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Happy days for realty sector as Realty Index scales 10-year highs

BSE Realty Index
13/07/2021

An unlikely sectoral index, BSE Realty Index, hit 10-year highs recently. Even as experts have been talking about weak offtake in residential properties, the undertone appears to be changing gradually. A host of stocks like Godrej Properties, IB Real Estate, Macrotech Developers and Mahindra Lifespaces scaled new highs in the stock market. Smaller names like Prestige Estates, Sobha and Brigade have also showed traction. What is driving these realty stocks?

Two factors contributed to the surge in residential real estate demand. Home loan rates are at an all-time low and most states have given concessions or waive on registration charges. This spurred a spate of investments in residential properties. In FY21, Godrej Properties sold an average of 20 homes per day, even as it beat Macrotech to become India’s largest real estate company. In the Jun-21 quarter, real estate developers have reported a sharp fall in residential inventory and that is changing the outlook for realty stocks.

Also Read: Godrej Properties is India’s largest realty player

The real estate story in India is not just about the crisis of the last few years, but the recovery that is expected in the next few years. Consider some numbers. Macrotech is up over 80% since its listing in April this year. Godrej Properties has doubled since September while Mahindra Lifespaces has tripled in the last 1 year. That is the story with most real estate companies. The moral of the story is that after a very long time, the stock market appears willing to bet on a full-fledged recovery in residential real estate demand. That is the difference!
 

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Digital dominates as MobiKwik all set for IPO

 MobiKwik IPO
IPO
13/07/2021

It looks like the new age of digital IPOs. After Zomato announced the opening of its IPO on 14 July, many more digital players will use this digital trend to make a mark. Of course, the mega Paytm IPO is already in the works and another mega digital issue of Nykaa is also expected during this fiscal. But, next on the digital line for IPOs appears to be MobiKwik, which just filed the Draft Red Herring Prospectus (DRHP) with SEBI for its proposed IPO.

According to the DRHP, MobiKwik will raise fresh funds of Rs.1,500 crore and will also do an offer for sale (OFS) for Rs.400 crore, taking total IPO size to Rs.1,900 crore. Some of the early investors taking partial exit in the OFS will include American Express, Bajaj Finance, Cisco, Sequoia Capital and Treeline Asia. Meanwhile, the company is also planning a pre-IPO placement, in which case the IPO size will  be reduced proportionately. 

In India, MobiKwik offers two principal services viz. MobiKwik Wallet, which is a simplified payment system, and BNPL facility, which is a buy now pay later scheme for users. The focus of MobiKwik has been to address the unmet credit demands in online transactions by combining the wallet and BNPL. As of now, ecommerce is a largely under-represented segment in the Indian stock markets. Hopefully that should change with Zomato, Paytm and MobiKwik listing on the bourses.
 

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Upcoming IPOs in July 2021 – Get ready for the IPO surge

Upcoming IPOs in July 2021
IPO
14/07/2021

The IPO business started a tad late in July. We are well into the third week of July and only 2 IPOs have been completed. The Rs.963 crore IPO of GR Infraprojects and the Rs.1,547 crore IPO of Clean Science and Technologies; both got subscribed over 90 times.

But the Zomato IPO opening on 14 July could set the trend for a string of IPOs in July. Here is a look at the big IPOs expected to open for subscription in the July 2021.

Upcoming IPOs in July 2021 – Some real big IPOs in the offering

IPO Issuer

Sector

Fresh Issue

Offer for Sale

Issue Size

Tatva Chintan Pharma IPO

Specialty Chemicals

Rs.225 crore

Rs.275 crore

Rs.500 crore

Seven Islands Shipping IPO

Logistics

Rs.400 crore

Rs.200 crore

Rs.600 crore

Ami Organics IPO

Chemicals

Rs.300crore

Rs.350 crore

Rs.650 crore

Arohan Financial IPO

Microfinance

Rs.850 crore

Rs.950 crore

Rs.1,800 crore

Shriram Properties IPO

Real Estate

Rs.250 crore

Rs.550 crore

Rs.800 crore

Utkarsh SFB IPO

Small Finance

Rs.750 crore

Rs.600 crore

Rs.1,350 crore

Glenmark Life Science IPO

Pharmaceuticals

Rs.1,160 crore

Rs.540 crore

Rs.1,700 crore

Vijaya Diagnostics IPO

Healthcare

-

Rs.2,000 crore

Rs.2,000 crore

Nuvoco Vistas IPO

Cement

Rs.1,500 crore

Rs.3,500 crore

Rs.5,000 crore

Aadhar Housing IPO

Home Finance

Rs1,500 crore

Rs.5,800 crore

Rs.7,300 crore

Car Trade IPO

Ecommerce

-

Rs.2,000 crore

Rs.2,000 crore

Penna Cement IPO

Cement

Rs.1,300 crore

Rs.250 crore

Rs.1,550 crore

Go Air IPO

Aviation

Rs.3,600 crore

 

Rs.3,600 crore

Zomato IPO

Ecommerce

Rs.9,000 crore

Rs.375 crore

Rs.9,375 crore

Rolex Ring

Auto Ancillary

Rs.70 crore

 

 

Data Source: SEBI Filings

Here is a quick look at the big IPOs in July 2021.

  1. Vijaya Diagnostics will raise Rs.2,000 crore via offer for sale. Vijaya is backed to the extent of 40% by Kedaara Capital. Vijaya is looking to capitalize on the tremendous response to the KIMS IPO and the positive sentiments surrounding healthcare.
     

  2. Glenmark Life Sciences is the API arm of Glenmark hived off via an IPO. The company has aggressive expansion plans and it will look to capitalize on the huge global demand for active pharma ingredients (APIs) in the post pandemic scenario.
     

  3. Nuvoco Vistas, the cement arm of Nirma, will raise Rs.5,000 crore. Nuvoco combined the cement interests of Nirma and added Lafarge India operations plus Emami Cements to it. Cement IPOs are in the limelight for robust demand and solid pricing power.
     

  4. Aadhar Housing Finance will use the Rs.7,300 crore IPO to give an exit to Blackstone, which owns over 98% in Aadhar Housing. The company is focused on low income home loan borrowers, which is one of the fastest growing segments in home loan business.
     

  5. Car Trade, an online digital trading platform for cars, will also come out with an IPO worth Rs.2,000 crore; structured as an offer for sale. Digital stocks are grossly under-represented in Indian market. The scarcity value will be the big story for Car Trade.
     

  6. If all goes well, Go Air plans to raise Rs.3,600 crore via the IPO route to bankroll its recovery and expansion plans. Aviation stocks have had a rough 18 months with deep losses. However, the scarcity value will still work in favour of Go Air.

The first of the mega issues; the Rs.9,375 crore IPO of Zomato open 14 July and closes 16 July. Obviously, other IPOs are waiting for the Zomato IPO to test waters. If the response is rock solid, expect a lot more IPOs to get front-ended to July 2021. Get ready for the surge!

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Adani Group takes control of the Mumbai Airport

Adani Group Mumbai airport
14/07/2021

The big dispute over the GVK stake in Mumbai International Airport Limited (MIAL) is finally over with control of MIAL likely to fall entirely in the hands of Adani Group. Adani Group had already acquired 23.5% stake in MIAL from two South African investors who had been looking for an exit route. The bone of contention was the 50.5% stake in MIAL owned by GVK group, which was unwilling to hand over control of MIAL to the Adani Group. However, with mounting debt burden and lender pressure, GVK group finally relented.

MIAL is stuck with an overall debt burden of Rs.8,000 crore and with the GVK group stretched financially, they were in no position to address the debt. It was this debt burden which Adani has agreed to take over and in lieu of that the GVK group will transfer their shareholdings to Adani group. With a combined 74% in MIAL, the Adani Group will get total control over the Mumbai Airport. Gautam Adani topped up the acquisition with a promise to revitalize the entire airport ecosystem and create thousands of jobs. 

Interestingly, this deal comes just a month ahead of Adani group’s plans to commence work on the Navi Mumbai International Airport. The new airport is expected to be commissioned in 2024. The Adani Group already controls 6 airports in their portfolio. With the addition of MIAL to its airports portfolio, the Adani group virtually controls 25% of all passenger footfalls in India as well as 33% of India’s air cargo movement. This move will effectively bring down the curtains on the involvement of GVK group in the airports business.
 

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Zomato IPO gets 1.05X subscription at the end of Day 1

Zomato IPO Day 1 Subscription
IPO
14/07/2021

The Rs.9,375 crore Zomato IPO got subscribed 1.05 times overall at the end of the first day of subscription. The IPO will remain open till Friday 16 July. The QIB portion was subscribed 0.98X, while the non-institutional HNI portion got subscribed just 0.13X. Applications for the HNI and QIB segment tend to get bunched on the last day of the IPO. The retail portion got subscribed 2.70X, but retail quota is just 10% in the Zomato IPO. The IPO is priced in the band of Rs.72-76.

The IPO of Zomato comprises a fresh issue of shares worth Rs.9,000 crore and an offer for sale worth Rs.375 crore to give an exit to Info Edge. With 2 more days to go for the IPO, the HNI portion subscription will largely depend on the demand for funded applications. However, the QIB subscription is likely to be robust, if you go by the anchor investor demand evinced on Tuesday 13 July.

On 13 July, when the Zomato issue opened for anchor investors to raise Rs.4,196 crore, the total demand from institutions was in excess of Rs.100,000 crore. Eventually, Zomato allocated a total of 55.22 crore shares of Zomato to QIBs priced at the upper band of Rs.76 per share. Out of the 55.22 crore shares allocated, 36.81 crore shares were allocated to foreign investors like Government of Singapore, MAS, Wellington, Nomura, Aberdeen, Schroders among others. A total of 18.41 crore shares were allocated to domestic institutions like SBI MF, Birla Sun Life Insurance, Kotak MF, Nippon Life MF, HDFC MF, IIFL MF etc. That is a hint that QIB subscription in the IPO could be really very strong.
 

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Zomato IPO oversubscribed on Day-2

Zomato IPO Day 2 Subscription
IPO
15/07/2021

At the end of the second day of the Zomato IPO, there was substantial build-up of interest from QIBs and Retail Investors. At 5.00 PM on Thursday, Zomato IPO QIB portion had been subscribed 7.06 times, with predominant demand coming from FPIs. The HNI (non-institutional) portion was subscribed just about 0.45 times. However, a large chunk of this segment uses the funding route, with funding applications being logged on the last day. The retail portion was subscribed 4.73 times with 78% being cut-off bids. Overall, the Zomato IPO was subscribed 4.79 times at close of second day. Zomato IPO closes on Friday 16 July.

Read : Zomato Fun facts
With just 1 day to go for the issue to close, here are 3 strong reasons to apply for the Zomato IPO.

  1. Some sectors make the best of tough times and Zomato is one of them. From Work-From-Home (WFH) to lockdowns to social distancing; Zomato was the answer to all problems. When you have weathered a crisis, you are better positioned to participate in better times. The Zomato IPO gives you an opportunity to do exactly that.
  2. Digital ordering may look simple to the customer, but to create that simplicity, companies like Zomato have to sink in hundreds of crores into process, prices and publicity. The good news is that these 3P costs are down from 88% of revenues in 2019 to 25% in 2021. The IPO is perfectly poised to benefit from net gains.
  3. Businesses that do not go digital are as good as dead. Portfolios that don’t include digital plays are assured underperformers. Zomato is your opportunity to invest in Digital India at a reasonable price.

You still have Friday 16 July to invest in the Zomato IPO. You miss it at your own risk!
 

Check : Zomato IPO day 1 subscription