There’s a problem of plenty with IPOs; one has to be very cautious: Pankaj Pandey

"A lot more IPOs are coming up next year and it is a problem of plenty. So we are still very cautious. We would not be chasing these companies even with the kind of price correction we have seen," says , Head Research, ICICIdirect.com

There was a lot of excitement about the IPO market around Diwali. Everything seems to be fading around Christmas. A stock like Policybazaar has fallen below issue price.
For most of the companies which have come up with their IPOs, the bulk of the value lies in the future, unlike in traditional companies where a bit of is captured in the existing numbers and some in the future. The challenge with most of the IPOs we have seen and that we are not yet chasing is that we would want to settle down.

We would probably look at some of the companies post 6- to 10-month or a year and that is where we will try to look at which company was slotted better in terms of future space and whether there is a wide space that they are chasing or if it is just an online version of an existing company. That is why we are still not very gung ho on most of the IPOs. So we are not chasing most of the companies at this point in time.



The only company which we covered was MyTrip because that certainly was making profits. This company is quite smaller in size compared to MakeMyTrip but has got better parameters. So on a lower scale, if it is making profit, we like that perspective. Otherwise, in the case of most of the IPOs, we would want to wait out for some more time for price correction to happen. The price discovery will be better and then only we will want to chase. So as of now, while the market looks good, even for next year we would be very cautious on this space.

You have a cautious view. Do you think Nykaa is a completely different kettle of fish?
I am not too sure. It is a wide space waiting to be chased and when I look at these new-age companies, it has to be a wide space, maybe something like Zomato but then look at the valuation! One is paying 30-40 times sales which is where the challenge is.

On the valuation side, one needs to imagine a lot more of what can happen in future and the kind of disruption that can cause. So unless you do not get that comfort, we will not really be chasing. We need to be sure that there is a wide space and this is the only company which is going to tap that particular wide space.

Otherwise, with the kind of lineup we have, a lot more companies are coming up next year and it is a problem of plenty. So we are still very cautious. We would not be chasing these companies even with the kind of price correction we have seen.