Bajaj Finserv AMC CIO stays cautious on IPOs despite strong market debuts

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Nimesh Chandan, CIO of Bajaj Finserv AMC, outlined a cautious and highly selective approach to investing in initial public offerings (IPOs), even as the market sees a wave of high-quality companies going public. Chandan stated that while many new listings, such as Lenskart Solutions and Pine Labs, are trading above their issue price, the fund house adheres to a philosophy of prudence, especially concerning valuations. "We are very, very selective," the manager emphasised, revealing that the firm had participated in the IPOs for Billionbrains Garage Ventures (Groww) and a pharmaceutical company, Rubicon Research. This selective participation is guided by a principle from Benjamin Graham's investment philosophy. "In Benjamin Graham's book, there is a phrase that during bull markets, IPO full form should be 'it's probably overpriced'. So, we go with that. If in the secondary market, we are getting value, then we don't chase IPOs that way," he explained, describing it as the fund house's official stance. Despite this cautious view on pricing, Chandan acknowledged the positive trend of strong companies entering the public market. "The kind of companies that are coming for IPOs is still good quality… either coming with a digital or a tech platform or a more futuristic business, or a high-growth business. I think that's still a positive sign for the market," he said. He distinguished the current environment and a potential market top, suggesting that the real cause for concern would be when companies with "questionable business models" or those lacking market leadership begin to see their IPOs oversubscribed. "Then you should be worried about. I think that's a sign where one should be worried," he added. The discussion also touched upon the upcoming expiry of lock-in periods for pre-IPO investors, a factor expected to increase the supply of shares in the market. While this could lead to short-term price corrections, the CIO views it as an opportunity for genuine long-term investors. He believes that any price drops caused by speculative shorting ahead of the lock-in expiry will allow committed institutions to build positions. "Over the long term, every company gets the shareholders it deserves," he concluded. "Slowly, the colour of the shareholding in every company will change to get what they deserve to be. I think in a year, you will actually see what the IPO ...

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