Insurance IPOs are overpriced, will be difficult for markets to absorb: Avendus Capital

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Updated: September 19, 2017 11:25:12 AM

Even as the insurance industry IPOs are set to are all set to collectively raise up to Rs 40,000 crore in this calendar year, Andrew Holland of Avendus Capital says that it will be difficult for the domestic markets to absorb these IPOs are they are overpriced.

Andrew Holland says that the liquidity driven rally in the Indian markets may soon come to an end. (Image:Reuters)

Even as the insurance industry IPOs are set to  are all set to collectively raise up to Rs 40,000 crore in this calendar year, starting with the ICICI Lombard General Insurance Company Rs 5,700 crore IPO which ends today, Andrew Holland of Avendus Capital says these IPOs are overpriced and will be difficult for the domestic markets to absorb them. In an interview to CNBC TV18, the CEO at Avendus Capital Alternate Strategies said, “We are getting huge premiums in IPOs for no real reason. Are we going in for the Insurance IPOs? Absolutely not. We think they are very highly priced. It will be difficult for the markets to absorb.”

Speaking about the concerns the expert pointed out that it’s a liquidity driven rally in the markets, and may soon end. “It’s a liquidity driven markets and the party ends at some point. I’m kind of thinking we shouldn’t be there till the end of the party, as it’s the last leg,” he told the channel. Yesterday, Kalpana Morparia, the Chief Executive Officer of South Asia and India Operations at JPMorgan Chase said, “ There is this wall of liquidity coming in. You’ve seen the kind of inflows we received in the mutual fund industry,  I’ve not seen this in the last 42 years.” According to news reports, 26 companies have already filed their offer documents with the Securities and Exchange Board of India (Sebi) for offerings worth 62,000 crore.

Mutual fund investing in India has reached unprecedented levels as investors pumped in a staggering Rs 20,362 crores into equity mutual funds in August, taking the tally of the overall industry AUM to Rs 20.6 trillion. “Everyone is chasing good investment thesis to invest in,” she observed.  Given the record inflows in August, there is the fear of froth building up even as fund managers grapple to find value picks. Mutual fund industry as a whole will find it difficult to find stocks at reasonable valuations as there has been a massive drop in overall profitability of the companies, Nilesh Shah of Kotak Mutual Fund told CNBC TV18 recently.

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