NCLT Instructs Zee Entertainment Board to Call for EGM
In its preliminary hearing on 30th September, the National Company Law Tribunal (NCLT) has instructed Zee Entertainment board to consider the EGM requisition put forth by Invesco Fund. Incidentally, Invesco Fund holds 17.88% stake in Zee Entertainment and is the single largest shareholder in Zee. The case is slated for its next hearing on 04-October.
After listening to the arguments put forth by both the counsels, the NCLT bench observed that holding of the EGM was not at the discretion of the board of the company. On the contrary, under Section 100 of the Companies Act, 2013, the board was obliged to call the AGM if shareholders with more than 10% of the paid-up capital demanded an EGM.
Check:- Invesco Approaches NCLT to Call EGM for Change of Zee Board
Invesco has not objected to the merger of Zee Entertainment with Sony Pictures. However, it has a problem, with the board composition. On 11-Sep, Invesco had called for the resignation of CEO Punit Goenka as well as directors; Manish Chokhani and Ashok Kurien. On 13-Sep, Zee announced that Kurien and Chokhani had resigned. However, Punit Goenka was appointed CEO of the merged entity for another five years.
Invesco has called for the AGM on two grounds. It wants Punit Goenka removed from the post of CEO and MD of Zee Entertainment. Secondly, it wants to nominate 6 directors to the board of Zee. Invesco is of the view that the Subhash Chandra family was exercising clout that was much larger than their pre-merger holding of 3.44%.
Also Read:- Invesco wants EGM to Replace Punit Goenka from the Post of MD & CEO
Invesco has demanded that the new board that is appointed based on the EGM voting should reconsider the merger proposal with Sony from ground zero. One objection that Invesco has is that the merger gives 53% stake in the combined entity to Sony and only 47% to Zee. This will substantially dilute the holding of Invesco from 18% to 8.4%. Ironically, the Subhash Chandra family will hike its stake in the combined entity from 3.44% to 4%.
Normally, any appointment or removal of directors of media companies requires the prior approval of the Ministry of Information and Broadcasting.
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Maruti Suzuki to Cut Car Production by 40% in October 2021
In a move that is significant, and also surprising, Maruti Suzuki has decided to cut its production of passenger cars by 40% for the month of October. This decision has been triggered by the tremendous shortage of microchips in the global market. Microchips are intelligent pieces of silicon that enable systematic and computerized processes to run efficiently in equipment.
The decision is rather surprising because the 3 months beginning in October are the peak festive season. Normally, auto companies report nearly 30-35% of their full year sales only during the festive season. The festive season begins with Navaratri and concludes with Christmas shopping towards the end of the year.
Without getting into specific numbers, Maruti announced that it would operate at 60% capacity at its car manufacturing plants. This is actually better than the month of September when Maruti had operated at just 40% of capacity. Microchips demand has surged in the last 2 years and auto companies have struggled to ensure regular supply commitments.
The production at its Haryana plant as well as its outsourcing plant in Gujarat are likely to be adversely impacted by this production cut. Apparently, the problem is not about sales falling but of sales failing to pick up to the extent expected. As a result, Maruti will be selling out of its inventories and the production cut will ensure that demand and supply are matched.
Both the Haryana plant and the Gujarat plant have worked lesser shifts in August due to the microchips shortage. Suzuki Motor Gujarat is wholly owned by Suzuki of Japan and it makes fully built Baleno and Swift cars on behalf of Maruti. The lower production only means that the car manufacturer is not keen on building inventory during the festive season.
However, other car manufacturers are not cutting production. Some of the major auto players in India like Hyundai, Tata Motors and Mahindra & Mahindra are maintaining current levels of output. On the other hand, a number of smaller players like Volkswagen, Skoda and MG Motors are even looking to boost their production cycles during this period.
Domestic Gas Prices Raised 62% and What it Means for Stocks
In an unprecedented hike, the Union government increased the price of natural gas by 62% from $1.79 per MMBtu to $2.90 per MMBtu (million British Thermal Units). This is the sharpest hike in natural gas prices in a subsequent 6 month period. Indian government sets the natural prices twice a year applicable for the next 6. This price of $2.90 per MMBtu will be applicable for the 6-month period from Oct-21 to Mar-22, the second half of FY22.
This above pricing refers to the regular gas that is extracted from wells. However, the government has a separate gas pricing formula for gas that is extracted from difficult to extract points like deep-water drilled gas, ultra-deep-water drilled gas etc.
The price for such difficult to extract natural gas has also been hiked by 69% from $3.62 per MMBtu to $6.13 per MMBtu effective for the next 6 months till Mar-22. This premium price is to encourage drilling in difficult fields.
The domestic gas pricing formula is based on the global natural gas prices, which has been up sharply. Globally, gas price is impacted by demand for gas, supply of gas as well as the price of crude oil, which is now above $80/bbl in the crude market. Indian natural gas is priced linked to the weighted average of the natural gas prices of four benchmark prices viz. the US, the UK, Russia and Canada.
What will be the impact?
It is going to impact the extractors and the users differently. Among the major gas extractors like ONGC, RIL and Vedanta, the impact will be positive as they realize a better price for the natural gas drilled. However, most of the gas producers have been demanding a price of around $3.50-3.60 per MMBtu for normal gas and over $7.50 for difficult drilled gas to be remunerative.
This spike in gas prices will negatively impact the largest consumes of gas; the city gas distributors. CGD players like Adani Gas, Indraprastha Gas and Mahanagar Gas will be impacted to the extent they cannot pass on the higher costs to the end consumers. Also, fertilizer companies relying on gas-fired plants will see an impact.
Paras Defence & Space Technologies IPO Lists at 168% Premium
Paras Defence & Space Technologies had a bumper listing on 01st October as it listed at a premium of 168%; much better than what the GMP had indicated. Paras Defence & Space Technologies listed at a premium of 168% and traded through the day in a range of Rs.40. The stock closed the day, well above the listing price. With overall subscription of 304.26X, listing response was in line with the robust subscription and the GMP indications. Here is the Paras Defence & Space Technologies listing story on 01st October.
The IPO price was fixed at the upper end of the band at Rs.175 after the 304.26X subscription. The price band for the IPO was Rs.165 to Rs.175. On 01st Oct, the stock of Paras Defence & Space Technologies listed on the NSE at a price of Rs.469, a premium of 168% over the issue price. On the BSE, the stock listed at a price of Rs.475, a listing premium of 171.43%.
On the NSE, Paras Defence & Space Technologies closed on 24-Sep at a price of Rs.492.45, a first day closing premium of 181.4% over the issue price. On the BSE, the stock closed at Rs.498.75, a first day closing premium of 185% over the issue price. On both the exchanges, the stock of Paras Defence managed to hold and marginally build on its listing premium quite effectively.
Check:- Paras Defence and Space Technologies Ltd IPO
On Day-1 of listing, Paras Defence & Space Technologies touched a high of Rs.492.45 on the NSE and a low of Rs.460. It closed exactly at the high price. On Day-1 of listing, the Paras Defence & Space Technologies stock traded a total of 21.32 lakh shares on NSE amounting to value of Rs.102.06 crore. Being a small issue, the total trading volumes on the first day were not as substantial as the other recent IPO listings.
On the BSE, Paras Defence & Space Technologies touched a high of Rs.498.75 and a low of Rs.456. On BSE, the stock traded a total of 7.57 lakh shares amounting to value of Rs.37.31 crore. Like on the NSE, even the volumes on the BSE were much lower than normal due to the small size of the issue.
At the close of Day-1 of listing, Paras Defence & Space Technologies had a market capitalization of Rs.1,945 crore with free-float market cap of just Rs.350 crore.
Aditya Birla Sun Life AMC IPO Subscription Day 3
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 already fully subscribed on Day-2. As per the combined bid details put out by the BSE, Aditya Birla Sun Life AMC Ltd IPO was subscribed 5.23 times overall, with bulk of the demand coming from the QIB segment. The issue has closed for subscription on Friday, 01st October.
Check :- Aditya Birla Sun Life AMC IPO Subscription Day 2
As of close of 01st October, out of the 277.99 lakh shares on offer in the IPO, Aditya Birla Sun Life AMC Ltd saw bids for 1,454.09 lakh shares. This implies an overall subscription of 5.23X. The granular break-up of subscriptions were tilted in favour of QIB investors but HNI and retail bids were also fairly robust.
Aditya Birla Sun Life AMC Ltd IPO Subscription Day-3
Qualified Institutional Buyers (QIB)
Non Institutional Investors (NII)
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 ended quite robust at the end of Day-3. 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 765.18 lakh shares, implying a subscription of 10.36X by QIBs at the close of Day-3. QIB bids got bunched on the last day, although the anchor response had already indicated strong interest in the issue from institutional investors.
The HNI portion got subscribed 4.39X (getting applications for 243.09 lakh shares against the quota of 55.40 lakh shares). Considering the response on Day-3 for the HNI segment it looks like the funded applications were largely limited. Normally, the funded applications automatically get limited when the issue size is larger and subscription is limited.
The retail portion was subscribed 3.22X at the end of Day-3, showing strong retail appetite. For retail investors; out of the 129.28 lakh shares on offer, valid bids were received for 416.23 lakh shares, which included bids for 319.28 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.695-Rs712) and has closed for subscription on 01st October.
1) Aditya Birla Sun Life AMC IPO : 7 Things to Know About
Power Crisis a Huge Problem for the Global Economy
Even as the Evergrande crisis has become the highlight of all that is wrong with the China model, the country is facing another crisis at a macro level. That is the rampant power shortage in China. It is not just China, but even the UK and the countries in the European Union are facing an acute crisis of power. What is this crisis and why has it come about?
Like in many other industries, this is again a supply chain issue that has cropped up. An important input to power production, natural gas, has seen a sharp spike in prices in the last one year. This has made it tough to maintain power flows. Also, the sharp surge in demand in power post pandemic means that supply is just not equipped to handle it.
Some interesting, yet scary, facts are emerging from various countries. Fertilizer companies in Europe are forced to cut down output due to input shortage. That was evident as India’s farmers found themselves short of fertilizers during the Rabi season. In Europe, the concern is that energy demand could surge once the peak winter starts as home heating becomes a major source of power demand. That could only worsen the power shortage.
The sharp spike in coal has also impacted the thermal power generators. China is trying to cool its own power crisis by limiting exports of key inputs. This is having a cascading impact on power output in other countries too. But there are larger repercussions which will go much beyond just the power sector and that could be quite an intimidating reality.
China still relies on thermal plants to fire 70% of its power output and China is suffering from one of the world shortage. The tighter environmental regulations also impact fresh production of coal. The bigger challenge is for Europe where the peak winter demand is yet to begin. The power shortage could mean more shut factories across the world, more supply chain constraints and a freezing and long winter in Western Europe.