Edelweiss Recently Listed IPO Fund

After a decade of chasing growth, India is on the cusp of being recognized as the fastest growing economy of the world. Boasting one of the biggest markets globally, the economically healthier country is poised to see home-grown talent take centerstage across seas and oceans.

The heavily revamped business behaviors of the Indian market set-up in the post-covid world are an  emblem of the unrealized potential that Indian equities have to offer. The dynamic shift of the  unorganized to organized sector, all-time high corporate profits, supportive macro support, and holistic bottom-up growth strategies, will further augur the unrealized potential that strategic investment principles can yield over the long-term.

What’s mentioned above is what the mass retail can see. However, a significant part of wealth that can be made from market-participation benefits lies in the yet-to-be-covered aspect of the markets, i.e., the universe of unlisted stocks / Initial Public Offerings.

IPO markets are growing in influence as wealth driver for domestic and foreign investors in India over the last few years. In fact, as of date, fundraising in India is at a 13 year high, and the third biggest world-wide, behind only USA and China.

The table below highlights how venture capital money has come hunting into India, coupled with how India is seeing a flourishing IPO market:

India’s growth over the long & near-termpast in attracting monies in the booming IPO market has gotten healthier and wealthier over time. The trend for the same is below:

• 2011-2020 CAGR – 17%

• 2015-2020 CAGR – 22%

• 2019-2020 Return – 38%

The last six months have seen peculiar interest and investment liquidity, courtesy of multi-type options across 18 sectors. The current trend is expected to strengthen in coming times due to host of business-friendly developments. The same are mentioned below:

The Indian IPO market, otherwise dearly known as the start-up ecosystem, has a devout government programme to focus on supporting and incentivizing the companies in order to design a new India for the new decade. The special focus is merited as the companies of tomorrow are showing promising potential tomorrow.

The table below highlights performance of all IPO stocks between Jan 2018 to April 2021 across sectors:

Over the last three years, IPO market has been a breeding ground to find future multi-baggers. The instances below highlight the same:

• 22 small-caps have turned into midcaps

• 4 small-caps have turned into large-caps

• 8 mid-caps have turned into large-caps

As is learnt, the opportunity is plenty where the eyes don’t see and the hands don’t reach. But the mass market crowd is not to blame as access to IPO subscription is not skewed in their favors.

The table below highlights the difficulty retail participants face in benefiting from value unlocking:

IPO markets are a mix of hits and misses. It is paramount to understand the business and market sentiment at the time of listing to make the most of fresh listings. The quintessential decision of holding/exiting the stock has the potential to print your portfolio returns.

General trend dictates that most investors exit immediately after listing, thus missing on follow-on gains. Studying IPO listing pattern since 2017, shows that the majority IPO participants have missed out on 30% gains vis-à-vis qualified buyers.

India carries an already vibrant equity market which will only get more lucrative from this point onwards. As is read through the note, there is lots of money to be made in the untapped and unseen “hidden” markets.

As is expected, many of you be excited to go hunting for a fund which can help avail you the best of IPO markets in a smart and savvy manner. As solution, Edelweiss AMC has revamped its close-ended “Edelweiss Maiden Opportunities Fund – Series 1” to an open-ended “Recently listed IPO fund”.

The fund is a reincarnation of the three year+ close-end fund (mentioned above) maturing on June 28th, 2021. The performance of the fund since inception against multiple indices are as follows:

In its new avatar, Edelweiss presents a diversified fund for retail investors to capture the gains of newly listed stocks on the market by investing with a process driven approach which maximizes overall returns and manages risk.

A snapshot of the workings of the fund are below:

Fund Positioning

• An open-ended scheme investing across market caps with a bias towards small and mid-cap

• Focusses on growth and quality of the business

Investment Philosophy

• Follows a rigorous bottom-up research process while selecting stocks and strict rules to keep an eye on portfolio liquidity while selecting stocks

• The Asset Allocation of the scheme will remain as follows

o 80-100% in recently listed equities or upcoming IPOs

o 0-20% in recently listed equities or upcoming IPOs or debt instruments

Portfolio Construction

Investor Suitability

• The fund is structured to capitalise on the growth of freshly listed or to be listed participants in the Indian equities space, hence meriting minimum moderately high-risk appetite amongst investors.

• Investors of this fund should ideally have an investment horizon of five years or more.

Key Details About The Fund