8 Figure Fortune Masterclass: The Crorepati IPOs of 2021

Feb 20, 2021

Zhong Shanshan is not an ordinary billionaire. The chairman of Chinese bottled-water company Nongfu Spring, he recently trumped Warren Buffett, Larry Page, and Steve Ballmer to become the sixth wealthiest person on earth.

Zhong's schooling was interrupted during China's cultural revolution. He later worked in construction, as a reporter, and later in the bottled-water business.

His net worth stood at US$ 17 bn after his drug company listed in April 2020 and multiplied 26-times in less than a year.

Known as Lone Wolf by the Chinese media, Zhong's story is ripe for a Bollywood blockbuster.

But back in China he has 24 other billionaires competing with him, chasing IPO riches. Crorepati IPOs became commonplace in China in 2020 in the midst of the pandemic.

And the crorepatis include promoters who were formerly teachers or accountants or software engineers.

--- Advertisement ---
2 High Growth Stocks for a Potential Millionaire Portfolio

Our co-head of research, Tanushree Banerjee, has uncovered these two high-growth companies.

The first company is using the same model which Apple used to become a global giant.

This asset light model of growth could enable this company to generate excellent shareholder returns... just like Apple's.

The second company is already a world leader in its domain. But the big catalyst of growth is yet to come. A catalyst of $1.4 trillion.

Both these companies have got a long runway of growth ahead. And Tanushree is very confident, their stocks could offer great returns to investors in the coming years.

Tanushree revealed the details of these two stocks at her recently concluded special event - The Great Indian Wealth Project.

You had registered for this event but missed it for some reason.

You can still get all the details about these stocks by watching the special replay of this event.

Get the Details of 2 High Growth Stocks for a Potential Millionaire Portfolio
------------------------------

The coronavirus pandemic shut down large parts of the economy and slowed growth.

But buoyed by an army of retail investors looking for quick returns, the Chinese IPOs created a bunch of billionaires and scores of millionaires.

The reason I am writing about this is because I see several crorepati IPOs in India over the next few years...starting 2021.

What almost everyone has heard and read about is the LIC IPO.

The insurer still has over 70% share of all life insurance policies sold in the country.

And its assets under management stood at Rs 31 trillion in 2020. These facts alone make the IPO very enticing apart from its potential size.

But there are several other companies, especially popular startups like Zomato and Paytm that are planning to tap the primary markets this year.

Add to that the government's plan to privatise some PSUs to raise funds for infrastructure spends.

The success of PSU IPOs like IRCTC (up 120% since listing in October 2019) makes this disinvestment plan a hook for IPO gains in 2021.

But IPOs certainly aren't always a win-win.

Watch Now: 3 Little-known Stocks We are Super Bullish On

And my team has been reminding readers of the risks for years.

Back in 2008, Economic Times called out Equitymaster for being the only entity with an Avoid view on Reliance Power IPO.

As value investors, we have taken comfort in the fact that a legend like Buffett passed on the opportunity to subscribe to Google's IPO in 2004, which was offered at over 52 times earnings.

In addition to Buffett's general reluctance towards the business models of most internet companies, Google's early valuations clearly didn't interest him.The stock returned nearly 1400% in ten years, proving Buffett's intrinsic value calculations wrong.

But he didn't compromise on his margin of safety criteria.

And the legendry investor never regretted his decision.In India, investors who skipped the initial offerings of stocks like Infosys, TCS, HDFC Bank, eClerx, Page Industries, etc over the past two decades may have regrets.

But most did not pass on the IPOs over valuation concerns. More likely, they were ignorant of the potential of these soon-to-be bluechips.

Or they underestimated the companies' moat and growth prospects.But the fact is that, like Google, each of these companies have offered post IPO investors plenty of opportunities to join their wealth creating journey.



It was an opportunity to become millionaires.Buffett has explained that the mathematical probability of fetching a good stock at cheap valuations in its IPO is minimal.

Therefore, investors hoping to become IPO crorepatis have to rely on luck apart from their value investing skills.To better your chances of becoming IPO crorepati in 2021, try following a checklist.

So that even if it is not valuations that you wish to worry about, companies with flawed fundamentals should not land up in your IPO list...

  1. Companies in regulated sectors such as telecom or fintech face very little bottlenecks in the first few years of operation. But as the years go by, the regulatory supervision increases. Therefore, you need to be wary of the possibility of regulatory bottlenecks suppressing growth and margins in the long term.
  2. Companies with extraordinary growth or profitability need to be evaluated on sustainability. If the profits are not coming from sustainable client or vendor relations, you can avoid them.
  3. It is not until the stock gets listed that you know that extent of transparency in its financial dealings. You can't judge the management's willingness to proactively explain challenges. Therefore, you would rather not buy a stock that would not have a business as simple as selling toothpaste.
  4. Since most companies do not have a clear dividend policy prior to listing, all healthy cash flow generating entities may not have the best payouts. So, while it is good to buy a cash-rich listed company, betting on rich dividends at the time of time of IPO may not work in your favour.

Warm regards,

Tanushree Banerjee
Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)

PS: To know more about becoming a crorepati in the stock market, join me on Monday at my Great Indian Wealth Project web summit. I'll show you how to potentially accumulate Rs 7 crore in wealth over the long-term. Book your free seat here.

Recent Articles

My Personal Checklist for Your Trading Success February 26, 2021
You my personal trading checklist and you will be well on your way to making it big as a trader.
The Key to Earning 176% in 6 Months. Don't be a 'Prediction-Jeevi' February 25, 2021
The no prediction approach to earn market beating returns.
It's the Beginning of a New Bull Phase in Smallcaps February 24, 2021
Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.
The Hidden Tesla in My Great Indian Wealth Project February 23, 2021
An Indian company founded three decades ago in a garage caught my attention...

Equitymaster requests your view! Post a comment on "8 Figure Fortune Masterclass: The Crorepati IPOs of 2021". Click here!