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Upcoming IPOs in India

I hope you had a good holiday season.

What I will share next is not worth celebrating.

According to Tracxn, Indian start-up funding was down 80% in the quarter ending September 2022. On a sequential basis, it’s down 57%.

How times have changed. Last year, money was literally printed and tossed around, it felt like an endless party.

Young people with barely a year of experience were spoiled for choice for their next job, being lured by ESOPs, membership bonuses and huge raises from loss-making companies.

But the tide has turned.

The tech boom is far from over, but has certainly come crashing down, as you can see in the chart below.

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This is the trajectory of the NASDAQ index.

The crash in tech stocks is bigger than the Covid crash. At this rate, it won’t be long before it beats the losses of the great financial crisis of the last decade.

A good number of my cousins ​​and friends were swept up in the post-pandemic tech boom, buying the famous FAANG. They were hoping to mount multibagger stocks. They are now looking at a loss of over 40%.

Fortunately, these companies are past the stage where their survival could be in question. IPO investors in new age companies like Zomato, Car Trade and Delhivery don’t even have that comfort.

It is not only retail investors, but also larger players – institutions and mutual funds, that have lost money on these loss-making companies.

Hopefully this crash won’t be wasted, that big investors are held accountable and appreciate the value of the margin of safety in valuations and sustainability – the basics of the equity market.

As for retail investors, I hope this will make them realize that following even seasoned investors and following wholesale trades to make investment decisions will not provide any safety net.

After all, they are humans – as sensitive to FOMO (Fear Of Missing Out) as a common investor.

Mark Cuban, the famous American Shark Tank judge, has been on the show since its inception. He was honest enough to admit it. In a shocking and embarrassing confession on the Full Send podcast, he revealed that he made no profit from the investments made in the show.

That could be $20 million – invested in 85 companies across 111 episodes, which fell through. It’s disappointing.

Cuban is an entrepreneur with a net worth of $4.7 billion. He wears many hats as an investor, film producer, author, famous TV personality (thanks to his popularity on Shark Tank), and with money in multiple businesses – from sports to cryptos, pharmaceuticals And so on,

There is more…

He considers his investment in “Breathometer” the worst of all. To be sure, Mark wasn’t the only one getting hit. The five judges have invested in the company. While Mr. Cuban still loves the product, he’s not happy that the founder is partying on fancy islands, under the guise of business networking.

As I recently shared with my followers, even the savviest investors aren’t immune to the allure of great storytelling (with or without solid foundations), the itch of action and fear of missing out.

What is happening in the technology space has three key points:

First – Don’t follow big investors blindly.

There is no Midas touch, either Cuban or Jhunjhunwala. Sidecar investing can only take you so far. By the time you know what smart money is looking for, the price has already gone up. And the value, if any, comes down to that measurement.

The odds are also stacked against you at release time. Big investors come out first. By the time you know this and follow, prices have already crashed.

You can always learn from the mistakes and experience of others. But when picking stocks or investing in companies, there’s no substitute for research and conviction developed through in-depth study. While Cuban can afford the losses he has suffered, most investors cannot.

Second – Don’t confuse investment with drama. The first is not for entertainment.

Real investing helps you make lasting gains and should probably feel boring if you do it right.

This includes long periods of waiting before finding the perfect pitch and ball to swing the bat. And even then, it will likely involve a long period of waiting before seeing respectable returns.

Finally, you won’t hit the limit every time you swing a bat. But if you have the temper to stay in the game for a long time, a few will be enough to win and beat market returns by a wide margin.

Third, and most important…

For unproven businesses, a high potential product or service is not enough. You need to give extra importance to the quality of management and founders. You need to spend enough time with them to assess their vision, thought process, and execution skills.

After a lackluster 2022, the wave of IPOs is gaining momentum.

According to Business Standard, 64 IPOs worth more than Rs 940 billion have received market regulator approval to raise funds. 45 companies worth Rs 650 billion are awaiting approval. Four IPOs aim to raise more than 45 billion rupees next week.

Beware the power of storytelling, the trap of gray market premiumsand the lure of signup earnings, as many of these unproven companies are brought to you by Mr. Market.

Disclaimer: This article is for information only. This is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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