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Adani Wilmar and Star Health Get SEBI Approval for IPO

Adani Wilmar and Star Health Get SEBI Approval for IPO
by 5paisa Research Team 18/10/2021

With a slew of IPOs already slated to hit the primary market in the last week of October, there are more big IPOs getting lined up. Two more companies got SEBI approval for their proposed IPOs and can now seriously start actioning the IPO process.

Adani Wilmar IPO


Adani Wilmar, the FMCG company and a joint venture between Adani Group and Wilmar of Singapore, has got approval for its proposed Rs.4,500 crore IPO. The entire IPO will be a fresh issue of shares. The Adani Wilmar joint venture proposes to use the fresh funds to expand the business organically and inorganically as well as to build its brand.

Adani Wilmar will become the seventh listed company from the Adani fold, once the IPO is through and the stock gets listed. Adani Wilmar (of Fortune edible oil brand fame) has plans to become India’s largest food-based FMCG company by 2027. Apart from being a food retailer, Adani Wilmar will target to own the entire food ecosystem from farm to fork.

The IPO price band is yet to be decided but it is reported to value Adani Wilmar at around Rs.45,000 crore to begin with. Since, Adani Enterprises owns 50% in the joint venture, the company will see value discovery to the tune of Rs.22,500 crore due to the IPO. However, there will not be any OFS component in the Adani Wilmar IPO.

Star Health Insurance IPO


The Star Health Insurance IPO of Rs.5,500 crore will be a combination of fresh issue and an offer for sale. The fresh issue component will be worth Rs.2,000 crore. The balance Rs.3,500 crore approximately will be accounted for by the OFS of 6.01 crore shares in an indicative price band of Rs.580 to Rs.600. 

The biggest seller in the OFS will be Safecrop Investments selling close to 3.07 crore shares. The rest will be sold by other early investors in the company as well as some early promoters. Incidentally, Rakesh Jhunjhunwala is one of the early investors in the company, although he is reportedly not participating in the OFS.

Check - Rakesh Jhunjhunwala's Portfolio

The fresh issue proceeds will be used by Star Health to create a capital cushion and for maintaining solvency levels. Star Health is the largest private sector player in the health insurance space with 15.8% market share.

Also Read:-

1. List of Upcoming IPOs in 2021

2. List of Upcoming IPOs in October 2021

3. Star Health Insurance Files DRHP - Insurance IPO

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Why Reliance walked in and walked out of the Zee Deal

Reliance walked in and walked out of the Zee
by 5paisa Research Team 18/10/2021

In the midst of the ongoing fracas between Invesco Fund and the Zee management, led by Punit Goenka, it emerges that Reliance walked in and then walked out of the deal to buy a strategic stake in Zee Entertainment. The Reliance group has confirmed that the deal fell through as they were uncomfortable with the tiff between Invesco and Punit Goenka.

Punit Goenka, son of Subhash Chandra, is the MD & CEO of Zee Entertainment. However, the Subhash Chandra family has just 3.44% in Zee Entertainment while Invesco Fund is the largest stakeholder in Zee with 17.88%. The tiff arose as Invesco felt that the promoter family was exercising clout disproportionate to its holdings.

Check - Invesco wants EGM to Replace Punit Goenka from the Post of MD & CEO

Invesco, on its part, confirmed that it had just tried to facilitate the deal between Reliance and Zee, which needed a big fund infusion. Meanwhile, Punit Goenka has accused Invesco of working at the behest of large media interests to take over Zee. In the process, RIL did not want to get embroiled in a deal what was seen as anti-promoter.

The Zee side of the story is that they were uncomfortable since Invesco was trying to push the deal very hard, which was not what they expected from a large investor. Zee also felt that the offer of Rs.220 per share and valuation of Rs.21,130 crore for Zee was not in the largest interests of small shareholders of Zee.

Invesco has a different story. Apparently, they tried to facilitate the deal and negotiations happened between Reliance and Chandra family. However, Invesco did not accept that the Chandra family should get a stake of 4% in the merged entity and Punit Goenka continues as the MD and CEO. Invesco did not want any special shareholder preferences.

Check - Subhash Chandra Takes Up a Good Deal on his Zee Stake

In a way, this is also roiling the Zee-Sony deal. Invesco is uncomfortable with Sony deal as post-merger, its own stake will be down to 8.4% while Zee promoters will have 4% in the merged entity due to the non-compete fee of 2% stake paid by Sony. Invesco feels there was no question of non-compete fee when Punit Goenka will be CEO for next 5 years.

For now any deal looks like Catch-22 with the largest institutional investor and the original promoter family not seeing eye to eye.

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Route Mobile gets Board Approval to Raise Rs.2,000 CR

Route Mobile gets board approval to raise Rs.2,000 crore
by 5paisa Research Team 18/10/2021

In its latest meeting of shareholders, the board has approved the raising of funds to the tune of Rs.2,000 crore via the issue of securities. This could be via the issue of equity shares or other securities. The amount is likely to be raised in tranches through the year and this is more of a blanket approval from the board for the fund raising plans.

The shareholder meeting had two main items in its agenda. The first was to raise funds via issue of securities to the tune of Rs.2,000 crore. The other item on the agenda was to enhance the investment limit for foreign portfolio investors or FPIs considering the elevated levels of interest that the QIBs had been showing in new technology companies in India.

As per the scrutinizer report, more than 95% of the votes of shareholders were in favour of raising the Rs.2,000 crore funding. The public institutional shareholders did not share that enthusiasm as nearly a quarter of them voted against the fund raising. However, on the vote for raising FPI stake in Route Mobile, the mandate was more decisive at over 99% favourable votes.

Route Mobile offers comprehensive enterprise communication solutions and offers what is called the CPAAS (communication platform as a service). This is something akin to the logic of SAAS. The CPAAS global market is expected to grow from the current $8.7 billion to $34.2 billion by 2026, which is an exponential growth market for Route Mobile in the next 5 years.

For FY21, Route Mobile reported Rs,1,406 crore by way of revenues and Rs.176 crore as EBITDA. The company also has a solid ROCE of 34.4% and ROE of 30.8% as of FY21. In the next few years, Route Mobile is looking to organically and inorganically expand its CPAAS platform to offer better customer experience. That will be capital intensive.

One question that does arise is whether Route Mobile really requires funds just one year after a mega IPO that was oversubscribed nearly 74 times? But, then as the old saying in the stock market goes, it is always advisable to raise funds when the iron is hot, so that funds are available when you actually need it.

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Air India Accumulated Losses Stare at Rs.78,000 Crore

Air India Accumulated Losses Stare at Rs.78,000 Crore
by 5paisa Research Team 18/10/2021

Just a week after the government announced that Air India was being sold to the Tata group, Air India has come out with numbers. It just underlines that the bleeding of the national carrier continues almost relentlessly. This comes just a week after the Tatas won the bid for Air India for a total consideration of Rs.18,000 crore consisting of a cash payment of Rs.3,700 crore and the balance by way of assumption of debt.

For the fiscal year ended March 2021, Air India reported losses of Rs.7,017 crore, better than the loss of Rs.7,765 crore in FY20. However, this loss took the total accumulated loss of Air India to Rs.77,953 crore. Since Air India and Indian Airlines were merged in 2007, the company has been consistently making losses each year.

Check - Tata Group to Consolidate Airlines Under a Single Entity

The lower losses in FY21 compared to FY20 was largely on account of a sharp fall in expenses by 47.4% to Rs.19,083 crore. The fall in expenses is attributed to cut in variable costs as airlines remained out of operations for long periods of time due to COVID. However, it also meant that fixed costs could not be adequately absorbed in FY21.

Apart from the big losses in FY21 and FY20, Air India also reported net loss of Rs.8,556 crore in FY19 and Rs.5,348 crore in FY17. The result of all this years of losses has been that the net liabilities of Air India exceed its assets by Rs.58,316 crore. In addition, the government has been sinking Rs.20 crore of public money each day to keep the airline afloat.

This only underlines the huge task ahead of the Tata group as they look to integrate Air India into their larger aviation plan and eventually make the airline profitable. Tatas also have extraneous challenges like the COVID lag effect, high ATF prices etc. In the midst of all this, there have been allegations of the government selling Air India too cheap. Looking at the financials, it appears good enough that the government saves Rs.20 crore per day.

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PNB Housing Finance Decides to Scrap Carlyle Deal

PNB Housing Finance Decides to Scrap Carlyle Deal
by 5paisa Research Team 18/10/2021

In early trades on 18th October, the stock of PNB Finance was locked in lower circuit as a slew of brokers and analysts downgraded the PNB Housing stock. The downgrade came after PNB Housing and Carlyle decided to mutually call off the share placement deal due to the legal hassles and absence of any visibility of the deal getting through.

Chronology of the PNB Housing – Carlyle deal

Here is the chain of events that eventually led to the deal being scrapped

a) On May 31st, PNB Housing approved a fund raising plan of Rs.4,000 crore by Carlyle PE Fund which would entail allotment of shares and warrants to Carlyle group. The deal would have made Carlyle the largest single shareholder in PNB Housing Finance.

b) Subsequent to the deal, proxy advisor, Shareholder Empowerment Services (SES) objected to the deal on 3 grounds. Firstly, a private placement over a rights issue was unfair to shareholders. Secondly, no control premium was being paid by Carlyle for becoming the largest shareholder. Lastly, no independent valuation was done.

c) Subsequent to the furore raised by the case, SEBI instructed PNB Housing not to go ahead with the deal till an independent valuation was conducted. However, PNB and PNB Housing maintained their stand that independent valuation was not required since PNB Housing was already listed.

d) Meanwhile, PNB Housing approached the Securities Appellate Tribunal (SAT) against the SEBI order. The SAT offered a split verdict, which was ambiguous from an implementation perspective. However, SEBI has already approached the Supreme Court to strike down any order of SAT not in the interests of minority shareholders.

e) With the deal stuck in legal wrangles, the stock price of PNB Housing which had rallied from Rs.390 to Rs.920, has now fallen nearly 30% to Rs.607. PNB Housing and Carlyle have already initiated the process of cancelling the agreement.

While that puts the deal to rest, it does raise some positive vibes about the activist role played by SES in the deal. The deal was piloted by former HDFC Bank CEO, Aditya Puri. Puri is not only an advisor to Carlyle, but was also supposed to invest in PNB Housing via his investment vehicle, Salisbury Investments.

Also Read:-

PNB Housing shares fall 5% as SEBI halts Carlyle deal

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Ashish Kacholia Portfolio

Ashish Kacholia Investment Portfolio
by 5paisa Research Team 18/10/2021

Ashish Kacholia has emerged as a very focused value investor in mid-cap and small cap stocks in India. He floated Lucky Securities in 1995 but eventually went on to become one of India’s ace investors.

As of the close of September 2021, Ashish Kacholia held 26 stocks in his portfolio with a market value of Rs.1,770 crore as of 15th October. Here is a snapshot of his top holdings in rupee value terms.
 

Ashish Kacholia's portfolio as of Sept-21:
 

Stock Name

Percentage Holding

Holding Value

Holding Movement

Mastek Ltd

2.8%

Rs.232cr

No Change

Vaibhav Global

1.4%

Rs.161cr

No Change

Poly Medicure

1.7%

Rs.159cr

No Change

HLE Glasscoat

1.4%

Rs.140cr

No Change

Shally Engineering

6.5%

Rs.119cr

Reduced in Q2

NIIT Ltd

2.3%

Rs.104cr

No Change

Acrysil Ltd

3.8%

Rs.75cr

No Change

Mold-Tech Packaging

3.3%

Rs.69cr

No Change

Garware Hi-Tech Films

3.3%

Rs.68cr

Increased in Q2


The top-10 stocks account for 64% of the value of the portfolio of Ashish Kacholia as of end Sep-21.

Stocks where Ashish Kacholia added stake

Let us look at the fresh addition of stocks to his portfolio first in the Sep-21 quarter. Ashish added 7 stocks to his portfolio in the Sep-21 quarter to the extent of more than 1%. The fresh stock additions include Tarc Ltd (+1.5%), Gateway Distriparks (+1.5%), VRL Logistics (+1.4%), Somany Home Innovations (+1.6%), Ami Organics (+1.4%), Xpro India (+2.5%) and Venus Remedies (+1.1%). Two out of the seven fresh additions are logistics stocks.

Also Read: Stock holdings of top Stock Market Investors

There were also some stocks where Ashish increased his positions. For example, he raised his holdings in Garware Hi Tech Films by 70 bps from 2.6% to 3.3%. Holdings in Safari Industries and HLE Glasscoat were raised very marginally in the Sep-21 quarter.

What stocks did Ashish Kacholia downsize in his portfolio?

In the Sep-21 quarter, there were several stocks in which he cut down his stake. For example, his stake in Shally Engineering was cut by 70 bps from 7.2% to 6.5%. There were marginal cuts in Vaibhav Global and Mold Tech Packaging.

There were 4 stocks in which Ashish reduced his stake to below the 1% mark, as a result of which statutory reporting is not required. He cut his stake in Apollo Pipes from 3.6% to below 1%, Birlasoft from 1.2% to below 1%, Caplin Point Labs from 1.2% to below 1% and in Apollo Tricot Tubes from 2.4% to below 1%. There was no stock which Ashish exited fully from his portfolio in the Sep-21 quarter.

Ashish Kacholia’s Portfolio Performance over 1 year and 3 years?

How did his portfolio perform as of the end of September 2021 quarter compared to the year ago period and the 3 year ago period. His portfolio currently stands at Rs.1,770 crore while a year back the portfolio value stood at Rs.821 crore. That is an appreciation of 115.6% for Ashish Kacholia on his portfolio in the last 1 year.

Let us turn to a 3-year perspective. The value of his portfolio was Rs.747 crore in Sep-2018. In terms of compounded annual growth rate, the annualized returns stand at 33.4%, which is still impressive. But clearly,  most of the returns for Ashish appear to have come in the last one year only.

Also Check - Radhakishan Damani's Portfolio 2021

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