Blue Chips of Pre-IPO Market

This article is written by Krishna Patwari, Founder and Managing Director of Wealth Wisdom India Pvt. Ltd (WWIPL)

Recently, Indian stock exchanges have seen a great deal of successful IPO’s in both Large Cap and Small and Medium Enterprises (SME) markets. We have seen the likes of Swiggy, NTPC Green Energy, Vishal Mega Mart and One Mobikwik listed with great pomp and show.

However, this article will delve into the historical trajectory of these shares, examining their performance and market standing prior to their listing. Furthermore, we will analyse the factors that contributed to their evolution into the blue-chip stocks that dominate the Indian market today.

Blue chip stocks, in general, are the crème de la crème of the stock market. These are shares of well-established and financially sound companies with a long history of consistent performance. They are often market leaders in their respective industries and have proven financial stability. To name a few Blue Chip Stocks in India are Reliance Industries, HDFC Bank, Infosys, TCS, Hindustan Unilever.

Key Characteristics of Blue Chip Stocks:

Large Market Capitalization: These companies typically have a market capitalization in the billions.
Strong Financials: They have a track record of consistent profitability and healthy balance sheets.
Dividend Payouts: Many blue chip companies pay regular dividends to their shareholders.
Brand Recognition: They are often household names with strong brand recognition.
Listing on Major Exchanges: They are typically listed on major stock exchanges, such as National Stock Exchange or Bombay Stock Exchange.

Why Invest in Blue Chip Stocks?

Stability: Blue chip stocks are known for their stability and resilience during market downturns.
Dividend Income: Many blue chip companies pay regular dividends, providing a consistent stream of income.
Long-Term Growth: While not as volatile as growth stocks, blue chip stocks can still provide long-term growth potential.
Lower Risk: Compared to smaller, less established companies, blue chip stocks are generally considered to be less risky.

Now that we understand Blue Chips, let’s dive-in to find some Blue Chips of Unlisted Market. We will not only cover basics but understand why they are the market leaders in their sector, while staying unlisted.

Blue chips of Unlisted Private market

Blue Chips or these hidden gems, because retail investors are usually not aware of these unlisted companies or the idea of approaching to invest in these unlisted shares in Private markets. Few of them are NSE, SBI AMC, Tata Capital and HDB Financials. Let’s take a look at NSE & SBI AMC.

NSE, India: A Year of Growth and Dominance

You might think there are companies listing on NSE every other day and here I am telling you NSE itself is an unlisted company. HOW, WHY, WHAT is happening here? Well, for some companies it’s all about personal choice and/or the time needed for the company to materialise their plan to list on an exchange. I am positively looking forward to see NSE list on NSE.

The National Stock Exchange (NSE) has once again demonstrated its leadership position in the Global and Indian financial markets, delivering strong performance across key metrics in FY23-24.

A phenomenal growth trajectory of unlisted share price from the price of INR 162 on 31^st May, 2019 to INR 1800 in December, 2024 depicts huge confidence in this company.

Key Highlights:

Capital Formation: NSE played a pivotal role in capital formation, facilitating the raising of ₹13.8 lakh crore through IPOs, with 213 companies listing on its platforms.
Investor Growth: The exchange registered a remarkable 9.2 crore unique investors, highlighting the growing participation of retail investors in the Indian stock market.
Financial Performance: Consolidated revenue reached ₹16,433.61 crore, resulting in a profit after tax of ₹8,305.74 crore, demonstrating strong financial health.
Operational Excellence: The average daily turnover in cash markets was ₹81,721 crore, while the average daily turnover in equity options markets was ₹61,779 crore, solidifying NSE’s position as a leading exchange globally.
Investor Focus: NSE contributed ₹1,992 crore to the Investor Protection Fund and conducted 5,889 investor awareness programs, emphasizing its commitment to investor education and protection.

Key Strengths:

Global Leadership: NSE ranks No. 1 in multi-asset class exchanges by the number of trades and No. 1 in derivatives exchanges by the number of contracts traded globally.
Robust Infrastructure: The exchange boasts a robust and resilient infrastructure, capable of processing over 5 million messages per second across asset classes.
Wide Reach: NSE reaches over 99.8% of Indian PIN codes, connecting investors across the country.
Market Dominance: NSE maintains a strong market share across various asset classes, with 92.7% in equity cash, 99.9% in equity futures, and 96.9% in equity options premium.

Looking Ahead:

NSE continues to innovate and expand its offerings, leveraging technology to enhance investor experience and drive market growth. The exchange is well-positioned to maintain its leadership position in the Indian financial markets and contribute significantly to the country’s economic growth.

Mind boggling isn’t it, checkout full Research analysis of NSE unlisted share here.

SBI AMC

SBI Funds Management: Leading the Indian Mutual Fund Industry

SBI Funds Management Limited (SBIMF) has solidified its position as the largest mutual fund house in India. Established in 1987, the company has built a strong reputation through a customer-centric approach, innovative investment strategies, and a commitment to providing quality products and services to its investors.

Dominant Market Share:

SBIMF boasts a significant market share, holding approximately 17.9% of the total industry AUM (Assets Under Management) as of January 2023.
With AUM of Rs. 7,30,786.11 crore, SBIMF stands as the industry leader, while the overall Indian mutual fund industry AUM stands at Rs. 40,80,311 crore.

Growth Trajectory:

The Indian mutual fund industry is expected to grow at a CAGR of around 14%, with the market size projected to reach Rs. 71,32,435.35 crore in the current year.
SBIMF has demonstrated consistent growth, with sales growing at a CAGR of 14.86% and PAT (Profit After Tax) growing at a CAGR of 20.92% over the last three years.
Asset growth has also been impressive, with a CAGR of 20.59%.

Employee Value Creation:

The company has consistently rewarded its employees through employee stock options (ESOPs).
The increasing exercise price of ESOPs (from Rs. 155 in 2017-18 to Rs. 560 in 2021-22) reflects the company’s strong growth trajectory and its commitment to employee value creation.

Financial Health:

While there were negative cash flows from financing and investing activities, positive cash flow from operating activities resulted in a decrease in Cash and Cash Equivalents from (₹7.24 Cr) in FY 21 to ₹71 Cr in FY 22.

Conclusion:

SBI Funds Management Limited has established itself as a leader in the Indian mutual fund industry. With a strong market share, a proven track record of growth and a commitment to investor education and employee value creation, the company is well-positioned for continued success in the years to come.

Full research analysis can be found here.

Concluding Thoughts on Investing in Unlisted Shares

The analysis of these 2 unlisted shares demonstrates that “blue chips” do exist in the private market. By identifying and analyzing promising companies early in their growth trajectory, investors can potentially capitalize on significant returns before they go public.

Investing in unlisted shares offers several advantages:

Early Bird Advantage: Early investors can secure a position at a lower valuation compared to the IPO price, potentially yielding substantial returns.
Higher Growth Potential: Private companies are often in their high-growth phase, offering the potential for significant capital appreciation.
Diversification: Investing in unlisted companies can diversify an investment portfolio beyond publicly traded equities.

However, it’s crucial to remember that investing in unlisted shares carries inherent risks:

Liquidity Risk: Unlisted shares are typically less liquid than publicly traded stocks, making it difficult to sell them quickly.
Valuation Challenges: Valuing private companies can be complex and requires in-depth research and analysis.
Information Asymmetry: Investors may have limited access to information about the company’s performance and financial health.

Therefore, thorough due diligence and careful risk assessment are essential before investing in unlisted shares.