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Decoding The Playbook For Generating Stellar Returns In India’s IPO Market



Graphic of IPO

India’s IPO market is making headlines: “2023 turns blockbuster year for Indian IPO mart! Can this euphoria last?” in the Economic Times while The CapTable says, “Small but mighty: How SMEs became India’s public market darlings”.


While Indian IPOs hit the bourses and while IPO volumes are cyclical, the current lot of IPOs has profound learnings and implications for India’s private market investors. We look at these through The AltG’s Proprietary Exponential SucceXX or The APEXX Formula to better understand the transformative nature of the IPOs, the business models of the companies coming to the public markets and why private market investors must look at these very carefully, for they hold the golden key towards generating market-beating returns in India.


For FDI investors in India and those looking to invest in India’s private markets, The APEXX Formals provides a playbook for how to succeed by focusing on businesses that have local network effects, leverage real estate effectively, own specialised proprietary distribution, service B2C businesses with services and goods that have inelastic demand and are singularly focused on serving the next 500 Million Indians coming into the middle class. A “repeatable process” is available to leverage and generate alpha in India's private markets.


Whether the company is across hospitals, pharma, logistics, Information Technology or Plastics, these companies adopt one of the three business models listed below:

  1. The Levered “Real-Estate” Play - Essentially, a business that uses real estate (could be both tangible or intangible) to deliver a service locally that can’t be replicated by a competitor due to the CAPEX involved. This could be a hospital business that caters to a section of a large Indian city. It’s effectively a “Real Estate Business + Services” play. The capital earns a return due to a service that the consumer is willing to pay for over and above the cost of capital. Why would local competition not come in here? That’s because the CAPEX needed to set up another hospital would not earn the requisite rate of return required due to various factors such as limited customer demand, availability of real estate, regulations etc. Over and above this, in some instances, the asset's replacement cost is greater than the asset's value. It’s simply uneconomical for a competitor to compete, allowing the existing business to earn an attractive ROIC. While this applies to tangible assets, we’ll see this across intangible assets in India going forward. What kind of assets can you acquire in which the replacement cost is greater than the asset's value and it’s a local monopoly is the question one should ask at the ideation stage.

  2. The “AWS Model” - This is the “AWS Model” “Buy Wholesale, Sell Retail" strategy that serves as the backbone of the Quasi Refining Business Playbook, a dynamic approach to business expansion. This Spread Business model empowers companies to maintain a resilient financial stance by passing on fluctuating input costs to the end consumer while safeguarding their Free Cash Flow (FCF) margins. A prime example of this strategy can also be found in the private market KKR- LEAP Pallet business deal, which adeptly navigates the intricate balance between wholesale and retail. This model thrives on acquiring large quantities at wholesale rates, capitalising on economies of scale. Businesses that can do so for products and services which other companies need flexibility and do not want to finance stand to generate significant returns. These are essentially “spread businesses”.

  3. Businesses with Asset-Light Specialised Distribution - Businesses possessing high-quality brands or exclusive licences hold valuable intellectual property that serves as a foundation for their growth. Such companies across diverse sectors, such as pharmaceuticals, information technology, and packaging, thrive through asset-light distribution models. Businesses can leverage their intellectual property to strategically partner with distribution networks, outsourcing manufacturing and logistics, thereby minimising capital-intensive investments.


Our APEXX Formula tells us that for investors looking to understand, evaluate and invest in India, Indian IPOs and their playbook is laying out crucial pointers on what a successful business looks like. The above three business models hold potential across sectors to deliver and leverage India’s incredible economic growth story.



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