Markets Grapple With High Intensity IPO Demand
All data shows that many IPOs, particularly from the newer gen tech companies, have not done well for investors so far
On Episode 721 of The Core Report, financial journalist Govindraj Ethiraj talks to Sheetal Sapale, Vice President–Commercial at Pharmarack as well as Shankkar Aiyar, veteran journalist, columnist and author.
SHOW NOTES
(00:00) Stories of the Day
(00:50) Markets grapple with high intensity IPO demand, the trust factor
(06:59) Consumer inflation in India is crashing
(08:35) Auto sales jump.
(09:44) India’s largest selling drug is…
(16:06) Direct benefit transfer or vote benefit transfer?
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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Monday, the 10th of November, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.
Here are the top stories and themes...
The stock markets grappled with high intensity IPO demand and the trust factor.
India's largest selling drug now is…
Consumer inflation in India is crashing to near decade lows.
A direct benefit transfer or a vote benefit transfer.
And auto sales jump in the last month.
The Trust Factor
Jimmy Wales, founder of Wikipedia, has written a new book.
It's called The Seven Rules of Trust, why it is today's most essential superpower. In the book, he refers to the breakdown of trust in society, to the polarisation which drives that breakdown or accentuates it, and the importance of not taking sides and presenting matters factually and then leaving readers to decide. There are two reasons I bring it up this morning.
First, I had the opportunity to do a one-hour conversation with him last night, at the Mumbai Lit Life Festival, at the Tata Theatre in Mumbai, of course. Sadly, this was virtual as he could not get a visa in time, else it would have been in person. I will share an extract of that conversation if I'm able to later.
Wales spoke about, among other things, Airbnb and Uber, and the importance of trust in the growth of business in general and the growth of these businesses in specific. How do you trust a random website to deposit you in a stranger's home with some surety and guarantee that the room will be there as promised? Or how can you open a house to a total stranger, often from another country, and trust them to take good care of it? Similarly, how do you trust a regular car owner to become a taxi driver and drive you from point A to point B safely and surely? Remember that unlike in India, in many countries, Uber drivers and owners are independent car owners and not licenced taxi drivers like in India. And of course then, how do you trust a website to deliver an order or service in good form or shape for which you're spending maybe thousands of rupees or hundreds of dollars? And finally, can you trust a company that has never made a profit to protect your investments and deliver returns since the objective of this initial public offer was to provide exits to venture investors and founders rather than any capital raised for growth, at least in many cases? There is, of course, an IPO party going on.
All data shows that many IPOs, particularly from the newer gen tech companies, have not done well for investors so far. Things could, of course, change, and we hope they do, but we don't know when, or even if these business models will survive, leave alone the companies. India's small investors are the world's best venture capitalists and usually lose out in as many cases as the big venture capitalists do, except that in their case, it's hard-earned savings.
We can't change any of that, but we have to be prepared for a breakdown in trust. And if that happens, capital raising will slow down. And this, of course, has happened in the past.
And that's when we think of investor protection, we have to think of protecting the trust that investors have in the stock markets, which is a different thing. And this is something that has been developed painstakingly over decades. The mandate to manage trust applies not so much to regulators, but also to intermediaries in the capital market and to the companies that hopefully have a moral compass of some sort in this context.
Meanwhile, the markets continue to hold steady to down as signals are weak. And of course, IPOs continue to suck up funds from investors who swipe away on their broking apps. On Friday, markets ended lower for the third straight session, thanks to a sharp fall and then a subsequent pullback.
The Sensex was down 94 points to 83,216, and the Nifty was down 17 points to 25,492. We've been talking about a new breakout peak, but that clearly is still a while away. The broader indices were also more or less flat.
The Nifty mid-cap 100 was up 0.6%, and the Nifty small-cap 100 was 0.16% lower. Small-cap stocks have been taking a bigger beating in the last few days. Meanwhile, other stocks that have been taking a beating are tech stocks across Asia, thanks to rising doubts on AI valuations.
And more on that shortly. Meanwhile, Indian financial assets are looking attractive across the board, according to HSBC, which said that equities were looking good against the strong rally in global AI stocks and a favourable risk profile for the rupee and value in government bonds. They also said that they recommended an overweight position on Indian equities, saying that they now offer better value compared to Chinese stocks.
And of course, this is the new narrative perhaps that India's equity markets are a good AI hedge and provide diversification for investors uncomfortable with the AI rally. Meanwhile, the MSCI Asia Technology Index fell about 4.2% on Wednesday, and this is the biggest intraday fall since April's US tariff shock. South Korea's Kospi fell 6.2%, Japan's Nikkei was down 4.7%. The big Nvidia suppliers like SK Hynix and Advantist were about 10% down.
All of this is from Bloomberg. The interesting thing that which you may or may not have noticed is that Asia is seeing similar concentrations like the US when it comes to tech and AI stocks. Chip giant, Taiwan Semiconductor Manufacturing Company, or TSMC, now accounts for over 40% of the TAIX.
That's triple its share about 10 years ago. In South Korea, Samsung Electronics and SK Hynix had about 30% of the Kospi, according to Bloomberg. And in Japan, the top five stocks in the Nikkei 225 account for about 38% of total weightage.
Analysts at Philips Securities told Bloomberg that if anything goes wrong with the AI or semiconductor boom, the Nikkei will plunge immediately. Meanwhile, something that's not plunging, gold. Gold exchange-traded funds in India are headed for record inflows with this year's purchases at about $3 billion, or 26 tonnes of gold, according to the World Gold Council report.
Investments so far in 2025, that's this year, have almost matched the combined purchase in value terms seen from 2020 to 2024. That's four years. So four years of gold purchases from 2020 to 24, and one year of gold equals one year of gold purchase.
That's 2025. And of course, 2025 still has November and December to go. Spot gold was up 0.7% to $4,005 an ounce, according to Bloomberg.
Gold trading, of course, is little changed from Friday's close after two weeks of losses and a fallback in the prices from a record high of $4,380 an ounce last month. But of course, gold is still up 50% this year, on track for its best yearly performance since 1979, according to Bloomberg. Just to come back to Asia markets, the MSCI Asia Pacific Index is up 24% in 2025 and is on track to outperform the S&P 500 by the widest margin in 16 years.
Inflation Crashes
More positive tailwinds on the macro front in India. Consumer inflation rates may have fallen to the lowest in at least a decade in October, thanks to a continued fall in food prices and, of course, intensified by a higher base of comparison last year, according to a median forecast in a Reuters poll of economists.
According to them, the CPI inflation rate has fallen more than a full percentage point to 0.48% in October. I repeat, it's 0.48 or 0.5% in October from 1.5% in September. According to a November 4th to 7th Reuters poll of 42 economists, and that, according to this report, would be the lowest in the current 2012-based CPI series, so Consumer Price Inflation series, introduced with the January 2015 release.
Now, the question to ask oneself is, do you feel that inflation is so low that prices are barely going up? That's 0.5%. Well, let's see. Meanwhile, economists have also said that a cut in GST, that's goods and services tax, from late September has contributed to this, though even others have said that this could be the bottom of sorts. Vegetable prices have fallen by double digits for six consecutive months on an annual basis, keeping overall food inflation, which accounts for nearly half the consumer price, index basket, under control.
Car Sales Up
Inflation might be falling, but car sales are rising. India's retail vehicle sales could remain strong through the rest of this year, according to the Federation of Automobile Dealers Associations. And the new development seems to be very strong rural demand, which boosted retail sales to a record high in October.
October's overall vehicle sales, which is also the first full month number since the goods and services tax, the GST was reduced in September 22. That's the date, September 22. Jumped about 40% year on year to more than 4.2 million units.
Remember taxes for cars, particularly at entry-level cars and two-wheelers came down to 18% from 28%. According to FADA, small car sales have been one of the breakthrough moments after the GST cut. Rates have returned to pre-COVID levels, according to them.
Retail car sales in rural areas grew three times faster than in urban centres, while two-wheeler sales rose at twice the pace, according to FADA, which also added that tax cuts obviously encouraged first-time buyers. All of this from a Reuters report.
India's Biggest Drug
India's largest selling drug by value is now weight loss drug Monjaro, worth about 100 crore rupees in monthly sales now. Total sales of Monjaro referred to by many as a magic drug of sorts, made by Eli Lilly since launch in March this year is at about 333 crore rupees, which is a record of sorts. Augmentin from GSK, which held the crown for many years has been obviously dethroned.
Augmentin is an antibiotic and used for treatment of bacterial symptoms, including cough and fever, whereas Monjaro, as we've been discussing, is a weight loss drug. Now this obviously has interesting implications from a public health point of view as well, though the details of that are for another discussion. And I reached out to Sheetal Sapale, vice president of pharma intelligence company Pharmarack, and I began by asking her if this was the first time a drug had scaled this peak so quickly.
INTERVIEW TRANSCRIPT
Sheetal Sapale: No drug has reached, in terms of value, so fast ever. In terms of position, it's possible that drugs have moved up relatively faster in terms of unit sales, but then value, no. It's only Monjoro which has done this type of magic because the cost per unit is relatively higher.
Govindraj Ethiraj: Got it. And one of the things that you've pointed out in your latest PharmaRack report is the distribution of sales. I think you've looked at Mumbai city and you've said that basically this seems to be selling more in affluent areas.
Is that something that we're seeing across the country or is it more in Mumbai?
Sheetal Sapale: I have done some study of Mumbai city because we do capture pin code level data and I understand the demographics of Mumbai city well and to some extent I looked at even Pune city. So what we are seeing is places where there is a, you know, celebrity status type of people or relatively richer people staying, we are seeing the contribution to sales relatively higher in these localities. Obviously, the anti-obesity clinics and weight loss clinics are also more.
Also, since there are affluent people sitting in this locality, probably they had exposure to usage of these drugs earlier. They were importing, now they're available in the country.
Govindraj Ethiraj: Right. And what are the other things that are happening in the market because of a drug like Monjoro rising so fast? I mean, are sales of other allied drugs becoming less or is there any other shake-up that's happening in the market?
Sheetal Sapale: Not as of now because, see, these products, when we talk about oral anti-diabetic drug or anti-diabetic drug, you have to be an eligible patient population. So the diabetes, if it can be controlled by the basic sulfonylureas or, you know, glycomid GP type drugs, then the doctor will usually not upgrade the patient to a DPP-4, SGLD-2 or a GLP-1 alcoholist. It is only where the obesity is so high that your normal or base oral anti-diabetic drugs or insulins are not able to manage it.
Only then the doctors will upgrade the patient. That is, you know, in clinical terms. However, what we have also seen is, in case of ribulses, the moment it was launched, it was considered to be a magic drug and you can lose weight faster.
Sales during marriage seasons or, you know, because there are some events or occasions in the family where people want to lose weight to look fitter. That class of population also started using these drugs for that quick loss. They were not necessarily the eligible population for these drugs.
Govindraj Ethiraj: Right. So if you look at now the universe of weight loss drugs, that's including Monjaro and Ribulses and so on. So what is this universe like today?
I mean, how many prominent drugs are there?
Sheetal Sapale: So the prominent drugs that we talk, the ones which are not lost patent, Vigovi, Ribulses and Monjaro. These are the drugs which are GLP-1 agonists are used exclusively for weight loss, though their prime indication is diabetes control. But then there are many other drugs in other areas like Orlistat was considered to be a drug which could lead to weight loss.
Dulaglutide was there. So there are a good number of other brands, but they are not so prominent in the area of weight loss.
Govindraj Ethiraj: Got it. And amongst other things, in the month of October, you pointed out that sales of cough and cold medicines were reversed, as in October sales are usually higher than September sales. But this year, October sales are less than September sales.
So what does that mean?
Sheetal Sapale: I wouldn't contribute this entire thing to the controversy because the Shericoff syrup, which had a controversial thing, the problem was with the quality of the product and not the formula as such. Formula is correct, the ingredients were incorrect, the proportion in which the ingredients were put were not as per the label. Otherwise, the cough and cold syrups market, you require this type of formula for treatment of cough.
And this entire product, you know, the sales of cough and cold depends upon the seasonal disease pattern. So when I look at the seasonal disease trends, it is actually the sales trend is in line with the seasonal disease trends. Only thing is October sales is slightly less than the September sales.
But whatever sales we are seeing in October 25 is much higher than the sales which we had seen in October 24. So it is one thing is the rampant usage of cough and cold syrups from smaller companies may have gone down. But established brands are definitely doing well because if there is a disease which needs to be treated by a cough and cold syrup, it will be prescribed.
Govindraj Ethiraj: Right. And last question. So end of the year, as winter sets in in many parts of India, Mumbai, where we are, also gets a little cooler.
Do you see any shifts in sales trends?
Sheetal Sapale: Yes, I do see because we looked, we studied the respiratory segment also and respiratory segment actually it has shown a double digit growth in terms of value as well as units. While cough and cold, now in respiratory we have two sections. One is the asthma segment and the second one is the cough and cold segment.
Cough and cold segment, the growth is actually zero percent or, you know, very minimal growth in terms of value. Whereas respiratory segment has actually grown by 17 percent in this month in terms of units. Now, this may be because we had Diwali and lot of festive seasons where asthma conditions flare up.
And though the temperatures have not cooled, at least in Mumbai city, I don't see that pleasant temperature throughout the day, but the nights have started getting cooler. So the asthma season may be picking up and that may lead to increase in the asthma products. Again, a seasonal disease pattern.
Govindraj Ethiraj: Got it. Sheetal, thank you so much for joining me.
Sheetal Sapale: Yeah, thank you so much.
Cash Transfers
Bihar is the 15th state to woo women with cash benefit transfers, the cost of which now is about 200,000 crore rupees or 2 trillion rupees. The BJP-JDU combo devised the CM's employment scheme and the government in Bihar is doing a cash transfer of about 10,000 rupees to 75 lakh women or 7.5 million women.
And that's the first instalment of a potential 200,000 rupee kitty. As of now, Bihar has about 179 schemes listed on DBT Bharat. DBT is of course direct benefit transfer and the opposition is also offering a substantial amount.
Veteran economic journalist Shankar Iyer says in a new article and column in the New Indian Express that states are able to design and execute audacious schemes thanks to GST collections and the predictable availability of funding. And of course, systemic ease. Thanks to Aadhaar enabled payments, governments can initiate instant transfer of cash to beneficiaries.
All you need is a registration of a court with the National Payments Corporation and the beneficiary details. The union government has 328 schemes with 56 ministries listed on DBT Bharat operating on the NPCI platform. There are 7,065 codes listed on NPCI for state and central schemes.
Ease of delivery, as he says, has perverse consequences. I reached out to Shankkar Aiyar and began by asking him how this could pan out in coming months and years.
INTERVIEW TRANSCRIPT
Shankkar Aiyar: Let's step back one minute. So, the history of India will show that it is the states who have always come up with welfare ideas, like midday meal scheme, food for work programme and stuff like that, or the two rupees per kilo ration by NTR and all. So, all of these have now become national programmes.
But the difference, then the political establishment was trying to solve some problem, which was literacy or child nutrition and stuff. Now, the schemes are solving the politician's problem. If the earlier schemes were solving people's problem, now the schemes are solving the politician's problem.
And why is that happening is because I think the governance architecture, for whatever reason, I mean, I've tried to sort of look at it in different angles, it seems easier for the political establishment to address the consequences, and they leave the cause unattended. So, if you're going to have distress in agriculture, you're going to increasingly spend more and more on Kisan Samman, on nutrition programmes for our free ration programmes. If you're going to have low incomes in 50% of the workforce that's going to persist, poverty is going to persist.
If you are unable to fix the factors of productivity issues in the state governments, labour laws, land laws and stuff, you won't create enough employment. The regulations aren't cleaned up, then you won't be able to create jobs. So, you will have to have job schemes.
These are the real issues. So, why we are here is basically because this is the price we are paying for unattended issues. For the politician, it is very easy to address the consequence because he only has to do this once in five years.
As I always say that India is a democracy once in five years, one day in five years when you vote, and then you vote and hope that it is a benign monarchy, whether it turns malign or not is up to the luck of the people and attendant factors. So, if the government of the day decides to sort of pillage the state exchequer and spend more and more, governments will have to borrow more and more. To address your question, where will this end is that we will have increasingly shrunk or weakened or decimated state capacity to execute programmes.
The availability of labour in states which attract investment or where the economy is doing well will be more and more difficult. Let me just play this out to you. So, if you were in Jhumri Talaiya or Araria or Ranchi or wherever.
Govindraj Ethiraj: In state of Bihar?
Shankkar Aiyar: In any state of Bihar, anywhere in Uttar Pradesh or Jharkhand or Odisha, these are the states which provide India migrant labour. So, if you were in any of the states, let's say that you were in Begusarai in Bihar. And you're a family of four.
So, your food ration is assured. Your health coverage is assured. If you have two women in the family, you get an X amount of money.
If you are a land owner of some sort, you will get Kisan Samman Nidhi, some money. If you are looking for a rural, you can get 100 days of employment or 90 days of employment under NREGA. Okay.
And you might be eligible for some Bhatta or allowance or the other. Now, your equation with the job provider, the terms of engagement are completely different because you are at some level of sustenance. So, your ability or your comfort disables you from taking the hard decision of moving out or going for the job or whatever.
Even if you were to be engaged in Bihar, the cost of agricultural labour would go up. The cost of construction labour would go up. This will boost cost of infrastructure projects.
All of these are long-term issues that I don't think people are sort of understanding because it's just press a button. I mean, GST is the boon that state governments had resisted and are now hugging all the way to the bank. And Aadhaar, which almost all of BJP and the states had opposed, is now being raised to the skies.
So, using both of them, they're able to do cash benefit transfers on sectionally, universally, however you want to see. And the effect of all these cash benefit transfers is visible in Maharashtra, where they had to reduce the amount on money spent on for allowance for women. There's also a lot of diversion.
Yeah. And ministers, finance ministers in Karnataka, Maharashtra, Telangana have openly said that because of these promises, they're unable to execute public projects and delivery of services. So, this is something that has been studied.
In fact, when NREGA was started in 2005, this is Amartya Sen, pro-welfare and everything. And he said that we have to be careful in creating private income if that is going to hurt public services. It's a very cryptic way of saying that be careful of how you spend your money.
So, if you look at the state governments, in all the critical areas, how do the state governments spend the money on these transfers? They don't spend on other things like employing teachers, employing policemen, employing judges, employing healthcare workers. All of these across states, I estimate that between 1 and 1.5 million posts are lying vacant. In the centre, roughly a million posts are vacant. This vacant post is actually decimation of the capacity of government to deliver services, to execute projects. This movie won't end well unless somebody steps in and says, we can't do that.
I mean, look at the power sector. We know now that we are going to consume more and more power because people are using more and more gadgets, more and more stuff is digital. And you have to bail out state electricity boards every 7 years, 10 years.
Now again, they're going to bail out. And yet in every election, we are promising free units of power, free power for farmers, concessional tariff, all of this stuff. I mean, what are they going to offer next in the elections?
I mean, air purifiers, dehumidifiers, Amazon discount coupons. I mean, what's left? This is a very serious issue.
I said in my piece that this should chill collective conscience, but instead we just see a collective shrug. I mean, everybody sort of said, okay, what can we do about it?
Govindraj Ethiraj: And states like Maharashtra and Gujarat are obviously economically stronger and are in some position to make good on promises of cash benefit transfers. States like Bihar are in a less position. So if Bihar says, I'm going to create X number of jobs and bring so much of industry, it's technically possible that that state can make up in terms of revenues and taxes to pay for all of this.
Or you don't think so?
Shankkar Aiyar: Well, the richest states are Karnataka and Maharashtra and Tamil Nadu, and all of them have very high levels of debt. Maharashtra and Karnataka have in recent months actually said that we can't execute public works programmes because we are short of cash. Bihar is a special case.
Almost 50% of its revenue comes from central grants. Its own revenue is less than 1.6 lakh crores. Its total budget is around 3 lakh crores.
On that budget, if it's going to spend 10%, 20% of that budget on cash benefit transfers and doles and stuff like that, it's pretty much not going to have money to do the things that need to be done for those people to do better in their lives.
Govindraj Ethiraj: Right. You've also pointed out that now there are 15 states. So is it your sense that more states could follow in this year, I mean, the coming year or so with more elections coming up?
Shankkar Aiyar: I have no doubt that in some form or the other, some shape or the other, there will be an upgrade on this idea. This is now the operating system, the iOS of politics, that they will target sections of voters and how women, youth. So next round, I see all the states joining in.
This might well become a national programme in the budget. You will also probably see a national allowance for people who have certain educational attainment but don't have jobs. There might be a reskilling or skilling allowance that might come to everybody.
So we haven't yet got to the point of universal basic income, but we have got to the point of universal income support or universal consumption support. So these are trends. I mean, the more the disruptions and the more challenges to the government, the more the money they will spend because public policy doesn't move as fast as the circumstance.
Govindraj Ethiraj: Right. Shankar, thank you very much for joining me today.
Shankkar Aiyar: Always a pleasure.
