Torrent Power Acquires 100% stake in Surya Vidyut

Torrent Power acquires 100% stake in Surya Vidyut
by 5paisa Research Team 22/09/2021

Torrent Power, belonging to the Samir Mehta Group of Gujarat, has entered into a stock purchase agreement with CESC Ltd based in Kolkata. The agreement is to acquire 100% of Surya Vidyut Limited for a consideration of Rs.790 crore.

Surya Vidyut is 54% owned by CESC and 46% owned by Haldia Energy Ltd. However, since Haldia Energy is a 100% subsidiary of CESC, Surya Vidyut effectively becomes a 100% subsidiary of CESC.

CESC is part of the RP Goenka group which is headed by Sanjeev Goenka. Surya Vidyut is structured as a special purpose vehicle (SPV) and it owns 156 MW  of Wind Energy generation capacity. 

These wind energy plants are located across the states of Gujarat, Maharashtra and Madhya Pradesh. Since Torrent is based out of Gujarat, these plants also become contiguous to the geographical location of their core business interests.

It is not just the existing 156 MW capacity that is of interest but also the capacity that is currently under development. Additional renewable energy projects to the tune of 815 MW are currently under development for which the LOA has already been executed and the power purchase agreements (PPA) have been signed off for 515 MW of capacity.

For its existing capacity of 156 MW spread across Gujarat, Maharashtra and Madhya Pradesh, Surya Vidyut has existing 25 year PPAs with the state DISCOMS at an average weighted tariff of 4.68 per KWH.
Most of the large power companies ranging from NTPC to Tata Power and the Adani group are heavily investing in renewable energy to improve the green mix in their power portfolio. That is what most of the power companies are currently trying to do.

For Torrent, which is a key player in the power sector in Gujarat, a big renewable shift will help reduce their carbon footprint and help improve their valuations overall. The Torrent group of Gujarat is already a dominant player in pharmaceuticals, power as well as into gas distribution. 
 

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Paras Defence & Space Technologies IPO Subscription Day - 2

Paras Defence IPO subscription Day 2
IPO
by 5paisa Research Team 22/09/2021

The Rs.170.78 crore IPO of Paras Defence & Space Technologies consists of a fresh issue of Rs.140.60 crore and an offer for sale or OFS of Rs.30.18 crore. The issue was heavily oversubscribed on Day-1 itself and further built up on Day 2. As per the combined bid details put out by the BSE, Paras Defence & Space Technologies IPO was subscribed 40.57X overall at the end of Day-2 of the IPO. The bulk of the demand came from retail segment followed by HNI segment. The issue closes on Thursday, 23rd September.

As of close of 22nd September, out of the 71.41 lakh shares on offer in the IPO, Paras Defence & Space Technologies saw bids for 2,896.93 lakh shares. This implies an overall subscription of 40.57X. The granular break-up of subscriptions were tilted in favour of retail investors but HNI investors have been surprisingly robust on the first two days of the IPO, while even the QIB portion got more than fully subscribed by end of Day-2. QIB bids typically surge only on the last day of the IPO.
 

Paras Defence & Space Technologies IPO Subscription Day-2

 

Category

Subscription Status

Qualified Institutional Buyers (QIB)

1.67 Times

Non Institutional Investors (NII)

26.32 Times

Retail Individuals

68.57 Times

Employees

N.A.

Overall

40.57 times


QIB Portion

The QIB subscription was subscribed 1.67 times at the end of Day-2. On 20 September, Paras Defence & Space Technologies did an anchor placement of 29.275 lakh shares at the upper end of the price band of Rs.175, raising Rs.51.23 crore. The list of QIB investors including a number of marquee names like Ashoka India Equity, Abakkus Emerging Opportunities Fund, Saint Capital, Nippon India Fund and HDFC Mutual Fund. 

The QIB portion (net of anchor allocation) has a quota of 20.18 lakh shares of which it has got bids for 33.61 lakh shares, implying a subscription ratio of 1.67X for QIBs at the end of Day-2. QIB bids typically get bunched on the last day, but anchor response hints at solid interest levels.

HNI Portion

The HNI portion got subscribed 26.32X (getting applications for 404.57 lakh shares against the quota of 15.37 lakh shares). This is a surprisingly robust response on Day-2 and could be due to the small size of the IPO. Bulk of the funded applications and corporate applications, come in on the last day, so the actual picture will get better. 

Retail Individuals

The retail portion was subscribed a whopping 68.57X at the end of Day-2, showing strong retail appetite. For retail investors; out of the 35.86 lakh shares on offer, valid bids were received for 2,458.76 lakh shares, including bids for 1,861.27 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.165-Rs175) and closes on 23rd September.
 

Also Read:-

Paras Defence IPO - 7 things to know

Upcoming IPOs in 2021

Upcoming IPOs in September 2021

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Steel Minister Calls for Cost Reduction Road map

Ministry of Steel
by 5paisa Research Team 22/09/2021

If one thing is hitting Indian industry and infrastructure hard, it is the price of steel. In the last one year, the price of Steel Rebars on the London Metal Exchange are up nearly 61%. It impacted major steel user industries like construction, automobiles and consumer durables. Not surprisingly, the Steel Minister, Ram Chandra Prasad Singh has asked steel companies to evaluate cost structures and target price reduction in next 6 months.

The problem is the cost structure does not offer much leeway. The Indian steel Industry is the second largest in terms of annual production after China. There are two technologies that Indian steelmakers deploy for manufacturing steel viz. Blast Oxygen Furnace (BOF) method and Electric Arc Furnace (EAF) method. The BOF method is more popular in India and accounts for nearly 75% of the steel produced domestically.

The table below captures the approximate cost mix of manufacturing one tonne of steel using the Blast Oxygen Furnace Method.
 

Cost Input

Share of Steel Cost

Iron Ore (including transport)

52%

Coking Coal (including transport)

22%

Steel Scrap

10%

Fluxes, industrial gases, ferro alloys

10%

Labour, electricity etc

6%


Data Source: Steelonthenet.com

The two major influencing factors in the cost of steel are iron ore and coking coal. Iron Ore prices are largely linked to global prices and if domestic prices are set too low then iron ore producers like NMDC will be incentivized to export iron ore. In the steel making process, coking coal is important as it is the primary reducing agent for iron ore.

The minister has made an interesting point about using pulverised coal injection to reduce the use of coking coal, which is mainly imported. What he means is that by injecting fine coal particles into the blast furnace, it is estimated that the use of coking coal can be reduced by almost 30%. That would be a good strategy, although the economics and government support for the same will hold the key.

The use of PCI technology will suit large integrated steel players like Tata Steel, JSW Steel and SAIL by reducing cost meaningfully.

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BTST Trading Tips for Today: 23rd September, 2021

BTST Trading Tips for Today: 23rd September, 2021
22/09/2021

5paisa analysts bring the best intraday ideas, short-term ideas and long-term ideas for you. In the morning we provide best momentum stocks to buy today, while in the last trading hour we provide buy today sell tomorrow (BTST) ideas.

BTST Trading Ideas for Today
 

1. BTST : SBILIFE SEP FUT

- Current Market Price: Rs.1217

- Stop Loss: Rs.1202

- Target: Rs.1250

 

2. BTST : LT SEP FUT

- Current Market Price: Rs.1,771

- Stop Loss: Rs.1,760

- Target: Rs.1,795

 

3. BTST : APOLLOHOSP SEP FUT

- Current Market Price: Rs.5,086

- Stop Loss: Rs.5,045

- Target 1: Rs.5,140

- Target 2 : Rs.5,195

 

4. BTST : RELIANCE SEP FUT

- Current Market Price: Rs.2,483

- Stop Loss: Rs.2,472

- Target: Rs.2,512

 

5. BTST : LALPATHLAB

- Current Market Price: Rs.4,046

- Stop Loss: Rs.4,015

- Target 1 : Rs.4,090

- Target 2 : Rs.4,125

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Sansera Engineering IPO - Grey Market Premium

Sansera Engineering IPO - Grey Market Premium
IPO
by 5paisa Research Team 22/09/2021

The Rs.1,282.98 crore offer for sale of Sansera Engineering IPO had been priced in the band of  Rs.734 to Rs.744 per share. The issue had closed on 16-Sep and the basis of allotment had been finalized on 21-Sep. With demat credits to eligible shareholders on 23-Sep, the stock is slated to get listed on the bourses on 24-Sep, Friday. Ahead of listing, one of the key information metrices of evaluating the potential listing is the grey market premium (GMP). 

While the GMP is not an official price point, it is a popular informal price point. That is a good gauge of informal demand and supply for the IPO and gives a broad idea of how the listing is likely to be and how the post-listing performance is likely to be. While the GMP is just an informal approximation, it is generally observed to be a good reflection of the real picture. More than the actual price, it is the GMP trend that matters. 

One of the key factors that impacts the GMP is the extent of oversubscription and the Sansera Engineering issue was oversubscribed 11.47 times overall. On a granular basis, it was the QIB segment that saw 26.47X subscription while the other two segments were relatively lower. That has surely made the GMP premiums quite muted in the informal trading market. 

Check Sansera Engineering IPO Subscription

As per updates on Thursday, 22-Sep, the Sansera Engineering IPO is commanding a premium of Rs.38-40 range on the issue price. The GMP was steady at around Rs.35 for the previous 3 days but on Thursday, the stock GMP has spiked sharply to the range of Rs.38-40. The GMP did see a spike after the sterling response to the Paras Defence IPO

That translates into a 5.4% premium over the issue price of Rs.744 at the upper end of the price band. Also, it hints at a listing price of approximately Rs.784 when the stock lists on Friday 23-Sep. Of course, subsequent price performance will depend on the selling pressure that emerges during the day. 

 

Also Read:-

Sansera Engineering IPO - 7 Things to Know

Upcoming IPOs in 2021

Upcoming IPOs in September 2021

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Kubota Corp to increase its Stake in Escorts Ltd

Kubota Corp to increase its Stake in Escorts Ltd
by 5paisa Research Team 22/09/2021

The Nanda family has been looking at monetizing its stake in Escorts Ltd for some time now and the first step may have been just about been taken. The buyer, Kubota Corp of Japan, may look to increase its stake from 9.9% to 15% in the first stage and then will look to take a control stake in the company. It will begin with acquiring the stake held by the promoters (Nanda group) in Escorts Ltd.

Escorts Ltd is one of the fastest growing tractor and agricultural equipment manufacturers in India. In the last 2 months, the stock is up 33% from Rs.1,137 to Rs.1,523. Between late 2015 and 2021, Escorts has been a 10-bagger, appreciating from Rs.159 to Rs.1523. Kubota is a leading Japanese agriculture and heavy equipment company with a market cap of $27 billion and is almost 10 times the size of Escorts.

Check:  Big Bull Rakesh jhunjhunwala 's holding in Escorts

The Nikhil Nanda group holds a total of 36.59% in Escorts. In March 2020, Kubota of Japan had acquired 9.9% stake in Escorts through preferential offer. Out of the Nanda family holdings, nearly 25% is held in the names of the Escorts Benefit and Welfare Trust. Buying out the promoter stake in Escorts gives a substantial stake to Kubota and they would eventually look to take a controlling stake in the company.

For Kubota Corp, Escorts offers the perfect fit. Kubota has aggressive plans in the Indian agricultural sector and Escorts fits in perfectly. After all, Escorts is the fourth largest tractor manufacturer in India with a market share of 11.3%. Interestingly, Kubota’s stake buy in Escorts last year via preferential issue was at a price of Rs.850, so the stock has nearly doubled from that price.

The Indian agricultural sector has been growing at 3.5% to 4% in the last 2 years and has been robust even through the pandemic. As Indian farms mechanize, Kubota sees a huge opportunity in the Indian agri sector. The Escorts acquisition surely fits in, although Kubota is yet to confirm its intentions by way of a statement.

 

Also Read: 

Stocks to Benefit from Good Monsoon