Summary

In this article, we examine data from three recent listings, of subsidiaries of reputed, large-cap firms. We come up with some general observations and a broader pattern. The analysis can be seen in the context of the listing of Bajaj Housing Finance Ltd.

Three Recent IPOs

• We have collected data from the listings of following firms, observe Fig 1:
  • (1) Bharti Hexacom (Bharti Airtel), from telecom
  • (2) Jio Finance (Reliance Industries), a conglomerate
  • (3) Tata Technologies (Tata Motors), from Automobiles sector
• We note the market cap of the parent company before listing, and their combined market cap a month after listing
  • We can see that the combined market cap listings gave 9%, 4% and 21% gains for these firms respectively within a month
• Clearly, there were substantial gains in a short period, so there was good value unlocking.
• Further, we also note the gains in the new listed firm in the period from listing to today.
  • The subsidiary firms gained 87%, 41% and 142% in terms of market caps after listing, in 4, 12 and 9 months, respectively.
  • It appears that the subsidiary firms here made substantial market cap gains in the subsequent period, much larger than the gains of their parent firms.
• The combined market caps of the three gained by 39%, 34% and 108% in this period.

• Was this just a good period in the market, or particularly for these 3 firms?
• Since these are 3 recent listing events, from 3 different industries, at different valuations, we cannot generalize with high confidence, but we can still come up with observations:

Observations and Pattern

• The IPO market is doing very well right now, listings have been by and large successful, no recent failed listings of note
• The listing of subsidiaries happens at current market valuations and can unlock good value immediately for the parent firm, which may have a conglomerate discount applicable or a complex structure, not so for the subsidiary.
• The reputational rub-off on the subsidiary is massive, and these being much smaller firms, often mid-caps, the upside potential is higher, and in these cases, they have been well received by the market.
• There may not be any direct correlation between these 3 successful listings from the past, and the Bajaj Housing Finance Ltd. IPO, but it does appear to indicate a positive pattern.

Disclaimers and Disclosures

• JMI published the IPO report Bajaj Housing Finance IPO – Take This Loan on 8th Sept. This note may be taken as an appendage / additional thought to the IPO report.
• Punit Jain discloses that he has a shareholding in Bajaj Finance since April 2003 (<1% stake). Other than this, he has no other financial interest or transactions with Bajaj Finance, or any group company. In addition, JMI and its promoters/ employees have no direct or financial interest in these companies, and no known material conflict of interest as on date of publication of this report. Punit Jain intends to apply in this IPO in line with his IPO research note opinion.
• This document has been prepared by JainMatrix Investments Bangalore (JMI), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. This report should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JMI has not independently verified the accuracy or completeness of the same. Neither JMI nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Investment in the securities market are subject to market risks. Read all the related documents carefully before investing. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from a RIA Registered Investment Advisor. JMI has been an equity investment adviser commercially since Nov 2012, and a SEBI certified and registered since 2016, under SEBI (Research Analysts) Regulations. Registration granted by SEBI, and certification from NISM in no way guarantee the performance of the Research Analyst or provide any assurance of returns to investors.
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