Mutual funds bet big on India story as PEs cash out new-age listed firms

Private equity firms have sold shares worth Rs. 14,935 crore through block deals in the last one year through November. While a major portion of this was absorbed by other foreign institutions, domestic institutions including mutual funds have also bought a substantial portion, data compiled by Venture Intelligence shows. Peppermint Showed, as they bet on promising fundamentals, relatively low free float and attractive valuations.

According to industry experts Peppermint Over 40% of the shares sold in the block deal in 2022 were bought by domestic institutional investors (DIIs), with the rest scooped up by foreign portfolio investors (FPIs).

“The overall environment for these new-age tech stocks remains challenging in line with the global downturn in tech valuations. Given that the path to profitability remains uncertain for many of these firms, some stocks have come under pressure after the lock-in period is over. Anuj Kapoor, managing director and chief executive of JM Financial Ltd’s private wealth group and alternative fund platform, said private equity investors holding such tech stocks have a limited investment horizon and may liquidate the holding at the end of the lock-in. is seen to do.

According to Kapoor, in such cases, the buyers are a mix of domestic institutional investors and foreign buyers, who see value at current prices.

Mutual funds have already increased their holdings significantly in some firms in the September quarter, which witnessed heavy FPI selling last year. These include Sona Comstar, where MF holding rose to 21.03% from 14.22% at the end of the previous three months, and Rolex Rings, where MF holding rose to 30.65% from 21.8% at the end of the September quarter.

Others observed that funds increased stake in smaller proportion in the comparable period: PolicyBazaar (2.52% to 4.68%), Zomato (2.37% to 4.57%) and Paytm (1.14% to 1.26%).

Of 14,935 crore sold by FPIs through block deals, Zomato tops the list 5,540 crore, followed by Sona Comstar ( 4,043 crore), Paytm ( 1,631 crore), Policy Bazaar ( 1,042 crore) and Rolex Rings ( 600 crores). Other companies like Nykaa, Dodla Dairy and Barbeque Nation hit big deals.

Relatively attractive valuations and low free float available (since PEs and VCs hold large stakes) are prompting funds to increase stake in select firms, said UR Bhat, co-founder of investor advisory Alfanity Fintech.

Bhat said, “Mutual funds have seen a spurt in investor interest through the SIP route, and they tend to zero in on such firms through block deals, where they always get substantial returns from the secondary market due to significant PE/VC holdings.” Can’t buy a share.” , who expect MF stake in such companies to increase.

From a valuation perspective, Zomato at on 65.5 and nyka 176 each are down 57% from their 52-week highs.

Nilesh Shah, managing director, Kotak AMC, said, “When PE funds exited after listing, domestic funds bought in select stocks.

An executive at a global investment bank, which helps PE investors sell through block deals, said insurance companies have increased holdings in recent IPOs. “He has a long term outlook to hold these stocks and ride out the current challenging environment on technical valuations. They are betting on the strong underlying business models of some of these firms with proven unit economics, which have a more visible path to corporate profitability,” the banker said.