India has, in the past, been called the "next China" for possessing some of the same growth potential and investment opportunities. The truthfulness of this claim was supported recently when Chinese authorities began cracking down on its tech sector giants, prompting investors to look elsewhere for a more reliable home for their money. Coincidently, Indian tech companies are currently experiencing a boom, with Paytm (NSE: PAYTM) and Zomato (NSE: ZOMATO) going public in 2021 and producing some of the country's largest IPOs to date.
While opportunities can be found outside India's stock exchanges, I want to explore these regulated markets and upcoming IPOs in this article.
India is home to eight stock markets with its listed companies worth a combined US $3.46 trillion. To put this into perspective, UK listed companies are worth a total of US $3.59 trillion, less than US $100 billion more than the former British colony. By 2024, Indian listed companies are projected to surpass the value of UK companies' value and hit approximately US $5.00 trillion.
Hosting these companies are the countries well-known exchanges, including the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), and the Multi-Commodity Exchange (MCX)
Snapdeal is an Indian e-commerce platform catering to the country's growing middle class, similar to the US's Amazon.com (NASDAQ: AMZN) or China's Alibaba (HKG: 9988).
The Company is said to be ready to file preliminary documents signalling its intent to IPO next year at a valuation of approximately US $1.50 billion. Snapdeal is currently backed by Japan's Softbank (TYO: 9984) and China's Alibaba Group, which are expected to continue to hold significant stakes after the Company's IPO.
Data Patterns has developed a vast array of electronic systems for the defence and aerospace sectors for the past 35 years.
The Company filed to IPO with regulators in September 2021, expecting to raise ₹700 crores, or US $100 million, to help it repay debt and aid expansion. The funds will assist Data Patterns to deliver on its order book, which has grown by 40.7% over the past four years.
Data Patterns is seeking a valuation of US $340 million when it goes public. However, no official date has been scheduled for its IPO.
The digital mapping company, headquartered in Delhi, MapMyIndia, develops mapping technology used by some of the world's largest companies.
The Company has received approval (as of the last week of November) from the country's financial authority to go public. MapMyIndia is perhaps the highest-profile Company on this list, with business relationships with US tech giants Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN) and Uber Technologies (NYSE: UBER), among others.
MapMyIndia is seeking a valuation of US $825 million when it IPOs, which it could do before the end of the year. The Company has expressed that the funds will, in part, be used to lift its marketing, helping it compete with the likes of Google (NASDAQ: GOOGL) and Dutch-based TomTom (AMS: TOM2).
While India is dealing with one of the worst health crises in its history, its leading stock indices are holding steady. The stability is likely linked to the rise in heavy commodity prices such as copper and aluminum. Indian heavy industry companies included in these indices are benefiting greatly from the increase in commodity prices. The share price in some heavy manufacturers is up by more than 20% over the month.
With the rise in commodity prices, the NRI has strengthened to yearlong highs against the USD. In contrast, the NRI is struggling to gain ground against its other major partners.
Nothing beats an old fashion conglomerate. Last week, we talked about the social media conglomerate we have all come to know on Facebook. However, the business we’re going to be talking about today dips its fingers into many industries. Reliance Industries Limited is an Indian multinational conglomerate with assets in Energy, petrochemicals, textiles, natural resources, retail, and telecommunications. They generated over $92 Billion in the past year, with their diversified investments into 5G and technology flourishing as their hard investments in oil and retail take a hit.
At the helm of the conglomerate is CEO, Mukesh Ambani, who owns almost 48% of the company. He is one of two sons of the founder of Reliance Industries, Dhirubhai Ambani. Mukesh has been CEO since 2003.
Reliance has been taking full advantage of depressed prices due to the pandemic to shore up their balance sheet, raise capital, and invest in businesses. Amid the pandemic, Reliance turned net debt negative (cash on hand is more than debt needed to be serviced), raised $20 Billion from the likes of Google and Facebook by selling stakes in Jio, their telecommunications arm and has plans to use all that capital to invest into acquiring online retailers. Their telecommunications investments are starting to flourish, and with their healthy balance, excellent leadership, and further investments, they are poised to generate high returns for their shareholders in the future.
They may be investing in tech-oriented businesses – however, this distracts from the fact that the other parts of the conglomerates are struggling. A $15 Billion oil deal with Saudi Aramco was put on hold after oil prices took a massive hit, alongside their retail and financial services segments also taking a beating due to the Coronavirus. Their tech assets may be flourishing. However, their other investments are not. Yet, the market has seen to discount the struggling parts of the businesses, with the stock price up 40% for the year. For reference, Facebook is up 25% year to date alongside beating earnings expectations. The market has put a premium on the excellent leadership and healthy balance sheet. However, we may see this reverse if the other parts of the conglomerate continue to show declining profits. The stock currently trades at around a 31 times earnings premium – something akin to a tech stock, which this is not.
An excellent example of a conglomerate adapting to the change in times (ahem. General Electric), Reliance Industries is an excellent company with exceptional leadership. What’s not so good is the price, which is quite expensive for a business with significant investments in non-performing sectors such as oil and financials. Investors may want to wait for a pullback before considering investing in the company.