The unicorn initial public offering (IPO) boom has been a mixed bag with some stocks giving super normal profits to the investors and some making history with their stock market punishment on listing day debut itself! So it’s clear that one needs to cherry-pick and can't paint the entire space with the same brush.
In an interview with CNBC-TV18, S Naren, ED and CIO of ICICI Prudential AMC said that the new age theme is set to dominate the stock market in the coming years, with many more IPOs expected to hit the market. However, he also said that private equity and venture capital firms have become cautious about IPOs due to the absurd valuations that many companies have been commanding. In recent years, some IPOs have failed to live up to expectations, causing disappointment among investors and causing valuations to fall.
He said, “I am hoping that private equity and venture capital firms, which own them, will come at a good valuation because they have realized that there is no way they will be able to come at absurd valuations and the global environment for growth stocks is not what it was in 2021. And many of the private equity firms do need exits at this point in time. So, I am hoping that they will come at an attractive valuation.”
One of the challenges facing new-age companies is corporate governance. Naren pointed out that many of these companies have already made mistakes in this area, which has resulted in negative publicity and loss of investor confidence. He stressed that new age companies have a lot to learn from older, more established listed companies when it comes to corporate governance.
Despite these challenges, Naren said the new age space is an interesting one for investors. He believes that there is a lot for these companies to learn, and that they have the potential to achieve great things in the future. However, he also warned that investors need to be cautious and carefully evaluate the risks involved before investing in new-age companies.
Also Read | ‘I am not a bear!’ says S Naren but explains why the market is in a moderate return environment
Talking about the recent derating of new age stocks, he said that it has made this pack even more interesting for investors. He said this was an opportunity to buy good companies at attractive valuations, which could potentially generate high returns in the long run.
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