Tamilnad Mercantile Bank files DRHP for proposed IPO
Tamilnad Mercantile Bank (TMB), is one of the oldest banking institutions in South India with a pedigree of more than 100 years. Now, Tamilnad Mercantile Bank has filed its draft red herring prospectus (DRHP) with SEBI for its proposed Rs.1,000 crore IPO. TMB is a profitable bank with gross NPAs well under control. It has a fairly strong base in semi-urban and rural segments of the state of Tamil Nadu.
The issue will predominantly be a fresh issue with a very small component of OFS by some of the early investors. In fact, out of the total offering of 1,58,40,000 (1.584 crore) shares, the fresh issue of shares will be 1,58,27,495 shares. In other words, 99.9% of the total IPO is a fresh issue and the OFS will just consist of 12,505 shares. The total size of the issue is estimated to be Rs.1,000 crore.
The bank’s financials have shown good traction in the financial year FY21. For example, net profits were up 48% at Rs.603 crore as compared to Rs.408 crore in FY20. The company also saw its deposit base grow by 11% to Rs.40,970 crore. The bigger progress was on the asset quality front.
The gross NPAs fell from 3.62% to 3.44% in FY21 and the bank has not seen any substantial slippage in the asset quality numbers. However, the IPO proceeds will be used to boost the capital adequacy ratio to be in sync with their aggressive asset book expansion plans.
Unlike most South-based smaller banks, TMB does not have any identifiable promoter family and the business is managed by professional managers. The company is yet to finalize the terms of the issue which will be done only after the SEBI approval is received.
TMB IPO will have 75% allocation to QIBs, 15% to Non-Institutional Investors and only 10% to retail investors. The issue will be lead managed by Axis Capital, Motilal Oswal and SBI Caps while Link Intime will be the registrars to the IPO.
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UCO Bank Partners with Fisdom for Wealth Management
Kolkata based UCO Bank has partnered with Fisdom, the wealth start-up operated by Finwizard Technology, for offering wealth management products to its clients. UCO Bank is one of the few surviving PSU banks after the spate of mergers that the government had piloted in the last 3 years. Fisdom is a wealth management products platform, which offers mutual funds, insurance and pension products along with research and content support.
The partnership will allow UCO Bank to offer the wealth management products on the Fisdom platform to its banking customers through the m-banking app. Customers of UCO Bank will have a more organized way to plan their finances with mutual funds and other financial products with the Fisdom platform integrated into the UCO banking application. In a way, it offers an integrated experience of banking and wealth nurturing.
For UCO Bank it becomes a product extension to the existing customer base. In the last two years, there has been a surge in equity and mutual fund investors with millions of new demat accounts and SIP accounts being opened. This agreement will allow UCO Bank to capitalize on this trend by offering the add-on wealth product offerings to banking clients.
With the number of banks reducing by merging into larger sized banks, the onus is on each bank to deepen their relationship with their existing customers to improve ROI. The digital nature of the product allows them to scale up their offerings at minimal cost.
For Fisdom, the partnership provides them the much needed banking partnership which is the key to offering wealth management products on a much wider platform. For Fisdom, this is an opportunity to offer a largely customized wealth management experience to the large mass of UCO Bank customers.
To begin with, it does look like a symbiotic relationship in which the bank gains from the customer deepening experience and the platform gains from the banking customer access.
Energetic Rally in the IRCTC Stock
When we talk of ecommerce value creators, the first names that come to our mind are Flipkart, Byju’s, Zomato and Paytm. There was been one listed ecommerce ticketing player doing phenomenally well since its listing in Aug-19. IRCTC came out with its IPO at Rs.320 and got listed in mid-August 2019. Over the last 2 years, the stock price has grown 10-fold from Rs.320 to Rs.3,295, an incredible 221% CAGR.
In the last 10 months since November 2020, IRCTC has grown 2.55 times from Rs.1,290 to Rs.3,295. What triggered such a sharp bounce at a time when Sensex gave around 30% returns? There are 3 factors that can explain this rally since the lows of November 2020.
1) The rapid opening up of economic activity, post COVID 2.0, is likely to be a big boost. It is expected that by December the vaccination process should be done and rail activity should resume in totality. That is a big boost to IRCTC.
2) The National Monetization Plan worth Rs.600,000 crore will entail intense private participation in highways and railways. IRCTC will not be constricted by the monopoly of the Indian Railways as private trains will give a big boost to IRCTC.
3) Lastly, there is a huge investment planned in rail infrastructure and that would mean greater efficiency in the railway network and deeper business prospects for IRCTC. All these factors helped the IRCTC stock in the last 10 months.
Don’t forget the Zomato effect
Most people may not have noticed this, but just look at the performance of IRCTC since the day of Zomato listing on 23rd July. IRCTC is up 42% since the day of Zomato listing. What is the link? It shows that IRCTC with its incredible digital reach may actually be a very cheap franchise on the digital edge that it holds. That could unfold in the coming months.
Sansera Engineering IPO - 7 Things to Know
The 40 year old auto component company, Sansera Engineering IPO, will open on 14 September and the issue will close for subscription on 16 September.
Here are 7 things you should know about the IPO about Sansera Engineering IPO
1) Sansera Engineering manufactures precision parts for automobiles and other industrial uses. Its main customers are original equipment manufacturers (OEM). It is a global leader in supply of connecting rods and has 15 operational plants across India.
2) In terms of revenues mix, 88.5% of its revenues come from the auto components business with the balance coming from the industrial precision segment. Sansera derives 65% of its revenues from India and 35% from abroad.
3) For the fiscal year ended Mar-21, Sansera reported revenues of Rs.1,572 crore and net profits of Rs.109.86 crore. The pandemic had impacted revenues in FY20 but FY21 has seen largely normalized revenues.
4) Sansera Engineering brings strong design and engineering capabilities and its diversified portfolio across auto components and industrial components fairly de-risks its business model. It also spreads its risk between domestic and international markets.
5) The entire IPO will be an offer for sale with promoters and early investors offering a total of 1,72,44, 328 shares in the price band of Rs.734 to Rs.744. At the upper end of the price band, the issue will be worth Rs.1,282.98 crore.
6) The book built IPO has a face value of Rs.2. Retail investors can apply in lots of 20 shares up to a maximum of 13 lots representing 260 shares of Sansera Engineering. The issue has allocated 50% for QIBs, 15% for HNIs and 35% for retail investors.
7) The issue will be lead managed by ICICI Securities, IIFL Securities and Nomura Financial Advisory. The registrar to the IPO will be Link Intime India.
The OFS will basically enable Sansera Engineering to list on the exchange and also arrive at a market driven valuation of its business.
Record Premium Collections by Private Life Insurance Companies in Aug-21
Jul-21 was a month of 11% contraction in life premiums but new business premiums (NBP) bounced back to 2.88% growth in Aug-21. Interestingly, while LIC reported lower premiums in Aug-21 comparable to last year, the premium collections of private insurers was sharply higher YoY. Much of this growth came from ULIPs and protection products.
The bigger story was the dichotomy between private insurers and LIC. During Aug-21, the total NBP mop-up was up 2.88% YOY at Rs.27,821 crore. Big daddy LIC saw the NBP falling by -3.82% in Aug-21 to Rs.18,961 crore. However, private insurers saw new business premiums grow by an impressive 20.94% yoy to Rs.8,860 crore.
This is the highest levels of premium collected by private insurers in a month. Private insurers also compensated for the fall in LIC premium collections so the life insurance industry overall ended with growth of 2.88%. For FY22 (Apr-Aug), LIC saw NBP premiums taper by -6.75% YOY while private insurers saw premiums grow 23.05%. As a result, overall NBP premiums FY22 (Apr-Aug) was up 1.62%.
How the Big four private insurers stacked up in Aug-21?
1) SBI Life Insurance: The second largest private insurer reported 24% growth in NBP flows for Aug-21 YOY. However, Aug-21 premiums were up 74% compared to the average for first 4 months of FY22.
2) ICICI Prudential Life: The third largest private insurer reported 43% growth in NBP flows for Aug-21 YOY. However, Aug-21 premiums were up 37.5% compared to the average for first 4 months of FY22.
3) HDFC Life Insurance: The largest private insurer reported muted -6% fall in NBP flows for Aug-21 YOY. However, Aug-21 premiums were up 22% compared to the average for first 4 months of FY22.
4) Max Life Insurance: Max reported 16.5% growth in NBP flows for Aug-21 YOY. However, the Aug-21 premiums were up 34.8% compared to the average for first 4 months of FY22.
Rupee weakens over US Dollar - Currency Market Update
The Indian rupee had been static around Rs.73/$ for a long time. In the last two days i.e. 07 Sep and 08 Sep, the rupee has sharply weakened to Rs.73.58/$. That is a rather sharp weakening in less than two days.
Here are some factors that drove the rupee lower.
a) One of the main reasons was dollar demand from banks and corporates. This demand normally comes up when there are dollar payments due. This led to a spike in value of the dollar and weakening of the rupee.
b) An important reason has been the hardening of the dollar index. The Bloomberg Dollar Index (DXY) measures dollar value against a basket of hard currencies. DXY has been strengthening on hopes that taper will harden the dollar.
c) The dollar has taken cues from the US bond yields. In last 2 weeks, the US bond yield have gone up from 1.23% to 1.36%. This indicates that bond markets are pricing a rate hike by the Fed, which buoyed the dollar.
d) The weakness against dollar is not just with INR, but most Asian currencies. That is because, some portfolio managers are again getting into long-dollar trade, which is likely to put pressure on emerging markets like India.
e) Portfolio flows have also been a factor. After being equity buyers last week, FPIs withdrew $750 million on 06 Sep and 07 Sep. That kind of selling by FPIs has also put pressure on the dollar.
f) Portfolio managers are beginning to express valuation concerns on India with Buffett Ratio shooting up sharply and the India premium over EM valuations at its highest.
The good news is that exporters are selling dollars around 73.70/$ and that could cap the rupee weakness. Clearly, the pressure is visible on the INR after it had appreciated in the last 2 months from 75 levels to 73 levels.