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Dow Cracks 700 points as Crude also retreats

NASDAQ
20/07/2021

It looked like a panic-driven sell-off in global markets on 19 July. The Dow Jones cracked 725 points to 33,962 while the NASDAQ fell 152 points to 14,275. If Dow fell 2%, the fall in European markets on 19 July was much sharper. The London-based FTSE fell 2.35%, German DAX fell 2.62% and the French CAC fell 2.54% on Monday. The big driving factor was a sharp spike in COVID cases; what is now referred to as COVID 3.0 or Delta variant.

With the WHO hinting at a return of COVID in a new form and the state of California re-imposing restrictions, fear is returning to haunt the markets. Market experts concur that this fall is not just about COVID fears but also about too much optimistic expectations in indices, already driven higher by liquidity. With the Fed hinting at tightening from mid-2022, the assumptions of this rally are likely to be questioned. On 19 July, even US bellwethers like Apple and Microsoft were down sharply.

Read: Crude Oil at $75

For emerging markets, including India, there is an additional concern on the dollar index front. The Bloomberg Dollar Index has moved up from 89 in early June to 93 in July. That is a sharp strengthening of the US dollar and is one of the reasons explaining the sell-off by FPIs in emerging markets. That pressure is visible across EMs.

Finally, we turn to the sharp fall in crude oil. After recently scaling a high of $77/bbl, Brent Crude has given up chunk of the rally to trade in the range of $68.00-$68.50/bbl. The fears of COVID 3.0 has raised the spectre of another global slowdown in oil demand. OPEC supply hikes from August could only depress oil prices further.
 

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SEBI insists preferential offers need independent valuation

PNB Housing - SEBI
20/07/2021

In the last two months, the proposed Rs.4,000 crore preferential offer by PNB Housing to Carlyle has become the bone of contention. The first objection to the deal came from proxy firm SES. Shareholder Empowerment Firm (SES) is run by former SEBI ED, J N Gupta. SES expressed reservations about the preferential offer in that there was no independent valuation done, was priced at discount to book value and did not factor control premium. The legal stand-off began with SEBI asking PNB Housing to withhold the EGM vote and PNB Housing, in turn, approaching SAT.

SAT has heard the arguments of SEBI and PNB Housing but reserved its final judgment. Meanwhile, in an interesting development, SEBI has insisted that all preferential allotments of shares pre-suppose an independent valuation. In the PNB Housing case, SEBI insisted that since the Articles of Association mandate an independent valuation for such deals, it should have been done. PNB Housing has argued that since ICDR rules do not stipulate independent valuations for listed companies, they had done the preferential allotment to Carlyle based on ICDR formula.

Also Read: SEBI halts PNB housing - Carlyle deal

The latest clarification from SEBI makes some interesting points. Firstly, ICDR is only a guide to determine minimum price and not a formula for valuation. Secondly, SEBI has also underlined that in all such cases, the only guiding factor should be minority shareholders getting a fair and just price. Lastly, SEBI pointed out that since the PNB Housing case resulted in change of control, an independent valuation should have been done by PNB Housing. The last word is yet to be said, but it could have implications for LIC Housing, Barbeque nation and a host of other proposed preferential allotments.
 

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How to increase the chances of IPO allotment

IPO Allotment
by Nikita Bhoota 20/07/2021

IPO investors generally have questions such as “No shares allotted to me in IPO, why?”, “I haven’t got any allotment in multiple applications” “why I am not getting allotment in any of the IPOs?”. Thus, it is clear that the lucky people get the allotment in highly subscribed IPOs. Sometimes there are some IPOs in which even people who applied only through a single application get the allotment while some apply in multiple numbers but still do not get allotment. This shows that the process is automated and the lucky person is getting the allotment. 

We are here with some of the ideas which can increase the chances of IPO allotment. 

Avoid big applications

SEBI’s allotment process treats all retail applications (less than Rs 200,000) equally. There is no point in making a big application in case of over-subscription. For the oversubscribed IPOs, one should go for minimum bids with multiple accounts. That will help to invest spare money in multiple IPOs as well.

Apply via more than one account or multiple accounts for the same ipo

Do not apply with the maximum bid in just a single account but apply through multiple accounts for the IPO. One should apply via multiple IPOs accounts for highly subscribed IPOs. Applying through multiple accounts can definitely increase the chances of IPO allotment.

Bid at cut off price / higher price band

Investors are often confused between the bid price and cut-off price.” Cut-off price” means the investor is willing to pay whatever price is decided by the company at the end of the book-building process. Once the application is made at Cut off, the investor has to bid at the highest price band. The excess amount, in case the price is lower, the excess amount is refunded.

As an example, the price band of Anand Rathi IPO is Rs.530-Rs.550 per share. As Anand Rathi IPO is subscribed 1.60 times, bids below Rs.550 per share might not be considered in the allotment. Thus, retail investors are requested to bid at either cut-off or maximum price to increase Anand Rathi IPO allotment chances.

Avoid last moment subscription:

If already decided that you are going to apply for the IPO, then go for it on the very first day or the second day. If the investor applies on the last day, it might cause few issues like the bank account is not responding due to HNI and QIB high subscription or any other technical issues. It is to take care that the investor does not miss the opportunity to invest in the IPO.

Fill the details properly

Do not rush in filling the IPO forms. The investor should fill in the details correctly like the amount, name, DP id, bank details etc. Printed forms are also available so one should go with it as well. The most secure way to apply for the IPO is through ASBA. One can go with ASBA via their bank but the investor needs to check the details before applying the same. It will surely avoid technical rejection.

Buy parent or holding company shares

The above techniques will be applicable on all IPOs but this trick does not apply to all the IPOs. Although this tip is a brilliant one wherever applicable. Having at least a single share of the parent company in the Demat Account will make the investor entitled to apply through the Shareholder Category.

Although, it applies only in the cases where the parent of the IPO company is already listed in the stock exchange and there is a reservation for shareholders in the parent company. Thus, it is obvious that the chances of allotment are much better in the shareholder category. Additionally, one can place a bid in both retail as well as shareholder categories. Thus, this increases the chance of allotment.

Detailed Video:

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Tatva Chintan IPO closes with a bang; subscribed 180X

Tatva Chintan IPO - day 3
20/07/2021

The early indications were that Tatva Chintan IPO would get comfortably oversubscribed. However, at close on Tuesday, the overall issue got oversubscribed by a solid 180.35 times. The Rs.500 crore IPO of Tatva Chintan consisted of Rs.225 crore of fresh issue and Rs.275 crore offer for sale. As per the combined bid details put out by the BSE on 20 Jun at 5 pm, Tatva Chintan IPO was subscribed 180.35 times, with maximum demand coming from the HNI segment followed by the QIB segment. Here is the final subscription status of Tatva Chintan IPO on 20 July.

Out of the 32.62 lakh shares on offer in the IPO, Tatva Chintan saw applications for 58.83 crore shares. That implies an overall subscription of 180.35X. The granular break-up is more insightful and shows how funded HNI applications flooded on the last day. The QIB portion got subscriptions for 185.23X of the ex-anchor allocation quota, with most applications coming on the last day. The HNI portion got subscribed a whopping 512.22X, with a surge of funded applications on Day-3. The retail portion continued to build on the last day and was 35.34X subscribed at the close of the IPO.

At the close of Day-3, among QIBs, FPIs had bid for 4.28 crore shares, MFs 1.24 crore shares while banks/insurance had bid 7.41 crore shares. Among retail investors; out of the 16.31 lakh shares on offer, valid bids were received for 5.76 crore shares, of which bids for 4.41 crore shares were received at the cut-off price. The HNI portion got applications for 35.8 crore shares of which close to 29.31 crore shares were funded applications. Tatva Chintan is scheduled to list on 29 July.
 

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Glenmark Life Sciences IPO: Getting a share of the global API market

Glennmark life science IPO
21/07/2021

Glenmark Life Sciences joined the list of big ticket IPOs making a public offer. The company was incorporated in 2011 as a wholly-owned subsidiary of Glenmark Pharma. Indian Pharma industry is divided into Active Pharma Ingredients (APIs), CRAMs and Generics. Glenmark Life is a key player in the API space and in India it competes with other names like Divi’s Labs, Laurus Labs, Aarti Drugs, Granules etc. Global PE players like Advent, Carlyle and KKR have shown keen interest in API companies. It is in this background that the Glenmark Life Sciences IPO has been announced.

 

Key terms of the IPO of Glenmark Life Sciences


The total issue size of Rs.1,514 crore will consist of a fresh issue of Rs.1,060 crore and an offer-for-sale by Glenmark Pharma to the tune of Rs.454 crore. Here is a quick IPO summary.

 

Key IPO Details

Particulars

Nature of issue

Book Building

Face value of share

Rs.2 per share

IPO Price Band

Rs.695 - Rs.720

Market Lot

20 shares

Retail Investment limit

13 Lots (260 shares)

Retail limit - Value

Rs.187,200

Fresh Issue Size

Rs.1,060 crore

Offer for Sale Size

Rs.454 crore

Total IPO Size

Rs.1,514 crore

Listing on

BSE, NSE

QIB Quota

50%

Data Source: IPO Filings

 

Read: 5 Reasons to invest in Glenmark Life Sciences IPO

 
Glenmark Life Sciences IPO Dates -

Key IPO Details

Particulars

Issue Opens on

27th Jul 2021

Issue Closes on

29th Jul 2021

Basis of Allotment date

03rd Aug 2021

Refund Initiation date

04th Aug 2021

Credit to Demat

05th Aug 2021

IPO Listing date

06th Aug 2021

Pre issue promoter stake

100%

Peer Group

Divi, Laurus, Granules

Indicative Market Cap

Rs.8,820 crore

HNI Quota

15%

Retail Quota

35%

Data Source: IPO Filings

 
Understanding the business model of Glenmark Life Sciences 


It is estimated that in the overall valuation of Glenmark Pharma, 35-40% value comes from Glenmark Life Sciences; a substantial chunk. Here is a key to the business model of Glenmark Life Sciences.
•    Glenmark Life develops APIs for specialized uses like in cardio vascular diseases, central nervous system diseases, pain management, diabetes and gastrointestinal disorders. APIs are the equivalent of specialized inputs that go into the manufacture of medicines and India and China have enjoyed an established leadership in this segment.

•    The API trend shifted towards India in the last couple of years after China tightened environmental norms for its bulk drug and chemical companies. Global pharma companies also preferred to diversify their dependence on China, and India offered an option. This opened up a huge opportunity for Indian API manufacturers.

•    If Active Pharma Ingredients (APIs) are one big segment of Glenmark Life, the other key segment is Contract Development and Manufacturing Operations (CDMO). This is another fast growing business which offers specialized high-end services to global pharma companies on a contract basis.

•    Glenmark Life is a leading API manufacturer for CVD, CNS and pain management via its 4 manufacturing facilities with a combined capacity of 726 KL. Glenmark Life exports to the Americas, Europe and Japan with long standing relations with top generic players.

 

Read: 6 Facts to Know Before Investing in Glenmark Life Sciences IPO

 
Glenmark Life Sciences' Financials – Smart growth, solid margins


Glenmark Life has presented a strong growth story and offers a macro play on the API growth in India. Sales more than doubled from Rs.887 crore in FY19 to Rs.1,886 crore in FY21. The asset turnover ratio (a key driver of profitability) has improved from 0.60 in FY19 to 0.94 in FY21.


Glenmark Life Sciences saw net profits growing 80% in last 2 years from Rs.196 crore in FY19 to Rs.352 crore in FY21. Over the last 3 years, the net profit margins have been 22.1%, 20.2% and 18.87%. During the same 3 years, the return on assets (ROA) were 13.3%, 18.1% and 17.6%. In short, return ratios have been robust and stable in last 3 years.

Look at Glenmark Life Sciences as a macro play on API opportunity


a)    When you invest in an idea look at what the leaders are doing. In the last 1 year, PE funds like KKR, Chrysalis, Advent and Carlyle have infused $1.5 billion into Indian API players. This year, they are cutting a cheque of $4 billion. Clearly the story is huge.

b)    The IPO upper price band values the stock at over 25X P/E ratio on FY21 EPS. However, the annualized growth in profits and revenues has been much more than that. This is lower than peer group valuations and should look better with forward earnings.

c)    APIs is really the story of what the Indian pharma industry is really likely to specialize, differentiate and deliver in the next 5 years. That is where Glenmark Life Sciences is positioned making it a highly attractive proposition.

Execution is the key in the API business, but the valuations and the virtually unlimited API opportunity for Indian companies, does make Glenmark Life IPO a compelling proposition.

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How are stocks settled after a trading holiday

Stock settlement on trading holiday
21/07/2021

We normally tend to use the words trading holiday and clearing holiday in the stock markets interchangeably. These are two different things altogether. The trading holiday is the day on which there is no trading permitted. That means you cannot use your trading account to place trades, either offline or online. No buy or sell orders in the stock market are allowed on trading holidays. Obviously, when there is no trading, there is no question of clearing and settlement of trades, hence there would also be no clearing of trades on such days.


However, there are a number of days on which there is trading in the stock market but then clearing is not available due to a bank holiday as stipulated by the RBI. In such cases, the clearing of trades get bunched together, as we will see in detail later in this article. But, let us first understand trading and clearing holidays from a practical perspective.

 
Trading and clearing holidays for calendar year 2021


The table below captures the NSE list of market holidays with the dates, description and the nature of the holiday.

 

Date

Day

Description

Holiday Status

26 Jan 2021

Tuesday

Republic Day

Trading Cum Clearing Holiday

19 Feb 2021

Friday

Chhatrapati Shivaji Maharaj Jayanti

Only Clearing Holiday

11 Mar 2021

Thursday

Mahashivratri

Trading Cum Clearing Holiday

29 Mar 2021

Monday

Holi

Trading Cum Clearing Holiday

01 Apr 2021

Thursday

Annual Bank Closing

Only Clearing Holiday

02 Apr 2021

Friday

Good Friday

Trading Cum Clearing Holiday

13 Apr 2021

Tuesday

Gudi Padwa

Only Clearing Holiday

13 Apr 2021

Tuesday

Gudi Padwa

Only Clearing Holiday

14 Apr 2021

Wednesday

Dr. Babasaheb Ambedkar Jayanti

Trading Cum Clearing Holiday

21 Apr 2021

Wednesday

Ram Navami

Trading Cum Clearing Holiday

13 May 2021

Thursday

Id-Ul-Fitr (Ramzan ID)

Trading Cum Clearing Holiday

26 May 2021

Wednesday

Buddha Pournima

Only Clearing Holiday

21 Jul 2021

Wednesday

Bakri Id

Trading Cum Clearing Holiday

16 Aug 2021

Monday

Parsi New Year

Only Clearing Holiday

19 Aug 2021

Thursday

Moharram

Trading Cum Clearing Holiday

10 Sep 2021

Friday

Ganesh Chaturthi

Trading Cum Clearing Holiday

15 Oct 2021

Friday

Dussehra

Trading Cum Clearing Holiday

19 Oct 2021

Tuesday

Id-E-Milad

Only Clearing Holiday

4 Nov 2021

Thursday

Diwali- Laxmi Pujan

Only Clearing Holiday

5 Nov 2021

Friday

Diwali-Balipratipada

Trading Cum Clearing Holiday

19 Nov 2021

Friday

Gurunanak Jayanti

Trading Cum Clearing Holiday

Data Source: NSE

 

Find the entire list of Stock Trading Holidays in 2021

 

The above is a comprehensive list of holidays published by the NSE but remember not all the above days are trading holidays. All the above days are clearing holidays when there will be no clearing done by the banks. We have marked the specific days in red colour in the last column where the particular day is a clearing holiday but not a trading holiday. For example, in the above 2021 list, 19 Feb and 01 April are clearing holidays but are not trading holidays. On these days, stock market trading goes on as usual. However, 05 November and 19 November 2022 are trading-cum-clearing holidays and on these days the stock market trading and bank clearing will be shut.


How is settlement managed when there are trading and clearing holidays?

We are all aware that the trade is not complete with executing the trade. The exchanges and clearing corporations along with the banks and Depositories perform the Clearing and Settlement function. For stock purchases, this entails calculating the Trading Member wise debits, collecting the debit amounts and ensuring that shares are credited to the respective demat accounts on T+2 day. For stock sales, it entails calculating the Trading Member wise credits, ensuring that clean demat delivery is given and the funds are credited to the respective bank accounts on T+2 day.


Now how would the above situation get impacted if there are trading / clearing holidays in between? Let us look at 2 situations.


1)    If there is an intervening trading holiday, then settlement gets postponed accordingly. For example, 21 July is a trading cum clearing holiday. All trades of 19 July will get settled on 22 July instead of 21 July. Similarly, all trades of 20 July will get cleared on 23 July instead of 22 July.

 

2)    What happens if it is only a clearing holiday. For example, 26 May, Buddha Purnima, was only a clearing holiday. In such cases, settlements would get bunched. So, the trades of 24 May and the trades of 25 May would get bunched and get settled on 27 May.


That is how your clearing and settlement of trades gets impacted by trading and clearing holidays.

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Find the entire list of NSE/BSE Holidays 2021, Commodity Market Holidays

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