InvestorQ : When invest in IPO should I prefer focused businesses or diversified ones?
Shreya Mashelkar made post

When invest in IPO should I prefer focused businesses or diversified ones?

Answer
user profile image
Anu Biswas answered.
2 years ago


This is an important question to ask. Ideally, prefer to invest in IPOs that have a focused business model. Typically, companies that are into multiple businesses tend to be viewed as a holding company and therefore they tend to get a discount valuation in the market. That is exactly what happened to Cafe Coffee Day. The listed company was virtually a holding company with interests in coffee trading, coffee retailing, financial services etc. In contrast, the real outperformers were highly focused plays. VRL focused only on logistics, Syngene is a pure play on research, Interglobe runs Indigo Airlines and Dr. Lal Pathlabs is totally into laboratory testing. Avoid putting money into IPOs that are into multifarious businesses. Focus on IPO that are staying close to their core competence.