EMS sector still a ‘Sunrise Industry’ but valuations stretched: Dipan Mehta

India’s primary market continues to pull in heavy retail money even as parts of the secondary market move sideways. With IPOs such as Excelsoft seeing ~45x subscription and Sudeep Pharma drawing 98x, the trend of investors shifting their attention to fresh listings is unmistakable.

Speaking to ET Now, Dipan Mehta, Director, Elixir Equities said the trend is real, but not necessarily alarming.

“That is right and I think not all IPOs are bad,” he noted, pointing out that some venture-funded companies are hitting the market earlier than ideal. According to him, this has created concerns among value-focused participants because “they are trading at extremely high valuations and tend to disappoint” after listing.

Citing examples such as Ola Electric, Urban Company, and Lenskart, Mehta said the pattern of post-listing corrections is visible. Even so, he believes reasonably priced and profit-generating IPOs continue to come through. Investors, he suggests, should wait for a few quarters of earnings history before taking a call.

Mehta also highlighted the sustained popularity of leveraged IPO applications and fast flips: “There is a whole class of investors who… are flipping it on listing and that strategy is still generating very-very good returns.”

EMS Stocks: Strong Industry, Stretched ValuationsElectronic manufacturing services (EMS) stocks—once absolute market favourites—have slowed down in recent months. But Mehta remains constructive on the sector.“It is a sunrise industry… but the valuations are a bit daunting,” he said. Companies such as Kaynes and Dixon continue to deliver strong growth, but the price multiples limit comfort for fresh buying.However, he believes sharp earnings or a temporary multiple compression could create attractive entry points:“These are great stocks to track… we are just searching for reasonable valuation or margin of safety.”

He added that the industry itself remains fundamentally strong, with quality management and solid governance.

Quick Commerce: High Risk, High Potential MultibaggersAs Zepto readies for its listing and Blinkit retains the lead in customer preference (Bank of America survey), the quick commerce sector is again in focus.

Mehta is optimistic—but with caveats.“We are very positive… but these investments are not for the weak-hearted,” he said, stressing the need for deep conviction and a long-term horizon.

He compared the potential trajectory to CarTrade, a platform that delivered losses for years before scaling and turning profitable. Quick commerce could follow a similar path if unit economics fall into place.

“If they have the business model right… these companies can deliver fabulous returns,” he said, advising investors to take a basket approach with about 4–5% allocation to such concept plays.

Consumption Trends: Jewellery Shines, Apparel and Footwear LagThe broader consumption sector has thrown mixed signals. Jewellery companies have outperformed, while apparel and footwear have shown softer trends.

Mehta pointed to innovative business-model retailers as interesting medium-term ideas. One name on his radar is Unicommerce, which enables quick online transitions for businesses. “It is scalable… has a great track record,” he said, though he finds it expensive at current valuations.

Among listed players, he said Tier II and III focused jewellers remain strong performers. “Kalyan Jewellers or Senco Gold… investors could certainly look at these businesses,” he said.

He also mentioned Sky Gold, a company he and his clients are invested in, as a differentiated model supporting large jewellery retailers.