India is in the midst of an unusual IPO boom
Investors looking to cash in on India’s growth have typically focused their attention either on the sprawling conglomerates run by the country’s tycoons or the buzzy tech firms transforming the way Indians shop, learn or move around. How, then, to explain the excitement over Cello World, a 61-year-old company of middling size that listed its shares on the two local bourses on November 6th? It produces the “tiffin” boxes Indians use to carry their lunch to school or work, along with inexpensive pens and moulded furniture—hardly exciting stuff. Yet on the first day of trading its shares soared by 29%, sending its market value above $2bn. That is nearly 60 times the net profit it made in the last fiscal year. Its initial public offering (IPO) was roughly 40 times oversubscribed.
Cello World does not have bold plans for reinvesting the $230m raised in the offering; all of it will go back to the family that controls the firm, which still owns 81% of the equity. Nor is the business unique. At the end of last month another company making pens, Flair Writing Industries, received approval for its IPO. Several furniture companies are lined up to offer shares in the near future, too. Cello World is, in short, rather boring.
Few venture capitalists would line up for a stake in such a business. Foreign portfolio managers, many of whom have settled on a strategy of entering India through slivers of holdings in the country’s mightiest conglomerates, would probably pass it over, too. Recent months, however, have shown that one of the most appealing corners of the Indian economy may be the companies like Cello World, which are benefiting from the country’s growth story without trying to write it.
2023-11-09 04:09:47
Post from www.economist.com