Infrastructure has been a buzzword in the Indian equity markets since 2005 but the fervour has been only picking up. The idea was if going for an Initial Public Offer, name your company which should suggests something to do with Infrastructure like power, energy, construction, real estate and now special economic zones and get a higher valuation. It is altogether a different matter whether you develop any infrastructure. Only name mattered.
If we look at the listof all IPOs listed on NSE till data, we can see:
1. 11 companies have “infrastructure” in name and all IPos after 2007.
2. 10 companies have “Power” in name; again the same story.
3. 4 have construction – most in 2006.
4. 5 have development (real estate, housing) – most in 2006-07
And we can expand the list. I agree some companies have the fundamentals but all? And that too when the entire infrastructure is in a mess. True. Government has put it on top priority but stll many issues need to be resolved.
Now, I see Mutual Funds cashing in. On a quick glance at SEBI’s what is new section, we can see quite a few new MF cashing on the word.
1. HDFC Infra fund
2. Lotus India Banking and Infra Fund
3. Reliance Infra Fund
4. Tata Growing Economies and Infra Fund (they already have a Tata Infra Fund)
There are already 10 Funds having infra, 3 having power and so on. So funds are trying to cash in by issuing many new funds highlighting the name and raising their Assets under management.
How does a regulator correct this issue? If it does anything, markets would say it is not a regulator’s job to say which names are to be used or not, and if it doesn’t the investors might loose their hard earned money. However, I think investors should be cautioned against emerging buzzwords and then finally Caveat Emptor prevails.
Update 1: Palak Shah of BS adds more info to the infra name.
Update 2: Now IT companies are giving up the IT tag and getting into that infrastructure related name. Palak Shah adds.