How GSFC will Benefit from the Anti-Dumping Duty
The stock of Gujarat State Fertilizers & Chemicals Ltd (GSFC) normally does not show too much movement in trading. On 28th September, GSFC started nearly 8-9% higher and touched a 52-week high of Rs.133.65. However, towards the close, the price did taper but the stock did close with gains of 3.2% on the NSE, amidst a falling Nifty index.
What exactly triggered this rally in GSFC?
The Central Board of Indirect Taxes and Customs (CBIC) has proposed anti-dumping duties on Caprolactam. This was based on an application made by GSFC requesting for an imposition of anti-dumping duties on imports so as to help Indian production of caprolactam remain competitive.
Based on the prima facie evidence submitted by GSFC and its investigations, the CBIC concluded that anti-dumping duties were warranted on Caprolactam, especially for the consignments coming from the European Union, South Korea, Russia and Thailand. Anti-dumping duties are necessitated when other governments reduce costs through subsidies.
GSFC currently has two caprolactam plants having rated capacities of 20,000 tonnes per annum (TPA) and 50,000 TPA respectively. GSFC is broadly into the manufacture of fertilizers and industrial chemicals and is one of the major producers of caprolactam in India. Benzene and ammonia are some of the major inputs that go into caprolactam.
Countries like China have been traditionally known to dump cheaper products into other countries on the strength of huge subsidies given to them by their government. This gives them an unfair advantage and in such cases, even under the WTO regulations, the anti-dumping duties are justified. Since dumping is hard to prove, it is normally based on the submissions of the aggrieved manufacturer and the investigations of CBIC.
The imposition of anti-dumping duties means that the imported goods are subjected to countervailing duties to the extent of the special benefits that they get to reduce their cost of production. This protects the interests of the local producer like GSFC. Normally, such anti-dumping duties tend to have sustained positive impact on the price of the stock.
Standard Life Sells 5% Stake in HDFC AMC for over Rs.3,000 cr
One of the reasons, the stock of HDFC Asset Management Company was down 5.51% on 29th September was the sale of 5% stake by Standard Life UK. The sharp fall in price was specifically because the seller had set the floor price for the sale at a discount of nearly 6.65% to the closing price on the previous day. But first a look at the deal.
Standard Life, the foreign partner in the HDFC Asset Management Company, plans to sell a total 5% stake at a floor price of Rs.2,870 per share. The closing price of Rs.2,904 on 29th September was quite close to the floor price of the proposed sale. The plan is to sell a total of 1.06 crore equity shares in HDFC AMC representing 5% of the capital.
Currently, Standard Life owns 4.52 crore shares in HDFC AMC representing 21.23% of the outstanding capital of the company. The current sale of shares entails a total of 1.06 crore shares representing 5% of the total capital base of HDFC AMC. The total value of the sale is estimated at Rs.3,042 crore. Normally, large blocks are sold at a discount to market price.
Standard Life has been gradually paring its stake in the insurance venture, HDFC Standard Life, too. The AMC stock is up sharply in the last 1 year on the back of solid traction in the form of a big boost to systematic investment flows into mutual funds. However, the AMCs have also been under pressure due to falling revenues as expense ratios moved lower.
HDFC AMC was the second AMC to list on the Indian bourses after Nippon India AMC. Subsequently, UTI AMC also listed on the bourses and currently the Aditya Birla Sun Life AMC IPO is on and that stock is also likely to be listed in the next 10 days. That would make it four listed AMC stocks traded on the Indian markets.
The supply of HDFC AMC is likely to be easily absorbed considered the expected demand.
Aditya Birla Sun Life AMC IPO Subscription Day 1
The Rs.2,768.26 crore IPO of Aditya Birla Sun Life AMC Ltd, consisting entirely of an offer for sale (OFS) of Rs.2,768.26 crore, was partially subscribed on Day-1. As per the combined bid details put out by the BSE, Aditya Birla Sun Life AMC Ltd IPO was subscribed 0.58X overall, with bulk of the demand coming from the retail segment. The issue closes on 01st October.
As of close of 29th September, out of the 277.99 lakh shares on offer in the IPO, Aditya Birla Sun Life AMC Ltd saw bids for 159.89 lakh shares. This implies an overall subscription of 0.58X. The granular break-up of subscriptions were tilted in favour of retail investors but HNI and QIB bids typically come in only on the last day of the IPO.
Aditya Birla Sun Life AMC Ltd IPO Subscription Day-1
|Qualified Institutional (QIB)||0.00 Times|
|Non-Institutional (NII)||0.14 Times|
|Retail Individual||1.09 Times|
On 28 September, Aditya Birla Sun Life AMC Ltd did an anchor placement of 110.81 lakh shares at the upper end of the price band of Rs.712, raising Rs.789 crore. The list of QIB investors included a number of FPI names like HSBC, IMF, ADIA, Morgan Stanley, Societe Generale etc. It included domestic institutions like ICICI Pru MF, HDFC MF, SBI MF, Axis MF, SBI Life, HDFC Life, Kotak MF, IIFL Special Opportunities Fund and Abakkus Growth Fund.
The QIB subscription saw negligible subscription at the end of Day-1. The QIB portion (net of anchor allocation of 110.81 lakh shares as above) had a quota of 73.87 lakh shares of which it has got bids for just 0.26 lakh shares, implying a negligible subscription by QIBs at the end of Day-1. QIB bids typically get bunched on the last day, but anchor response does indicate strong interest.
The HNI portion got subscribed 0.14X (getting applications for 7.54 lakh shares against the quota of 55.40 lakh shares). This is a rather tepid response on Day-1 and could be due to the large size of the IPO. Bulk of the funded applications and corporate applications, come in on the last day, so the actual picture should only get better.
The retail portion was fully subscribed 1.09X at the end of Day-1, showing strong retail appetite. For retail investors; out of the 129.28 lakh shares on offer, valid bids were received for 140.97 lakh shares, which included bids for 109.06 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.695-Rs712) and will close for subscription on 01st October.
5 Mantras for Call Option
Right and obligation: A call option is a derivative that derives value from an asset, that could be a stock, bond, commodity or any other asset. It gives the purchaser the right, but not the obligation to purchase the asset at a specified price on expiry. The seller, however, has an obligation to sell the asset if the purchaser exercises his right at expiry. For this right, the purchaser pays the seller a fee called premium.
Premium: A call option’s premium is made up of two portions: Intrinsic Value and Time Value. The call option is at least worth the difference between the specified price (strike price) and the current market price, if the current market price is higher, this is the intrinsic value of the call option. It is positive or zero. Time value is the balance of the premium – it is attributable to the time remaining until expiry. This portion of the value keeps decreasing as the option approaches expiry.
Asymmetric Payoff: The payoff for an investor purchasing or selling a call option is asymmetric. An investor purchasing a call option will only exercise the call if it is profitable, thus his profit is potentially unlimited but his loss is limited to the premium paid to acquire the call option. For an investor selling a call option, it is the opposite. He will have to fulfil the contract if it is profitable to the purchaser and thus his potential loss is unlimited. Whereas, if he is right and the price is unfavorable, he will only earn the premium amount, keeping his profit limited.
Tool for Hedging or Speculation: Just as any other derivative, Call options are a tool for hedging as well as speculation. Call options can be purchased to protect short trades. They can be sold to offset the losses from stocks owned by an investor (called covered calls). Naked calls can be purchased or sold for speculation; these can be done very cheaply. Several popular strategies such as a bull call spread, long call butterfly spread, straddle and strangle can be executed with the help of call options.
ITM/ATM/OTM: A call option is In the Money (ITM) if the current market price of the underlying is above the strike price of the option. It is At the Money (ATM) if the current market price of the underlying is the same as the strike price. Similarly, it is Out of Money (OTM) if the current market price is below strike price. Whether or not it is profitable will also factor in the price paid for the premium.
Log in to www.5paisa.com to start trading equities.
Sahajanand Medical Files for Rs.1,500 Crore IPO
Sahajanand Medical Technologies has filed the draft red herring prospectus (DRHP) with SEBI for its proposed Rs.1,500 crore IPO. The company is into the design and manufacture of vascular devices, with specialization in stents. Sahajanand already has strong institutional PE backing with investments from Samara Capital and Morgan Stanley PE Fund.
The Rs.1,500 crore IPO will comprise of a fresh issue of Rs.410 crore and an offer for sale of Rs.1,090 crore. While the OFS will be used to give partial exit to the promoters and to the early investors, the fresh issue component will be predominantly used by the company to reduce its debt and deleverage its balance sheet and also for working capital purposes.
Currently, the company is predominantly PE Fund owned. While Morgan Stanley PE Fund has a 18.44% stake, Samara Capital has a 36.59% stake in Sahajanand Medical Technologies. The company is based out of Surat in Gujarat and is a leader in drug eluting stents (DES). In the year FY21, it had a 31% share of the DES market, making it the undisputed niche leader.
Cardio vascular diseases are striking people more frequently and also striking them early. Hence it is critical that people are able to lead a normal life despite cardio vascular problems. The vascular devices market is expected to grow at 8.6% between 2021 and 2026 even as the incidence of cardio vascular afflictions have doubled globally in last 30 years.
The COVID pandemic has resulted in greater health consciousness and the vascular devices market is also likely to benefit from this trend. The global market size of cardio vascular devices is close to $26 billion and this is likely to see steady growth in the coming years. That will also open up a huge global opportunity for the stent manufacturer.
The Sahajanand Medical IPO will be managed by Axis Bank, BOFA Securities, Edelweiss and UBS. This marks the second IPO filing by a medical devices manufacturer. The first such company to file DRHP was Healthium Medtech, which is largely into surgical sutures and medical consumables.
List of Upcoming IPOs in 2021
SEBI Approves Setting Up Gold Exchange
In its latest board meeting held on 28th September, the SEBI Chairman Ajay Tyagi announced a slew of changes to capital market regulations to expand the offering for retail investors and better protect their interest. One such move is the proposed framework for a gold exchange. Here are the highlights of the gold exchange announcement.
1) The proposed gold exchange is intended to create a robust and transparent market to trade in spot gold. This will also offer a scientific process for price discovery of gold on a daily basis. It will trade in standardized spot gold.
2) The Gold Exchange will be set up under the aegis of the recognized stock exchanges and the platform will offer trading, clearing and settlement of trades in gold. The trading will be regulated by SEBI and will be covered by Settlement Guarantee Fund.
3) Gold will be traded on the gold exchange through Electronic Gold Receipts (EGRs), the equivalent of warehouse receipts in commodities. Gold being a perpetual asset, EGRs will have perpetual validity. EGRs will be classified as securities under SCRA definition.
4) SEBI will authorize Vault Managers subject to a minimum net worth of Rs.50 crore. They will provide vaulting services including taking gold deposits, safekeeping gold, issue of EGRs, verification of physical gold, reconciliation with EGRs etc.
5) The EGRs will be fungible both ways. Gold can be converted into EGRs and EGRs can be surrendered for gold. EGRs will be traded like a security on the stock exchange with real time quotes. EGRs and physical gold of two vaulting managers will also be fungible.
6) Electronic Gold Receipts or EGRs will be the closest to physical trading in gold and will add a lot of value to intraday traders, short term traders, arbitrageurs, hedgers like jewellers looking for price protection, gold ETFs etc.
7) The spot gold exchange was in the works for a long time, but post the NSEL spot exchange crisis, the regulator had been doubly wary of the systems required in regulating a spot exchange. That now appears to be under control.
In a related development, the SEBI has also authorized the launch of Silver ETFs, on the lines of gold ETF, as an additional asset class.