Coal India IPO to see strong retail demand: Raamdeo Agrawal

The initial public offer (IPO) of Coal India received an overwhelming response from institutional bidders while today is the last bidding day for retail and high net worth individuals (HNIs).

According to Raamdeo Agrawal of Motilal Oswal it will see huge participation from the retail side too.On the overall markets, he noted that cash market volumes have started improving from September. However, he is a little cautious on earnings. He thinks that there might be some bad earnings towards the end.

Agrawal is bullish on auto sector in the both 2-wheeler and 4-wheeler spaces.

Q: What did you make of the Coal India subscription and do you think retail and HNI will follow with oversubscription today?

A: I am sure there is lot of excitement. I am getting lot of calls from many places?whether to go ahead and buy in. We should get some surprising number in terms of subscription from every segment. It?s a bumper thing.

Q: You think they left enough value on the table. What is your sense of fair value there?

A: Firstly, it is that its world?s largest mining company. India?s third largest coal reserve company in the world and they have literally monopoly on that. We are energy short and our dependence on coal is very high. We have a large land mass so even if imported coal comes to the sea coast it becomes difficult to take to deep northern and eastern parts. They have their own competitive advantage vis-?-vis imported coal. It?s a terrific story. Of course, we know all the issues about their weakness but once it goes public that itself is going to help the company bring in more efficiency, more transparency. I remain positive on this particular stock.

Q: Your quarter-on-quarter broking revenues are sort of flattish?up 2% but cash market volumes are going up. You are not seeing any great traction as more and more cash market volumes pickup in your brokerage income?

A: Actually cash market volume is most significant part of the broking revenue in our kind of revenues. We saw only in last month?that is September?some traction in participation by the retail. Even October is somewhat better but very big increase in volume is yet to come through whereas expenses are much more fixed in character. So when you open new offices and hire new employees the expenses keep going up. So the operating leverage for broking business is working in reverse at this point of time.

Q: How are you positioning yourself as a brokerage at this point of time because the market is approaching new highs, domestic participants have sort of been skittish so far. Are you investing in the business hoping that retail and HNI interest will grow over time or you want to see the first signs of big participation coming back before you do that?

A: The investment in business?expansion of distribution, expanding the infra stream coming out with newer products, even in AMC we have launched new product despite all the headwinds we have in the business?so we are going all out in terms of whatever we can do and what we think is right because we know we cannot time the market. We cannot time the investors?when they will come in, when they will go out. So we are going about investing with an optimistic view that it is not very late that investors are going to come. We are not keeping anything waiting.

Q: Are you sending any divergent kind of trends between HNIs and pure retail? I am talking about differential ticket sizes. Since you talk to both classes of investors and they are both important for generating revenues for you, are you sensing any divergence in behaviour between these two investor classes?

A: No. Surprisingly, even the large institutional investors? revenues, its not that large investors are doing much better?bringing in much more business and smaller investors are less. The trend is more or less same. Of course the very small investors have not participated yet big time in the market. Maybe the first signs are coming from Coal India subscription?maybe some more subscriptions which comes in will wake them up from their non-participation and create some excitement into the market.

I don?t know what will create excitement?maybe index going to the new high, maybe maximum rally in midcaps. Something has to happen before people come in wholesale into the market.

We are the Best share market tips and stock tips provider in India for Intraday trading of cash , Nifty future and Nifty Options.We give only sure shot tips so that you can trade with high volume