D-Street investors are attracted by listed regional players

ET Intelligence Group: What do PN Gadgil, Arkade Developers and Bazaar Style Retail have in common? Saraswati Sarees Depot and Tolins Tires? All of these companies have strong regional businesses and have launched their IPOs in recent months. Several of their peers, with a strong regional presence, have debuted in bag in recent years, often to provide an exit to a private equity investor that had helped these companies build scale.

Some of these regional actors in sectors such as health care, agrochemicals and jewelry have outperformed their domestic peers. For example, Manoj Vaibhav Gems N Jewellersto retail jewelry sales The Andhra Pradesh-based chain has gained 34% since its listing last September, outperforming Titan’s shares, which gained 16% during the same period.

Similarly, Yatharth Hospitals, a hospital chain with a presence in Delhi NCR, has gained 76% since it was listed in August 2023, compared to 38% rise achieved by Apollo Hospitals.

Mumbai based real estate company Suraj Real Estate Developers has risen 127% since its listing in December last year, surpassing Godrej Properties‘ gain of 52%. Dharmaj Crop Protectora Gujarat-based agrochemical company that went public in December 2022, has gained 61% since last year. In contrast, shares of major agrochemical companies UPL has fallen by almost 4% during this period.

However, not all the recently listed regional players have fared well on the exchanges. For example, Gujarat-based company Gopal Snacks has fallen 11% since its IPO in March this year. Sai Silks (Kalamandir), a south Indian sari retailer, has lost 31% since its IPO last September. Popular Vehicles and Servicesa South Indian car dealership, has fallen 20% since its listing in March this year. Private equity Investors and venture capitalists are leaning towards regional players, as these companies tend to become strong territorial players with a local presence. Market experienceThey face less competition on the ground, have localised strategies to operate efficiently at the local level and have room to grow or become attractive acquisition targets for national players. However, regional players also face certain inherent risks such as high business concentration, limited market size, greater exposure to regional geopolitical dynamics, supply chain disruptions and natural disasters, limited brand visibility and the threat of acquisition by national players. However, in India, there are several examples of strong local companies becoming national players such as Amul, Haldiram’s, MTR Foods and Patanjali being just a few of them in the food sector.