundai’s strong domestic position. Such stark difference in valuation obviously sparked debates — is the Indian market assigning a premium to Hyundai Motor India’s growth potential, or is it simply reflecting the general exuberance around the prospects of the Indian economy? Another concern is the allocation of IPO proceeds. Hyundai’s IPO was structured as an offer for sale (OFS), meaning all funds raised would flow to the parent company rather than Hyundai India’s operations. Although Hyundai has committed to investing in R&amp;D for EVs and hybrids, critics argue that the lack of immediate reinvestment in India’s operations reflects a missed opportunity for domestic growth. Despite the early disappointment, Hyundai was confident that the valuation was fair. It did have some factors going for it, in addition to the fact that other auto giants like Mahindra &amp; Mahindra and <keyword id="19909974" type="General" weightage="20" keywordseo="maruti-suzuki" source="keywords">Maruti Suzuki</keyword> command even higher P/E ratios. And looking at the company fundamentals, it does seem like Hyundai is playing a long-term game. <h3>Hyundai in India: A proven track record</h3>Despite the initial stumble, Hyundai India’s long-term story is compelling. Since entering the Indian market in 1996, the automaker has sold over 8 million vehicles and firmly occupies the second spot in the domestic passenger vehicle market, trailing only Maruti Suzuki. Hyundai’s blockbuster SUV offerings, like the Creta and Venue, have been critical in building this dominance. Despite some challenge from Maruti Suzuki Brezza and Tata Punch, Creta has retained the tag of ‘most-selling SUV in India’ successfully so far this year. <div type="image" title="Hyundai" agency="Business Insider India" msid="116156234" hostid="261" caption="&amp;lt;p&amp;gt;Selling over 17,000 units per month on average this year, Creta has edged past major competitors to be the most-selling SUV in India in 2024. As Indian consumers preference continues to shift gradually towards premium products over budget segments, Hyundai stands to benefit (Wikimedia Commons / Canva)&amp;lt;/p&amp;gt;"></div> Selling over 17,000 units per month on average, Creta has edged past major competitors to be the most-selling SUV in India in 2024. As Indian consumers preference continues to shift gradually towards premium products over budget segments, Hyundai stands to benefit (Wikimedia Commons / Canva) Hyundai India’s market share of 14% in October 2024 underscores its clout. The company’s ability to tap into India’s premiumisation trend, where consumers increasingly prefer high-end vehicles, positions it well for growth. With plans to expand in electric vehicles (EVs) and hybrid technology, Hyundai is poised to capitalise on both domestic demand and export opportunities. The company’s ability to capitalize on its strong brand, extensive dealer network, and leadership in segments like SUVs and exports will determine its future performance. Hyundai’s strategic focus on expanding electric vehicle production also aligns with global trends towards sustainability, potentially positioning it as a leader in the segment. By listing in India, Hyundai aims not only to expand its operations but also to make India a global manufacturing and export hub for its products, especially SUVs and EVs. Therefore, despite early setbacks, Hyundai’s gamble seems to have paid off. The stock has rebounded, gaining 5% in the past month. More good news came in this week, as positive projections from Morgan Stanley and JPMorgan forecast an impressive 17-28% upside for the stock over the next year, reflecting growing investor optimism. <h3>A strategic pivot from the Korean Discount?</h3>The Korean Discount has long plagued South Korea’s chaebols, including Hyundai. Experts attribute this to several factors: <ul> <li>Chaebol Governance: South Korea’s conglomerates, known as chaebols, are often criticised for opaque governance structures and excessive family control.</li> <li>Geopolitical Risks: Tensions with North Korea contribute to investor caution, adding a layer of perceived risk.</li> <li>Limited Domestic Liquidity: South Korea’s relatively small investor base can constrain market activity and valuation potential.</li> </ul> By listing in India, Hyundai sought to unlock better valuations for its subsidiary, leveraging the optimism of Indian markets. India’s stock market has a trailing P/E ratio of 24.4, far above South Korea’s Kospi average of 16-17. The Indian market’s appetite for high-growth stories provides a fertile ground for companies like Hyundai to escape the valuation constraints of their home market. A successful IPO could encourage other such conglomerates to follow suit, setting a precedent. While Hyundai India has a robust track record, its future success hinges on navigating key challenges: <ul> <li>Supply Chain Vulnerabilities: Hyundai relies heavily on its Chennai plant, making it vulnerable to disruptions.</li> <li>Intensifying Competition: Domestic rivals like <keyword id="19906967" type="General" weightage="20" keywordseo="tata-motors" source="keywords">Tata Motors</keyword> and MG Motors are making aggressive inroads into the EV market.</li> <li>Policy Risks: The automotive sector’s reliance on government incentives for EVs and hybrids adds a layer of unpredictability.</li> </ul> High valuations come with risks. Hyundai will need to prove that it can sustain its growth trajectory in India, fend off competition from established players like Maruti Suzuki and Tata Motors, and navigate challenges such as supply chain disruptions and regulatory hurdles. If Hyundai successfully capitalises on its strong brand and market leadership, it could not only redefine its value but also serve as a case study for other Korean companies seeking better recognition and valuations in global markets. <h3>Is Hyundai saga a reflection of overheated Indian markets?</h3>The bigger question here is, does Hyundai’s IPO highlights a broader narrative about Indian markets’ premium valuations? With a trailing P/E ratio of 24.4, Nifty 50 index is among the highest in emerging markets. India’s stock markets consistently command a premium due to robust retail participation, strong economic growth prospects, and a burgeoning middle class. While this premium reflects optimism about India’s long-term growth story, it also signals potential risks of overvaluation, particularly in sectors like technology, automotive, and consumer goods. With a record ₹94,017 crore outflow by Foreign Portfolio Investors (FPIs) in October 2024, concerns about overheated valuations are mounting. Sustaining such unprecedented valuations required companies to consistently perform above global averages, and retaining robust earnings growth quarter after quarter remains a challenge in today’s uncertain world. For Hyundai, the high valuation is both an opportunity and a risk. While it underscores investor confidence, it narrows the margin of safety, making the stock vulnerable to corrections during economic downturns. Take for example, the high-profile IPO of Life Insurance Corporation of India (LIC) that raised over ₹21,000 crore. Its listing was met with disappointment as the stock began trading at a 9% discount to its issue price, and subsequent performance has remained subdued. LIC’s post-IPO journey also highlights how inflated valuations can lead to long-term underperformance, as the stock gave only 12% return over the past 30 months when even the Nifty 50 index went up by over 44%. This happens when when the company's growth narrative fails to align with its pricing. Despite being a household name with a dominant market share, LIC's stock has struggled to meet expectations, partly due to concerns about its operating efficiency and the limited use of IPO proceeds for growth initiatives. Make no mistake, Hyundai Motor India’s IPO is a landmark event! It showcases the potential for Korean companies to leverage emerging markets like India for better valuations. It also shows that strong fundamentals can help justify a company such premium valuations even amidst bearish economic prospects. However, it also serves as a cautionary tale about the risks of overvaluation. For Hyundai, the next steps involve proving its long-term growth story, navigating competitive challenges, and maintaining investor confidence. For Indian markets, Hyundai’s IPO underscores the need to balance optimism with realistic expectations as they continue to evolve as global investment hotspots. To sustain the country’s economic narrative as a land of unmatched opportunities, corporate India must work on improving long-term fundamentals and mitigating long-term risks. As global investors watch closely, Hyundai India’s success or failure could shape how international companies view India as a listing destination in the years to come.

Tackling the 'Korean Discount': A deep dive into curious case of Hyundai Motor India's market listing

New Delhi: India's <keyword id="19913114" type="General" weightage="20" keywordseo="initial-public-offering" source="keywords">Initial Public Offering</keyword> (IPO) market witnessed a resurgence in 2024, with a total of 272 companies going public compared to 164 during the previous fiscal year, highlights a report by <keyword id="19901201" type="General" weightage="100" keywordseo="SEBI" source="keywords" meta.keywordsubtype="org" meta.entityname="SEBI" meta.hostid="261" meta.entityid="SEBI">SEBI</keyword>. The market regulator SEBI stated that upbeat secondary markets, enthusiasm from retail investors, and strong institutional flows set the stage for a flurry of new listings. "After a relative moderation during 2022-23, the equity segment witnessed a resurgence in fundraising activity during the current fiscal. The <keyword id="19926041" type="General" weightage="20" keywordseo="IPO-market" source="keywords">IPO market</keyword> had been vibrant with a total of 272 companies going public as compared to 164 during the last fiscal year," said SEBI. The report also noted that India received the highest <keyword id="20018891" type="General" weightage="20" keywordseo="foreign-investment" source="keywords">foreign investment</keyword> in the year 2023-24, as the investment surged to a new high of Rs 3.4 lakh crore. It also added that the investment in the year 2023-24 is the highest since the year 1992-93. "Compared to net outflows of Rs 40,936 crore in 2022-23, FPIs invested Rs 3.4 lakh crore in India during 2023-24, which was the highest since 1992-93," said SEBI. SEBI highlighted that Foreign Portfolio Investment and foreign venture capital investment are crucial for emerging economies like India. FY 2023-24 was an exceptional year for India in terms of foreign portfolio investment flows. It added that India's continuing growth resilience, financial stability, reining in of inflation, fiscal consolidation coupled with the persistence of inflation in advanced economies, uncertain geopolitical scenarios, etc., attracted a record level of foreign flows to India. The report noted that in the midst of a subdued global economic scenario with recession risks and monetary tightening, India's economic prospects were bright among emerging markets, driven by a fillip in manufacturing and service sector activities, easing inflation, fiscal consolidation, financial stability, and buoyant <keyword id="20977711" type="General" weightage="20" keywordseo="market-performance" source="keywords">market performance</keyword>. According to the sector-wise breakup on FPI investment, the report stated that out of the consolidated Rs 64.2 lakh crore equity assets held by FPIs, Rs 18.6 lakh crore were invested in financial services, followed by oil, gas, and consumable fuels (Rs 6.0 lakh crore), information technology (Rs 5.9 lakh crore), and automobile and auto components with Rs 4.8 lakh crore invested.

In FY24, 272 companies went public as compared to 164 in FY23: SEBI

The rupee rose 2 paise to 84.40 against the US dollar in early trade on Tuesday amid a recovery in domestic equity markets and a weaker American currency against major Asian rivals. Forex traders said, however, sustained outflow of foreign funds and an upward movement in crude oil prices put pressure on the local unit and capped its sharp gain. At the interbank foreign exchange, the rupee opened at 84.39 and slipped further to 84.40 against the greenback, trading 2 paise higher from its previous close. On Monday, the rupee recovered from its lowest level of 84.46 to settle 4 paise higher at 84.42 against the US dollar. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.09 per cent at 106.10. Brent crude, the global oil benchmark, rose by 0.19 per cent to USD 73.44 per barrel in futures trade. On the domestic equity market front, Sensex was trading 271.42 points, or 0.35 per cent higher, at 77,610.43 points. The Nifty advanced 105.55 points, or 0.45 per cent, to 23,559.35 points. <keyword id="19932515" type="General" weightage="20" keywordseo="Foreign-Institutional-Investors" source="keywords">Foreign Institutional Investors</keyword> (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth Rs 1,403.40 crore, according to exchange data. SEE ALSO:<a href="https://www.businessinsider.in/tech/mobile/news/tata-to-buy-a-majority-stake-in-pegatrons-iphone-plant-in-india/articleshow/115414852.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/news/tata-to-buy-a-majority-stake-in-pegatrons-iphone-plant-in-india/articleshow/115414852.cms" target="_blank">Tata to buy a majority stake in Pegatron's iPhone plant in India</a><a href="https://www.businessinsider.in/stock-market/webstories/ntpc-green-energy-ipo-gmp-risk-factors-and-all-you-need-to-know/slidelist/115403791.cms" target="_blank"></a> <a href="https://www.businessinsider.in/stock-market/webstories/ntpc-green-energy-ipo-gmp-risk-factors-and-all-you-need-to-know/slidelist/115403791.cms" target="_blank">NTPC Green Energy IPO – GMP, risk factors and all you need to know</a><a href="https://www.businessinsider.in/entertainment/news/jiostar-announces-plans-starting-at-15-heres-everything-you-need-to-know/articleshow/115326701.cms" target="_blank"></a> <a href="https://www.businessinsider.in/entertainment/news/jiostar-announces-plans-starting-at-15-heres-everything-you-need-to-know/articleshow/115326701.cms" target="_blank">JioStar announces plans starting at ₹15 – here’s everything you need to know</a>

Rupee rises 2 paise to 84.40 against US dollar in early trade

<div type="image" title="In 2024, India has seen around $12.2 billion worth of IPOs, including mainboard and SMEs" msid="113878163" hostid="261" sizebytes="45300" caption="&amp;lt;p&amp;gt;In 2024, India has seen around $12.2 billion worth of IPOs, including mainboard and SMEs&amp;lt;/p&amp;gt;"></div> Missing some action, adrenaline rush, and thrill in your life? Are the good old, albeit mundane money investment avenues like mutual funds and fixed deposits not making the cut for you? Want to experience a heart-pounding, financial rollercoaster that will constantly keep you and your portfolio on tenterhooks? Well then, welcome to the world of initial public offers (IPOs), especially those brought to you by SMEs, or <keyword id="6375845" type="General" weightage="20" keywordseo="Small-and-Medium-Enterprises" source="Orion">small and medium enterprises</keyword>. Truth be told, <keyword id="19938687" type="General" weightage="20" keywordseo="sme" source="keywords">SME</keyword> IPOs have been all over the bourses this year. So far, 2024 has seen 206 SMEs debuting on both BSE and NSE, out of which 146 listed in gains and 46 listed in losses. Odds seem good, right? In contrast, the year has only seen 63 IPOs from the elder brother i.e. mainboard, only 48 of which managed to post any listing gains. And getting an allotment has also been a major uncertainty, given the unusually high demand this year. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">So, what's an <keyword id="5559702" type="General" weightage="100" keywordseo="SME-IPO" source="Orion">SME IPO</keyword>, you ask?</h2>Think of a mainboard company as Shah Rukh or Salman Khan—well-established, financially stable, strong legacy of profitability, and fairly well-known. On the other hand, SMEs are your Prateek Gandhi (Harshad Mehta, Scam 1992), Siddhant Chaturvedi (MC Sher, Gully Boy) or Avinash Tiwary (Majnu, Laila Majnu). While they are doing super well, they are yet to make it big like the Khans. They’re currently underdogs, lesser known, but who knows? They can be the next big thing in the future! And SME IPOs are getting a stellar reception. In 2023, 182 such IPOs had raised a substantial Rs 4,967 crore. In 2024, more than 200 companies have already raised over Rs 7,500 crore, and we have four months to go. This, with one quarter of the year still remaining. <div type="image" title="In 2024, India leads IPO activity in the Asia-Pacific region" height="900" width="1200" msid="113875643" hostid="261" caption="&amp;lt;p&amp;gt;In 2024, India leads IPO activity in the Asia-Pacific region&amp;lt;/p&amp;gt;"></div> But what does it take for a company to be classified as a small enterprise? The company has to have an annual turnover/income of up to Rs 50 crore, and for a medium enterprise to be called so, its annual income has to be up to Rs 250 crore. When such companies go public, in a bid to raise funds from investors and expand their operations, they launch an <keyword id="19898327" type="General" weightage="20" keywordseo="ipo" source="keywords">IPO</keyword>, but not on the main exchange, but separately, on NSE’s Emerge and BSE’s SME platform. As of September 2024, <keyword id="4484133" type="General" weightage="20" keywordseo="NSE-Emerge" source="Orion">NSE Emerge</keyword> has 147 listed participants, while <keyword id="1885131" type="General" weightage="20" keywordseo="BSE-SME" source="Orion">BSE SME</keyword> has 155 market makers. Mounting an SME’s IPO is comparatively less stringent than their mainboard counterparts, as far as regulations are concerned since their DRHPs (draft red herring prospectus) are not filed with SEBI. So, wouldn’t a lenient treatment make them inherently riskier? Why are they so appealing, you ask? <a href="https://www.businessinsider.in/stock-market/news/a-company-with-8-employees-looking-to-raise-12-crore-ended-up-getting-applications-worth-over-4700-crore/articleshow/112824522.cms">Delhi firm with just 8 employees seeks ₹12 crore via IPO, gets ₹4,700 crore worth of investor applications!</a> Well, for one, some of them have delivered exceptional returns—we’re talking 100%, 200%. Consider this—Owais Metal and Mineral Processing, which launched its IPO in February this year, delivered a whopping listing gain of 201%. Another SME, Maxposure, whose IPO was out in January 2024, had earned its investors listing gains worth 317.40%! Apparently, higher risks also mean higher returns, and also super high investment. Most SME IPOs need a minimum investment of Rs 1,00,000 or more, as opposed to mainboard IPOs, where you can buy one lot of shares for anywhere between Rs 14,000-15,000. Even the minimum trading lot size for SME shares is about 10,000. In short, you’d have to potentially empty your pockets to invest in an SME IPO. And still, there’s no guarantee that the listing will fill your wallets. For all you know, your pockets before and after the IPO is listed might stay the same - EMPTY! There's also the question of whether or not these SMEs are able to maintain their listing day mojo, or do they just fizzle out thereafter? Data from Prime Database highlights more instances of the latter. As of August 2024, about 166 SME IPOs had made it to the exchanges. Around 72 of them, or close to 50%, could not sustain their momentum going ahead, and were trading below their listing day prices. Consider this. The post listing gains of Medicamen Organics, whose IPO came out in June 2024, earned its investors massive listing gains of over 300%, by listing at Rs 137.85, significantly higher than its price issue price, which was set between Rs 32-34. But as of October 1, 2024, the stock was trading at Rs 64.2. Talk about falls. Additionally, risks of pump-and-dump, and illiquidity, among others makes SME IPOs dangerous See, you're largely venturing into unknown, pitch-dark territories, without much light to guide you. For starters, SME IPOs face less scrutiny from market watchdog SEBI. This also means they are able to list quickly, just 3-4 months. On the other hand, mainboard IPOs can take upto a year before they are cleared for listing. Also, there is far less information and disclosures available about their financials, fundamentals and performance to investors for making an informed decision, as compared to mainboard stocks. Then there’s the issue of illiquidity. Once purchased, you might find it hard to sell off your SME stocks, since they are not traded as frequently in the market, which means lower liquidity. Trivesh D, COO, Tradejini explains that liquidity is a major concern for such stocks. “These stocks typically have a smaller free float, and are traded in lots, which can lead to volatility and sharp price swings. This means it can be challenging for investors to buy or sell shares without significantly impacting prices. Additionally, speculative trading practices, like 'pump-and-dump' schemes, can inflate stock prices, leaving retail investors vulnerable to sudden drops”. Recently, SME IPOs have gained notoriety for price manipulation via showing fictitious sales and revenue in their books of accounts, selling of promoter holdings at inflated prices, and being the facade for many infamous pump and dump schemes. This is where select people create frenzy, or mass euphoria over a particular stock or company, causing its prices to soar, and then dumping them, or selling their shares at this massive price to make a killing! Infact, it's not just the promoters, but also the investment banks floating these IPOs. At present, SEBI is investigating around 6 investment banks which have allegedly charged SMEs a staggering 15% of funds raised via IPOs as fee, as opposed to the standard 1-3%. In March 2024, SEBI chairperson Madhabi Puri Buch had also highlighted witnessing signs of manipulation in the SME space. “We do see signs of manipulation in the SME segment. We are able to see certain patterns.” Buch had observed back then. Adds Kresha Gupta, Founder &amp; Director, StepTrade Share Services, “Investing in SME IPO comes with significant risks, despite their impressive returns in recent years. Limited participation from institutional investors and public in some SME IPOs also mean that those companies may lack the support and stability that comes with larger-scale investments” “Additionally, many SMEs may not have strong fundamentals to justify their valuations. High P/E ratios can be misleading, and while some IPOs have delivered impressive returns, they often come with significant volatility, continues D of Tradejini. <h2 style="box-sizing: border-box; border: 0px; outline: 0px; padding: 0px; margin: 0px 0px 0.7em; font-family: &quot;Open Sans&quot;, sans-serif; font-weight: 700; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; list-style: none; background: 0px 0px; text-rendering: optimizelegibility; text-transform: none; font-style: normal; font-variant-ligatures: normal; font-variant-caps: normal; letter-spacing: normal; orphans: 2; text-align: start; text-indent: 0px; widows: 2; word-spacing: 0px; -webkit-text-stroke-width: 0px; white-space: normal; text-decoration-thickness: initial; text-decoration-style: initial; text-decoration-color: initial;">So, should I stay away?</h2>Yes, and No. Yes, if you don't want to do your homework of researching the company thoroughly beforehand. Anand K. Rathi, Co-Founder of MIRA Money suggests asking a couple of questions before investing your hard earned money: <ul><li>What is the company's financial performance over the past 3-4 years?</li><li>What is the company's governance structure?</li><li>Is the financial success driven by the IPO, or is it a result of consistent performance?</li><li>Does the company have what it takes to scale its operations to the next level?</li><li>Are the company’s promoters trustworthy, capable and experienced?</li><li>What is the level of participation by large, institutional investors?</li></ul> But staying away completely? Not necessary. Gupta adds that retail investors, in particular, should avoid viewing SME IPOs as quick money-makers based on their short-term performance, as this can certainly lead to poor investment decisions. “To mitigate risks, investors should always focus on long-term fundamentals rather than just short-term price movements. Key indicators include the participation of institutional investors like DIIs and FIIs. This often signals confidence in the stock”, she continues. A red flag you should look out for is if a company is only offering OFS, or Offer for Sale. This can indicate early investors looking to exit, potentially signaling weaker future growth. That's why it is better to look for companies which are raising capital for expansion purposes. This is a sign of healthy business growth prospects and improving fundamentals. In conclusion, backing the underdog, or SMEs, is not a bad proposition, but not without its risks. Investing in SME IPOs is like riding a unicorn—but you don't know whether you're riding it to rags or riches! So, take your pick.

SIMPLY PUT: Why investing in SME IPOs should not be on top of your adventure to-do list!

Missing some action, adrenaline rush, and thrill in your life? Are the good old, albeit mundane money investment avenues like mutual funds and fixed deposits not making the cut for you? Want to experience a heart-pounding, financial rollercoaster that will constantly keep you and your portfolio on tenterhooks? Well then, welcome to the world of initial public offers (IPOs), especially those brought to you by SMEs, or <keyword id="6375845" type="General" weightage="20" keywordseo="Small-and-Medium-Enterprises" source="Orion">small and medium enterprises</keyword>. Truth be told, <keyword id="3704207" type="General" weightage="100" keywordseo="SME-IPOs" source="Orion">SME IPOs</keyword> have been all over the bourses this year. So far, 2024 has seen 206 SMEs debuting on both BSE and NSE, out of which 146 listed in gains and 46 listed in losses. Odds seem good, right? In contrast, the year has only seen 63 IPOs from the elder brother i.e. mainboard, only 48 of which managed to post any listing gains. And getting an allotment has also been a major uncertainty, given the unusually high demand this year. <h2>So, what's an SME <keyword id="6354763" type="General" weightage="20" keywordseo="IPO" source="Orion">IPO</keyword>, you ask?</h2>Think of a mainboard company as Shah Rukh or Salman Khan—well-established, financially stable, strong legacy of profitability, and fairly well-known. On the other hand, SMEs are your Prateek Gandhi (Harshad Mehta, Scam 1992), Siddhant Chaturvedi (MC Sher, Gully Boy) or Avinash Tiwary (Majnu, Laila Majnu). While they are doing super well, they are yet to make it big like the Khans. They’re currently underdogs, lesser known, but who knows? They can be the next big thing in the future! And SME IPOs are getting a stellar reception. In 2023, 182 such IPOs had raised a substantial Rs 4,967 crore. In 2024, more than 200 companies have already raised over Rs 7,500 crore, and we have four months to go. This, with one quarter of the year still remaining. <div type="image" title="In 2024, India leads IPO activity in the Asia-Pacific region" height="900" width="1200" msid="113875643" hostid="261" caption="&amp;lt;p&amp;gt;In 2024, India leads IPO activity in the Asia-Pacific region&amp;lt;/p&amp;gt;"></div> But what does it take for a company to be classified as a small enterprise? The company has to have an annual turnover/income of up to Rs 50 crore, and for a medium enterprise to be called so, its annual income has to be up to Rs 250 crore. When such companies go public, in a bid to raise funds from investors and expand their operations, they launch an IPO, but not on the main exchange, but separately, on NSE’s Emerge and BSE’s SME platform. As of September 2024, <keyword id="4484133" type="General" weightage="20" keywordseo="NSE-Emerge" source="Orion">NSE Emerge</keyword> has 147 listed participants, while <keyword id="1885131" type="General" weightage="20" keywordseo="BSE-SME" source="Orion">BSE SME</keyword> has 155 market makers. Mounting an SME’s IPO is comparatively less stringent than their mainboard counterparts, as far as regulations are concerned since their DRHPs (draft <keyword id="12225712" type="General" weightage="20" keywordseo="Red-herring-prospectus" source="Orion">red herring prospectus</keyword>) are not filed with SEBI. So, wouldn’t a lenient treatment make them inherently riskier? Why are they so appealing, you ask? <a href="https://www.businessinsider.in/stock-market/news/a-company-with-8-employees-looking-to-raise-12-crore-ended-up-getting-applications-worth-over-4700-crore/articleshow/112824522.cms">Delhi firm with just 8 employees seeks ₹12 crore via IPO, gets ₹4,700 crore worth of investor applications!</a> Well, for one, some of them have delivered exceptional returns—we’re talking 100%, 200%. Consider this—Owais Metal and Mineral Processing, which launched its IPO in February this year, delivered a whopping listing gain of 201%. Another SME, Maxposure, whose IPO was out in January 2024, had earned its investors listing gains worth 317.40%! Apparently, higher risks also mean higher returns, and also super high investment. Most SME IPOs need a minimum investment of Rs 1,00,000 or more, as opposed to mainboard IPOs, where you can buy one lot of shares for anywhere between Rs 14,000-15,000. Even the minimum trading lot size for SME shares is about 10,000. In short, you’d have to potentially empty your pockets to invest in an SME IPO. And still, there’s no guarantee that the listing will fill your wallets. For all you know, your pockets before and after the IPO is listed might stay the same - EMPTY! There's also the question of whether or not these SMEs are able to maintain their listing day mojo, or do they just fizzle out thereafter? Data from Prime Database highlights more instances of the latter. As of August 2024, about 166 SME IPOs had made it to the exchanges. Around 72 of them, or close to 50%, could not sustain their momentum going ahead, and were trading below their listing day prices. Consider this. The post listing gains of Medicamen Organics, whose IPO came out in June 2024, earned its investors massive listing gains of over 300%, by listing at Rs 137.85, significantly higher than its price issue price, which was set between Rs 32-34. But as of October 1, 2024, the stock was trading at Rs 64.2. Talk about falls. Additionally, risks of pump-and-dump, and illiquidity, among others makes SME IPOs dangerous See, you're largely venturing into unknown, pitch-dark territories, without much light to guide you. For starters, SME IPOs face less scrutiny from market watchdog SEBI. This also means they are able to list quickly, just 3-4 months. On the other hand, mainboard IPOs can take upto a year before they are cleared for listing. Also, there is far less information and disclosures available about their financials, fundamentals and performance to investors for making an informed decision, as compared to mainboard stocks. Then there’s the issue of illiquidity. Once purchased, you might find it hard to sell off your SME stocks, since they are not traded as frequently in the market, which means lower liquidity. Trivesh D, COO, Tradejini explains that liquidity is a major concern for such stocks. “These stocks typically have a smaller free float, and are traded in lots, which can lead to volatility and sharp price swings. This means it can be challenging for investors to buy or sell shares without significantly impacting prices. Additionally, speculative trading practices, like 'pump-and-dump' schemes, can inflate stock prices, leaving retail investors vulnerable to sudden drops”. Recently, SME IPOs have gained notoriety for price manipulation via showing fictitious sales and revenue in their books of accounts, selling of promoter holdings at inflated prices, and being the facade for many infamous <keyword id="10663340" type="General" weightage="20" keywordseo="Pump-and-Dump" source="Orion">pump and dump</keyword> schemes. This is where select people create frenzy, or mass euphoria over a particular stock or company, causing its prices to soar, and then dumping them, or selling their shares at this massive price to make a killing! Infact, it's not just the promoters, but also the investment banks floating these IPOs. At present, SEBI is investigating around 6 investment banks which have allegedly charged SMEs a staggering 15% of funds raised via IPOs as fee, as opposed to the standard 1-3%. In March 2024, SEBI chairperson Madhabi Puri Buch had also highlighted witnessing signs of manipulation in the SME space. “We do see signs of manipulation in the SME segment. We are able to see certain patterns.” Buch had observed back then. Adds Kresha Gupta, Founder &amp; Director, StepTrade Share Services, “Investing in SME IPO comes with significant risks, despite their impressive returns in recent years. Limited participation from institutional investors and public in some SME IPOs also mean that those companies may lack the support and stability that comes with larger-scale investments” “Additionally, many SMEs may not have strong fundamentals to justify their valuations. High P/E ratios can be misleading, and while some IPOs have delivered impressive returns, they often come with significant volatility, continues D of Tradejini. <h2>So, should I stay away? </h2>Yes, and No. Yes, if you don't want to do your homework of researching the company thoroughly beforehand. Anand K. Rathi, Co-Founder of MIRA Money suggests asking a couple of questions before investing your hard earned money: <ul><li>What is the company's financial performance over the past 3-4 years?</li><li>What is the company's governance structure?</li><li>Is the financial success driven by the IPO, or is it a result of consistent performance?</li><li>Does the company have what it takes to scale its operations to the next level?</li><li>Are the company’s promoters trustworthy, capable and experienced?</li><li>What is the level of participation by large, institutional investors?</li></ul> But staying away completely? Not necessary. Gupta adds that retail investors, in particular, should avoid viewing SME IPOs as quick money-makers based on their short-term performance, as this can certainly lead to poor investment decisions. “To mitigate risks, investors should always focus on long-term fundamentals rather than just short-term price movements. Key indicators include the participation of institutional investors like DIIs and FIIs. This often signals confidence in the stock”, she continues. A red flag you should look out for is if a company is only offering OFS, or Offer for Sale. This can indicate early investors looking to exit, potentially signaling weaker future growth. That's why it is better to look for companies which are raising capital for expansion purposes. This is a sign of healthy business growth prospects and improving fundamentals. In conclusion, backing the underdog, or SMEs, is not a bad proposition, but not without its risks. Investing in SME IPOs is like riding a unicorn—but you don't know whether you're riding it to rags or riches! So, take your pick.

Why investing in SME IPOs should not be on top of your adventure to-do list!

Dear reader, Another week comes to an end, and with it, a fresh roundup of stories shaping the business and finance landscapes. This week, we explored data that challenges the idea that large IPOs automatically lead to large returns—18 of India’s biggest IPOs fell short of expectations. On the investment front, experts debunked the popular advice of ‘<keyword id="23577643" type="General" weightage="20" keywordseo="buying-the-dip" source="keywords">buying the dip</keyword>’ and suggest a better approach for long-term success. And in the world of <keyword id="19963428" type="General" weightage="20" keywordseo="quick-commerce" source="keywords">quick commerce</keyword>, recent incidents like bizarre notifications and uncalled-for freebies piqued social media's interest. For stargazers and romantics, the upcoming <keyword id="22852367" type="General" weightage="20" keywordseo="Hunters-Moon" source="keywords">Hunter’s Moon</keyword> offers a beautiful setting for a moonlit night. And for career climbers, we have insights from a <keyword id="21560867" type="General" weightage="20" keywordseo="product-manager" source="keywords">product manager</keyword> who landed a $180,000 role at <keyword id="19904352" type="General" weightage="20" keywordseo="Cisco" source="keywords" meta.keywordsubtype="org" meta.entityname="Cisco" meta.hostid="261" meta.entityid="Cisco">Cisco</keyword>, sharing <keyword id="21767233" type="General" weightage="20" keywordseo="resume-tips" source="keywords">resume tips</keyword> to help you stand out. Dive in, and enjoy this week’s highlights! <h2>Top stories of the week</h2> Do large IPOs guarantee large returns? Data suggests that 18 of India's biggest 30 IPOs did not generate solid returns A study of India’s top 30 IPOs reveals that a majority—18 of them—failed to deliver substantial returns to investors. Despite the hype surrounding large public offerings, data shows that a company’s size or popularity doesn’t always correlate with strong post-IPO performance. Investors are urged to manage their expectations and conduct thorough research before jumping into large IPOs, as high-profile launches don’t guarantee hefty returns. <a href="https://www.businessinsider.in/finance/news/do-large-ipos-guarantee-large-returns-data-suggests-that-18-of-indias-biggest-30-ipos-did-not-generate-hefty-returns/articleshow/114302378.cms" data-type="tilCustomLink" target="_blank">Read more</a> Free tomatoes to i-pill notification, recent quick commerce incidents that sparked outrage Recent incidents in India’s quick commerce sector have sparked widespread outrage, ranging from offering free tomatoes as promotional giveaways to sending unsolicited I-Pill notifications to customers. These occurrences highlight issues around <keyword id="19999043" type="General" weightage="20" keywordseo="consumer-privacy" source="keywords">consumer privacy</keyword>, safety, and inappropriate marketing strategies. As rapid delivery services continue to expand, so do concerns about their ethical and operational practices. <a href="https://www.businessinsider.in/business/news/free-tomatoes-to-i-pill-notification-recent-quick-commerce-incidents-that-sparked-outrage/articleshow/114315992.cms" data-type="tilCustomLink" target="_blank">Read more</a> Why "buying the dip" is not always good advice, and the right time to start is now The age-old investment advice of ‘buying the dip’ may not always hold true, especially in unpredictable markets. Experts argue that waiting for stocks to drop before investing could result in missed opportunities, as market timings are nearly impossible to predict. Instead, the best strategy for long-term investors may be to focus on consistent investing, with the right time to start being now. <a href="https://www.businessinsider.in/stock-market/news/why-buying-the-dip-is-not-always-good-advice-the-right-time-to-start-is-now/articleshow/114253456.cms" data-type="tilCustomLink" target="_blank">Read more</a> Why this week's Hunter's Moon is the ultimate backdrop for the perfect moonlit date night The upcoming Hunter’s Moon, which will grace the skies this week, offers the perfect opportunity for a romantic, moonlit night. This full moon is not only visually stunning but also holds cultural significance, symbolizing harvest and abundance. For those seeking an atmospheric, nature-infused experience, this celestial event promises to be the ultimate backdrop for a memorable date night. <a href="https://www.businessinsider.in/science/space/article/why-this-weeks-hunters-moon-is-the-ultimate-backdrop-for-the-perfect-moonlit-date-night/articleshow/114317181.cms" data-type="tilCustomLink" target="_blank">Read more</a> A product manager shares the résumé that helped him transition from consulting and land a $180,000 role at Cisco Transitioning from consulting to a high-paying role as a product manager at Cisco, one professional shared the resume that helped him land the $180,000 job. His strategic approach included tailoring his CV to highlight relevant skills and experiences, positioning himself as the perfect candidate for the tech giant. Aspiring product managers can take notes on crafting resumes that stand out in competitive job markets. <a href="https://www.businessinsider.in/careers/news/a-product-manager-shares-the-rsum-that-helped-him-transition-from-consulting-and-land-a-180000-role-at-cisco/articleshow/114232654.cms" data-type="tilCustomLink" target="_blank">Read more</a> <h2><h2>Web Stories </h2> <a href="https://www.businessinsider.in/international/webstories/india-canada-tussle-a-timeline-of-escalating-tensions-under-trudeaus-regime/slidelist/114283096.cms" data-type="tilCustomLink" target="_blank">India-Canada Tussle: A timeline of escalating tensions under Trudeau’s regime</a><a href="https://www.businessinsider.in/international/webstories/india-canada-tussle-a-timeline-of-escalating-tensions-under-trudeaus-regime/slidelist/114283096.cms" data-type="tilCustomLink" target="_blank"></a> <a href="https://www.businessinsider.in/international/webstories/the-weirdest-guinness-world-records-ever-set/slidelist/114288059.cms" data-type="tilCustomLink" target="_blank">The weirdest Guinness World records ever set</a><a href="https://www.businessinsider.in/international/webstories/the-weirdest-guinness-world-records-ever-set/slidelist/114288059.cms" data-type="tilCustomLink" target="_blank"></a> <a href="https://www.businessinsider.in/travel/india/webstories/from-amber-to-gagron-indias-unesco-world-heritage-forts-to-explore/slidelist/114282776.cms" data-type="tilCustomLink" target="_blank">Amber to Gagron: India’s UNESCO world heritage forts to explore</a> </h2>

Weekend wrap: IPO myths, quick commerce gone wrong and more

<ul class="summary-list"><li>SoftBank reported a $7.7 billion quarterly profit on Tuesday after a loss last year.</li><li>Gains in its tech bets come as it prepares to invest further in AI and eyes future IPOs.</li></ul><a target="_blank" class="" href="https://www.businessinsider.com/masayoshi-son-softbank-gambling-man-lionel-barber-technology-2024-9">SoftBank's</a> bets on AI and timely public listings have helped it post its biggest profits for two years, a year after posting losses in the billions.The Japanese technology conglomerate swung to a 1.18 trillion yen ($7.7 billion) profit on Tuesday. For the same period last year it reported a 931.1 billion yen ($6 billion) loss. Masayoshi Son's company — once associated with its notorious <a target="_blank" class="" href="https://www.businessinsider.com/weworks-nightmare-ipo">failed bet on WeWork</a> and other lossmaking startups — pointed to gains made across its Vision Funds, its huge investment vehicles with both public and private holdings in tech companies.Gains for its Vision Fund 1, a $98.6 billion investment vehicle launched in 2016 with backing from Abu Dhabi and Saudi Arabia's sovereign wealth funds, totaled $3 billion in the second quarter. It reported strong performances in listed companies in its portfolio, such as Didi Chuxing, a Chinese version of Uber.Navneet Govil, chief financial officer at <a target="_blank" class="" href="https://www.businessinsider.com/inside-softbank-vision-funds-awful-year-former-employees-rival-vcs-2022-12">SoftBank's Vision Funds</a>, told Business Insider that "macro tailwinds" such as US interest rate cuts and stimulus measures in China helped its public portfolio.Vision Fund 2, which made a $500 million investment in OpenAI last month, made a $900 million investment gain in the quarter due to growth in privately held portfolio companies such as Revolut.The UK-based fintech giant, which has won banking licenses in the UK and Mexico in recent months, is now valued at $45 billion. SoftBank invested in Revolt in 2021, when it was worth $33 billion.<h2 id="18d37cf2-1aaf-4020-8453-aa9f8c4b8cca">Tailwinds for IPO activity </h2>Listings in India of companies like Ola Electric have also provided a boost for SoftBank.Govil said SoftBank saw opportunities to realize future gains from IPOs after a period of stagnancy, adding that "rate cuts in the US and elsewhere are constructive developments because they effectively lower the cost of capital and provide a good tailwind for IPO activity."He continued: "We have a late-stage portfolio that's now valued at about $34 billion and some really high-quality companies which are leaders in their respected industries, from ByteDance to PayPay to Fanatics. They will all list when the time is right."Despite the investment gain, Vision Fund 2 has lost an overall total of $21 billion since its inception. The fund has been forced to grapple with a tougher interest rate environment in recent years and a slow <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/recent-upcoming-ipo-processes-stock-market-impact-outlook-reddit-astera-2024-4">IPO market.</a>The results come as SoftBank gears up for a huge investment spree in AI to realize Son's ambitious vision. Last month at SoftBank World — its annual customer event — the founder and CEO said he <a target="_blank" class="" href="https://group.softbank/en/event/earnings_2024q2?utm_source=pressmail&amp;utm_medium=email&amp;utm_campaign=press1112#webcast02">hoped to achieve "artificial superintelligence"</a> within a decade.The 67-year-old Son, who made his original fortune with a timely bet on Alibaba, is hoping to create outsize returns in the generative AI era. He has already bet on buzzy companies such as Perplexity and chip firms trying to rival Nvidia, such as Graphcore and Arm.

SoftBank is betting on AI and an IPO revival after swinging to a $7.7 billion profit

<keyword id="19895995" type="General" weightage="20" keywordseo="HDFC-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="HDFC Bank" meta.hostid="261" meta.entityid="HDFC Bank">HDFC Bank</keyword> on Saturday posted a marginal 5 per cent increase in its standalone profit at Rs 16,821 crore in the second quarter ended September 2024. The country's biggest private sector lender had earned a <keyword id="19942166" type="General" weightage="20" keywordseo="net-profit" source="keywords">net profit</keyword> of Rs 15,976 crore in the same quarter a year ago. Total income increased to Rs 85,500 crore during the quarter under review against Rs 78,406 crore in the same period last year, HDFC Bank said in a regulatory filing. The bank reported <keyword id="20202322" type="General" weightage="20" keywordseo="interest-income" source="keywords">interest income</keyword> of Rs 74,017 crore during the quarter compared to Rs 67,698 crore in the same period a year ago. Net Interest Income (NII) improved to Rs 30,110 crore, from Rs 27,390 crore in the second quarter of previous year, registering a 10 per cent growth. As regards asset quality, the bank witnessed slight deterioration with gross <keyword id="19927319" type="General" weightage="20" keywordseo="Non-Performing-Assets" source="keywords">Non-Performing Assets</keyword> (NPAs) rising to 1.36 per cent of the gross loans by the end of September 2024 from 1.34 per cent a year ago. Similarly, net NPAs or bad loans rose to 0.41 per cent from 0.35 per cent at the end of the second quarter of the previous fiscal. On a consolidated basis, the bank logged a growth of 6 per cent in net profit to Rs 17,826 crore as against Rs Rs 16,811 crore in Q2FY24. SEE ALSO:<a href="https://www.businessinsider.in/personal-finance/news/best-credit-cards-for-online-shopping-in-india/articleshow/114354358.cms" target="_blank"></a> <a href="https://www.businessinsider.in/personal-finance/news/best-credit-cards-for-online-shopping-in-india/articleshow/114354358.cms" target="_blank">Best credit cards for online shopping this festive season</a><a href="https://www.businessinsider.in/tech/mobile/webstories/best-smartphones-under-25000-in-india-in-october-2024/slidelist/114339207.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/webstories/best-smartphones-under-25000-in-india-in-october-2024/slidelist/114339207.cms" target="_blank">Best smartphones under ₹25,000 in India in October 2024</a><a href="https://www.businessinsider.in/stock-market/webstories/waaree-energies-ipo-price-band-to-risk-factors-all-you-need-to-know/slidelist/114350114.cms" target="_blank"></a> <a href="https://www.businessinsider.in/stock-market/webstories/waaree-energies-ipo-price-band-to-risk-factors-all-you-need-to-know/slidelist/114350114.cms" target="_blank">Waaree Energies IPO – Price band to risk factors, all you need to know</a>

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SIMPLY PUT: Why investing in SME IPOs should not be on top of your adventure to-do list!

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Why investing in SME IPOs should not be on top of your adventure to-do list!

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Weekend wrap: IPO myths, quick commerce gone wrong and more

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SoftBank is betting on AI and an IPO revival after swinging to a $7.7 billion profit

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