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NSE Likely to Get Clearance from SEBI for Big Ticket IPO

NSE Likely to Get Clearance from SEBI for Big Ticket IPO
by 5paisa Research Team 16/11/2021

Nearly 5 years after the discussion of the NSE IPO began, it looks all set to see the light of day. It is reported that SEBI may finally give approval to NSE to go ahead and file for its IPO.

While the IPO size is yet to be ascertained, NSE is expected to command a valuation of more than Rs. 2 trillion. Currently, BSE and the MCX are the two exchanges that are already listed on the bourses.

The initial IPO plan of NSE was launched in the year 2016, just a couple of months before Mr. Ajay Tyagi assumed office as SEBI chairman.

However, subsequently, the data breach issue assumed serious proportions after which SEBI had asked NSE to withdraw their offer documents till the time the entire data breach issue was fully resolved. It was only in May 2019 that SEBI framed charges against senior NSE officials over the data breach.

SEBI has reportedly sought legal opinion on the subject and the opinion appears to be in favour of allowing NSE to go ahead with the IPO plans even though the case is still sub-judice. Since there is no stay order given by any court on the public issue, the legal opinion is in favour of allowing NSE to go ahead with the IPO plans.

SEBI had imposed a total penalty of Rs.1,000 crore on NSE, including disgorgement of losses caused to other traders and brokers due to the preferential treatment to a handful of brokers. The said order has been challenged by the NSE at the Securities Appellate Tribunal.

However, the reason there was no stay on the public issue was that NSE had not applied for the IPO. Now it remains to be seen, what is the response, although an approval is expected.

While the BSE was valued at a PE of 30-35 times, NSE is expected to get a much higher P/E in the range of 80-100 times considering its dominance in the futures and options space.

For the year ending Mar-21, NSE saw operating revenue grow by 60% at Rs.5,625 crore, while its net profits were up nearly 90% at Rs.3,574 crore. However, this profit figure may be misleading as a big chunk came from the sale of stake in the CAMS IPO last year.

NSE has marquee investors that includes domestic banks, institutions and global portfolio investors. Many have been waiting for the public issue for a partial exit from their holdings and monetizing part of their holdings. The actual IPO may still be some time away, the first challenge is getting the IPO approval.

Also Read:-

Upcoming IPOs in 2021

Upcoming IPOs in November 2021

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MSCI Additions and Deletions From 30-Nov

MSCI Additions and Deletions From 30-Nov
by 5paisa Research Team 16/11/2021

Morgan Stanley Capital International (MSCI), the largest provider of country specific indices to global portfolio managers, has announced a few interesting shifts in the MSCI Global Standard India Index. Here are the 7 stocks that are being added to the MSCI index effective from 30-Nov close and the 2 stocks that are going to be removed.
 

Stocks to be added:


1) Godrej Properties
2) IRCTC
3) Mindtree Ltd
4) Mphasis Ltd
5) SRF Ltd
6) Tata Power
7) Zomato Ltd


Stocks to be removed:


1) Rural Electrification Corporation 
2) IPCA Laboratories

The 7 stocks that are being added to the MSCI Global Standard India Index will result in net inflows of around $1.45 billion.

However, if you factor in the outflows due to the removal of REC and IPCA, then the net inflows from global fund managers would be to the extent of $1.25 billion. That is substantial flows that is expected as part of the rebalancing.


How exactly do these flows come about?


Some of the biggest participants in the Indian markets are global passive funds. Now, passive funds do not take view on specific stocks or sectors but on markets as a whole. They do it through representative indices.

One of the most popular benchmarks for these passive investors to allocate money to various countries is via these country specific indices offered by MSCI. It is estimated that  90% of the global fund managers allocated based on MSCI.

Passive funds broadly comprise of global index funds and global exchange traded funds or ETFs. These index funds and ETFs prefer the MSCI indices since they are created using a fine-tuned methodology considering liquidity at a micro and macro level.

This ensures that they are able to allocate large sums of money to such markets by just riding on these indices. The only consideration for such investors is the tracking error, which is monitored by MSCI.

It is not just about the MSCI inclusion. It is estimated that an MSCI inclusion normally is followed by inclusion in the FTSE world index too.

That would lead to further flows of capital. In addition, a slew of brokers, traders and investors also trade on these stocks ahead of the shift creating more liquidity in these counters.

Also Read:-

MSCI India Index Rebalancing

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How to Buy Bonds via the Retail Direct Scheme?

How to Buy Bonds via the Retail Direct Scheme?
by 5paisa Research Team 16/11/2021

For the investors who always wanted to participate in government debt but did not know how to do it, there will be this all new “Retail Direct Scheme”.

This scheme will facilitate retail investors to direct buy government securities and other government issued bonds through an online portal making the process simple and absolutely transparent. Investors just need to open a Retail Direct Gilt Account with the RBI.

The entire account opening and account operating process is online and the necessary KYC documents like your bank details, PAN card details, Aadhar card details, etc must be uploaded online.

A valid email id for registration and a valid mobile number for registration is mandatory for participation in the Retail Direct scheme.

Under the Retail Direct Scheme, investors have the choice of investing in 4 broad asset classes viz. dated government securities, short term treasury bills, state development loans (SDL) and sovereign gold bonds.

In the first 3 cases, the minimum investment will be Rs.10,000 and in case of sovereign gold bonds, the minimum investment will be 1 gram of gold. G-Secs can be bought in the primary auction or in the secondary market.

Individuals intending to buy government securities via primary auctions cannot place competitive bids. That means, they cannot specify the price at which they want to purchase the particular security. All bids by retail individuals have to necessarily be non-competitive only where the investors have to be price takers.

These securities bought through the retail direct scheme will be held in a specified gilt account with the RBI and not in your existing demat account.

However, in case you are already having government securities in your demat account, the same can be moved to the gilt account under the RBI Value Free Transfer (VFT) guidelines. Investors need to raise a request for the same in the online portal.

Also Read:-

Factors to Consider Before Investing in Bonds Directly

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RBI Bulletin Raises Questions on Indian Equity Valuations

RBI Bulletin Raises Questions on Indian Equity Valuations
17/11/2021

On 16-November, the sharp correction in the stock market was triggered by the concerns over factors like inflation, bond yields etc raising the spectre of the Fed front-ending rate hikes. It was also feared that if the Fed opted to front-end rate hikes, the RBI may be inclined to follow suit.

At Mint Street, the RBI has been expressing concerns about too much liquidity in the system. Its recent measures were aimed at absorbing Rs.50,000 crore liquidity from the bond markets.

It is in this light that the latest salvo came from the RBI bulletin, a monthly publication by the central bank. The November issue of the bulletin raised concerns over equity valuations.

The statement in the bulletin was quite clear. It said, “Reserve Bank of India remains concerned about India’s steep valuations.” Talking of the RBI concern, the statement added, ”The spectacular gains have raised concerns over overstretched valuations with a number of global financial service firms turning cautious on Indian equities".

RBI was obviously referring to international brokers who had downgraded Indian equities.

Over the last couple of months, a number of global banks like Morgan Stanley, Nomura and Citibank have raised concerns over Indian equity valuations. Recently, Goldman Sachs and CLSA also expressed concerns and downgraded Indian equities from “Overweight” to “Neutral”.

Their concern was that the rise in the MSCI India index was exponentially higher than the minor rise in the global indices or even the Asia indices.

RBI’s concern over equity valuations should be seen in the context of its recent measures to soak excess liquidity out of the system. One of the major concerns of the RBI was that the relentless global liquidity had led to most equity markets getting priced upwards.

India had got an inordinate share of the rally, raising real questions about whether the liquidity was really being channelled in the right direction.

The liquidity was an outcome of the measures taken by the RBI and the government to overcome the COVID-19 crisis. That was inevitable.

According to the RBI, the stretched equity valuations did raise questions over whether continued liquidity infusion was really justified or it was only stoking speculative spirits in the Indian market.

The other downside of liquidity that the RBI is worried about is inflation and that is evident in the core inflation figure at above 6% in October.

Equity valuations for the RBI were just an external symptom. The real issue was that the Indian economy was perhaps having to contend with more liquidity that it could really handle.

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Grey Market Premium of Tarsons Products Ltd IPO

Grey Market Premium of Tarsons Products Ltd IPO
by 5paisa Research Team 17/11/2021

The Rs.1,023.47 crore IPO of Tarsons Products Ltd consists of an offer for sale of Rs.873.47 crore and a fresh issue of Rs.150 crore. The issue had been priced in the band of Rs.635 to Rs.662 per share and the price discovery will depend on the IPO response. The issue opened for subscription on 15-Nov and closed for subscription on 17-Nov.

Most of the shares start trading in the grey market well ahead of the IPO opening, which offers important indicators. Ahead of the issue and ahead of listing, one of the key parameters for evaluating the potential IPO is the GMP or the grey market price.

A word of caution here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has proved to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance would be.

Check - Tarsons Products IPO - Subscription Day 3

While the GMP is just an informal approximation, it has been generally seen to be a good mirror of the real story. More than the actual price, it is the GMP trend over time that really gives the insights about the stock being upgraded or downgraded over a period of time and which direction the wind is blowing.

One of the key factors that impacts the GMP in most cases, is the extent of oversubscription, which is above 77 times in case of Tarsons. The GMP premiums will largely predicate on the extent of oversubscription in each of the categories. That would make the GMP premiums robust in the informal trading market.

As per updates coming in on Tuesday, 17-Nov, the Tarsons Products Ltd IPO is commanding a premium of Rs.200 over the issue price in the grey market. The GMP has spiked sharply in the last 5 days from Rs.150 levels to Rs.200 levels. Of course, this GMP will keep changing even after the issue closes on 17-Nov and till the date of listing.

The current GMP of Rs.200 for Tarsons Products Ltd IPO translates into a 30.21% premium over the upper price band of Rs.662. It also hints at an indicative listing price of approximately Rs.862 when the stock lists on 26th November, but this is subject to real time change.

GMP is an important informal indicator of likely listing price. However, investors must keep in mind that this is just an informal indication and has no official sanction.

Also Read:-

Tarsons Products IPO - 7 Things to Know

Upcoming IPOs in 2021

Upcoming IPOs in November 2021

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Tarsons Products IPO - Subscription Day 3

Tarsons Products IPO - Subscription Day 3
by 5paisa Research Team 17/11/2021

The Rs.1,023.47 crore IPO of Tarsons Products, consisting of a fresh issue of Rs.150 crore and an offer for sale (OFS) of Rs.873.47 crore, saw decent response on Day-1 and Day-2 of the IPO.

As per the combined bid details put out by the BSE at the close of Day-3, Tarsons Products IPO was subscribed 77.49X overall, with good demand coming from the HNI segment followed by the QIB segment and the retail segment with all the segment getting more than fully subscribed. The issue has closed on 17th November.

As of close of 17th November, out of the 108.44 lakh shares on offer in the IPO, Tarsons Products saw bids for 8,402.82 lakh shares. This implies an overall subscription of 77.49X.

The granular break-up of subscriptions was dominated by the HNI/NII segment followed by QIBs and retail in that order. However, the QIB bids and NII bids gathered momentum only on the last day, as is the general trend in the IPO market.
 

Tarsons Products IPO Subscription Day-3
 

Category

Subscription Status

Qualified Institutional Buyers (QIB)

115.77 Times

Non Institutional Investors (NII)

184.58 Times

Retail Individuals

10.56 Times

Employees

1.83 Times

Overall

77.49 times

 

QIB Portion

Let us first talk about the pre-IPO anchor placement. On 12th November, Tarsons Products did an anchor placement of 46,21,757 shares at the upper end of the price band of Rs.662 to 32 anchor investors raising Rs.305.96 crore.

Check - Tarsons Products IPO - Subscription Day 2

The list of QIB investors included a number of marquee global names like GIC Singapore, Monetary Authority of Singapore, First Sentier Investors, Theleme India Fund, Macquarie and Abu Dhabi Investment Authority (ADIA). Domestic anchor investors included Birla Mutual Fund, Sundaram MF, ICICI Pru MF, Kotak MF, L&T MF, Mirae MF, Reliance General Insurance; among others.

The QIB portion (net of anchor allocation as explained above) has a quota of 30.81 lakh shares of which it has got bids for 3,567.11 lakh shares on Day-3, implying a subscription ratio of 115.77X for QIBs at the close of Day-3.

QIB bids typically get bunched on the last day but the heavy demand for the anchor placement had indicated at a strong response for the Tarsons Products IPO subscription overall.

HNI / NII Portion

The HNI portion got subscribed 184.58X (getting applications for 4,265.48 lakh shares against the quota of 23.11 lakh shares). This is a relatively good response on Day-3 because this segment normally sees the maximum response bunched on the last day. Bulk of the funded applications and corporate applications, came in on the last day of the IPO.

Retail Individuals

The retail portion was subscribed an impressive 10.56X at the end of Day-3, showing decent retail appetite. It must be noted that retail allocation is 35% in this IPO. For retail investors; out of the 53.92 lakh shares on offer, valid bids were received for 569.13 lakh shares, which included bids for 431.37 lakh shares at the cut-off price.

The IPO is priced in the band of (Rs.635-Rs.662) and has closed for subscription on 17th November 2021.

Also Read:-

Tarsons Products IPO - 7 Things to Know

Upcoming IPOs in 2021

Upcoming IPOs in November 2021

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