Pied pipers of primary market

 Anand Adhikari        Print Edition: Nov 14, 2010

1A pizza maker, a homegrown health club chain, a microfinance institution, a coaching institute and a timesharing resort network are as disparate as they come, but there are a couple of strands that bind these businesses together. One, they all offered shares to the Indian public in 2009.

Two, they are all unique models to join the ranks of nearly 5,000 companies listed on Indian stock exchanges. In the process, they've opened up new sectors - and high-growth ones at that - for investors looking to diversify their risks.

 Leading the way
New IPO, Market
Industry
 Market Capitalisation

Jubilant FoodWorks
Food Franchisee
 3,354
Talwalkars Better
Value Fitness
Gym & Fitness

 583
SKS Microfinance Microfinance 8,827
Career Point
Infosystems
Direct Coaching
 1,057
Mahindra Holidays
& Resorts
Time-sharing Resort
 3,958
Consider, for instance, Talwalkars, which has made investors in the stock richer by 80 per cent in six months. The company made an offer of Rs 128 a share, debuted at Rs 155, and, last fortnight, was quoting at Rs 230 levels.

Investors see bright prospects for this company - as do its promoters. "Even in the Salman Khan starrer Dabangg, they have shown a traditional gym or an akhara," says 42-year-old Anant Ratnakar Gawande, one of the Co-promoters of Talwalkars Better Value Fitness. The other promoter is the Talwalkar family itself, represented by the second generation Prashant Talwalkar. The seven-year-old chain with a 75-yearold "Talwalkars" brand is a pioneer of sorts in the fitness sector. Says Gawande, "We want our fitness centres to do what Titan's Tanishq did to gold and jewellery."

Talwalkars has given investors yet another avenue to put their money in a sector that is benefiting from higher awareness and more purchasing power. As is Jubilant FoodWorks, the master franchisee for Domino's Pizza.

Ajay Kaul, CEO, Jubilant FoodWorks, says: "Investors are riding on the India consumption story." Companies such as Talwalkars and Jubilant are doing what a Bharti did earlier in the decade - provide investors with an opportunity to put their money in a highgrowth sector. Yet, the heady valuations of some of these companies make you wonder what kind of growth these promoters are in for.

Consider, for instance, Jubilant FoodWorks, which is trading at a mind-boggling price-earnings multiple (P/E) of close to 90, as against the broader market P/E of 20. The 50-year-old Domino's Pizza Inc, which listed on the New York Stock Exchange six years ago, trades at a P/E of less than 10. Even Talwalkars enjoys a P/E of 84. Gawande believes that much of the growth to justify the valuation will come from the non-metros.

One new listing to come under intense scrunity is SKS Microfinance, after the recent sacking of its CEO. The share has dipped close to 30 per cent since the controversy broke out, and questions are being raised about the lack of transparency and the sustainability of the business model itself. "Great companies need not necessarily be great investments," Saikiran Pulavarthi, a research analyst with Indiabulls Securities, wrote recently. Scalability, he feels, is a challenge for the sector. "And there are questions as to how to value an unsecured lending business. It is a big risk," says Pulavarthi.

Kaul of Jubilant FoodWorks is on a smoother road. "We are actually the fastest-growing Domino's franchisee in the world," says Kaul, who has 300 Domino's outlets in India. He is not satisfied with that, pointing to the fact that KFC has 3,000 outlets and McDonald's 1,200 in China.

Clearly, whether it is fitness or coaching or fast food or finance, the key to meeting investor expectations lies in scaling up, profitably.

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