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Vedanta May Look to Demerge its Commodity Businesses

Vedanta May Look to Demerge its Commodity Businesses
by 5paisa Research Team 18/11/2021

At a time when metal companies have been having the time of their life, one of India’s largest commodity players, Vedanta, has not really outperformed. For Vedanta, it looks like the answer may be to restructure the business in order to deliver extra value to shareholders.

While the broad focus is on restructuring its business, Vedanta may be specifically looking to demerge 3 of its key businesses into separate listed entities.

Vedanta chairman, Anil Agarwal, believes that the Vedanta group has a Hindalco, JSW Steel and an Exxon hidden within his group. The need of the hour is just to demerge these businesses and let each business discover its own value as an independent units.

The concept of SOTP (sum of total parts) is nothing new. This is the reverse situation where the parts are estimated to be worth a lot more than the whole.

Getting to specifics, it is reported that Vedanta may look to hive off its aluminium business, oil & gas business and the Iron & steel business into 3 separate entities. Of course, the core Vedanta may still retain some of the business like the stake in Balco, Hindustan Zinc and the chrome business.

The plan is that the existing shareholders of Vedanta will be issued shares in each of the separate entities against their current holdings in Vedanta.

Historically, Vedanta has always grown by inorganic acquisitions. Over the last 2 decades, Vedanta has acquired a majority stake in a host of companies in India including Balco, Hindustan Zinc, Sesa Goa, Cairn India, Electrosteel, Madras Aluminium etc.

Having integrated most of these entities into Vedanta, it is now looking to separate these companies into separate entities to deliver better shareholder value.

The emerging thought process is that separating these companies based on their core activity would enable sharper business focus, better allocation of capital and more flexibility to drive long term growth.

This will allow the group to separate the capital intensive businesses from the capital light businesses so that ROI can be properly demarcated.

The company has been keen to generate value to shareholders. In the last few years, the group had taken a hit on account of corporate governance issues at the UK based holding company.

Subsequently, Anil Agarwal had tried to delist Vedanta from the stock exchanges at the bottom of the commodity cycle by buying out the shareholders. That had got stuck after LIC had rejected the price. This is one more attempt at value creation.

Also Read:- Vedanta to make a $20 billion capex bet on commodities

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Go Airlines (India) IPO - 7 Things to Know About

Go Airlines (India) IPO - 7 Things to Know About
by 5paisa Research Team 20/11/2021

One of India’s major air carriers, Go Airlines, is planning to hit the IPO market. While the DRHP had been filed some time back, it has just filed an addendum to the DRHP which includes some additional items of payment in the utilization of fresh funds. The entire IPO will be a fresh issue.
 

Here are Seven Interesting Facts to Know About Go Airlines IPO


1. The Go Airlines, part of the Nusli Wadia group, has been flying domestically in India for nearly 17 years now. As per the latest numbers put out by the Directorate General of Civil Aviation (DGCA), Go Airlines had a market share of passengers at 9%.

This puts them almost at par in terms of market share with Vistara, Spice Jet and Air India.

2. Go First, formerly Go Air, is the core business of Go Airlines Ltd. It plans to hit the IPO market with a fresh issue of Rs.3,600 crore. There will be no OFS component in the IPO and the entire IPO amount will result in fresh inflows of funds into the company and also dilute equity.

The public issue is reported to open on 08-December.
 

3. Go Airlines has a fleet inventory of 56 aircraft and covers about 28 domestic and 9 international routes. It is gradually coming back from a testing 2020 and first half of 2021 when airlines had been asked to operate at skeletal capacity.

This meant inadequate absorption of fixed costs resulting in huge losses.

4. The company has been consistently making losses but the losses sharply widened in 2020 and 2021 due to a sharp fall in aircraft churn.

In the first half of FY22, the company has already reported a net loss of Rs.923 crore so the overall losses could widen for FY22 as the CASK (cost per average seat kilometer) continues to be much higher than the RASK (revenue per average seat kilometer).

5. The company has accumulated substantial debt and lease outstanding and it will use the proceeds of the IPO to reduce the same. It will prepay loans, replace letters of credit to secure lease payments and pay fuel supply dues to IOCL.

In the addendum, it also added payment of outstanding lease rentals to lessors and payables for MRO activity.

6. In the first half of FY22, revenues doubled YoY to Rs.1,202 crore on better capacity utilization. Domestic passenger traffic is expected to grow at 45-50%, so even if Go Air maintains its market share, it will still see a spike in its top line revenues.

7. The issue will be lead managed by Citigroup Global, ICICI Securities and Morgan Stanley India. Link Intime will be the registrars to the IPO.

Also Read:- 

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Upcoming IPOs in November 2021

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API Holdings (PharmEasy) IPO - 7 Things to Know

API Holdings (PharmEasy) IPO - 7 Things to Know
by 5paisa Research Team 20/11/2021

Over the last few months, a number of extremely popular digital brands have hit the market and these include Zomato, Paytm, Nykaa and Policybazaar. One more such unicorn to tap the IPO market is API Holding Ltd. While the name of the parent company may not be well known, its online brand, PharmEasy, is one of the most popular retail brands.
 

Seven things to know about the API Holdings (PharmEasy) IPO


1. PharmEasy has already filed its draft red herring prospectus with SEBI for its proposed Rs.6,250 crore IPO. The entire issue will be by way of fresh issue and the promoters or the early investors do not intent to dilute their existing holdings, although their stake would reduce overall due expansion of the capital base.

2. As one of India’s leading digital pharmaceutical platforms, API Holdings (PharmEasy) has marquee investors on its roster including Prosus Ventures, TPG Growth, Temasek, CPDQ, LGT Lightrock, Eight Roads and Think Investments. Existing shareholders are not reducing their holdings at this point of time.

3. Out of the fresh issue of Rs.6,250 crore proposed to be raised in the IPO, API Holdings (PharmEasy) would look to raise around Rs.1,250 crore via private placement as part of its pre-IPO fund raising.

Check - PharmEasy parent API Files for DRHP for IPO

If that round is successful, the final size of the IPO would be reduced to that extent. This would be done post the SEBI approval and before RHP filing.

4. API Holdings (PharmEasy) has identified the applications of its fresh funds. It will use Rs.1,930 crore for reducing its current debt. In addition, the company will use Rs.1,260 crore to fund organic expansions and another Rs.1,500 crore to fund its inorganic expansions via niche mergers and acquisitions as opportunities arise.

5. Interestingly, API Holdings (PharmEasy) has seen its revenues grow exponentially on YoY basis. Between FY20 and FY21, total revenues of PharmEasy grew 3.5 times to Rs.2,335 crore.

The company has already reported revenues of Rs.1,197 crore in the Jun-21 quarter, so FY22 promises to be another year of heady growth in the top line.

6. API Holdings (PharmEasy) reported net loss of Rs.645 crore in FY21, nearly twice the losses in the previous year. It has already reported Rs.335 crore loss in Q1 so FY22 promises wider losses.

However, what matters in this business is the gross merchandise value (GMV), which has grown 2.5 times at Rs.787 crore in FY21.

7. The issue will be lead managed by Kotak Mahindra Capital, Morgan Stanley, BOFA Securities, Citigroup Global and JM Financial who will joint act as the book running lead managers to the issue.

Also Read:- 

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Veranda Learning Solutions IPO - 7 Things to Know About

Veranda Learning Solutions IPO - 7 Things to Know About
by 5paisa Research Team 20/11/2021

One of the big success stories during the pandemic has been the online learning companies. Big names like Byju’s, Simplilearn and Vedantu have all seen their valuations grow manifold as students across the board increasingly opted for online learning. One more company from the online learning fold tapping the IPO market is Veranda Learning Solutions Ltd.
 

Here are Seven things to know about Veranda Learning Solutions IPO


1. Veranda Learning Solutions Ltd has filed preliminary papers (DRHP) with SEBI for its proposed IPO. The IPO size is small at just around Rs.200 crore and the issue will be entirely by way of a fresh issue of funds.

Thus fresh funds will come into the company and there will also be overall equity dilution.

2. Veranda is also considering a private placement of shares worth Rs.50 crore. This exercise will be taken up after the SEBI approval comes through and before filing the RHP with the Registrar of Companies.

If the pre-IPO placement is successful, then the company will reduce the size of its IPO to that extent.

3. The proceeds of the IPO will be used for repaying its debt and also retiring the acquisition consideration of Edureka. This was an acquisition made by Veranda in the month of September 2021 to supplement its learning offerings online and offer it to a much wider international audience.

4. In September this year, Veranda Learning Solutions acquired 100% in Brain4ce Education Solutions from Edureka. As per the share purchase agreement signed with Edureka, the acquisition will allow Veranda Learning Solutions to expand its learning content offerings on the software education front to the US and also to the UK.

5. Veranda provides its services through four subsidiaries. Veranda Race Learning Solutions is into digital software training. Veranda XL Learning Solutions offers the most comprehensive Chartered Accountancy training for intermediate and final levels.

Veranda IAS Learning Solutions is aimed at aspiring IAS officers while Brain4ce Education Solutions, is the Edureka acquisition for the global markets of US and UK.

6. Veranda has a wide business matrix offering its palate of learning solutions to students, professionals and corporate employees.

The training courses have long-term and short-term preparatory courses to prepare for UPSC Exams, SPSC exams, Staff Selection Commission, Banking, Insurance, Railways and Chartered Accountancy.

7. The issue will be lead managed by Mumbai based Systematix Corporate Services. The size of the IPO is quite small but online learning is one of the fastest growing and robust business models currently in India.

Also Read:- 

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Upcoming IPOs in November 2021

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Five Star Business Finance IPO - 7 Things to Know

Five Star Business Finance IPO - 7 Things to Know
by 5paisa Research Team 20/11/2021

Chennai based Five Star Business Finance Ltd has filed its DRHP with SEBI for its proposed IPO. The Rs.2,752 crore IPO will entirely be an offer for sale by the existing shareholders.

Hence, there will be no fresh funds coming and no dilution of equity. The intent of the IPO is to list the stock for greater visibility and also as a potential future currency.
 

Here are seven things to know about the Five Star Business Finance IPO


1. The Rs.2,752 crore IPO of Five Star Business Finance will entirely be by way of offer for sale. Five Star Business Finance was originally set up as an NBFC in the year 1984 and caters to the small lending segment in the market, with focus on entrepreneurs and self-employed persons.

2. Currently, over 54% of Five Star Business Finance is held by 4 major PE investors. For instances TPG Asia holds 20.99% while Matrix Partners holds 14%.

Among other key investors, Norwest Venture owns 10.22% in Five Star Business Finance while SCI Investments holds a significant 8.83% stake in the company.

3. Most of the large holders will participate in the OFS to partially monetize their stake. Out of the total Rs.2,752 crore OFS, TPG Asia will sell Rs.1,350 crore, Matrix Partners will sell Rs.568 crore, Norwest Ventures Rs.386 crore and SCI Investments Rs.257 crore.

Promoters entities will sell around Rs.181 crore between them in the OFS.

4. Five Star Business Finance is based out Chennai and has leadership focus in South India. Since 2005, it provides secured business loans to small entrepreneurs and self-employed individuals, outside the purview of existing banks and financial institutions.

Most loans are secured by self-occupied residential property to reduce chances of default.

5. Five Star witnessed enviable growth . It has growth in last 2 years from 173 branches to 268 branches. Over last 4 years, live accounts have grown 12-fold to 1.92 lakhs.

While Five Star has presence in 8 states and 126 districts, nearly 95% of its portfolio is located in the 4 states of Tamil Nadu, Karnataka, Andhra Pradesh and Telangana.

6. Financial numbers have also been impressive for Five Star. For FY21, total income grew 34% at Rs.1,051 crore while net profits were up 37% at Rs.359 crore. Its assets under management or AUM currently stands at Rs.4,445 crore and has grown at a CAGR of 86% in last 5 years.

7. The IPO will be lead managed by ICICI Securities, Kotak Mahindra Capital, Edelweiss Financial and Nomura Financial Advisory, as book running lead managers.

Also Read:- 

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Droom Technology IPO - 7 Things to Know About

Droom Technology IPO - 7 Things to Know About
by 5paisa Research Team 20/11/2021

Like CarTrade, which had listed on the stock exchanges post its IPO about 3 months back, Droom Technology is also a reputed agnostic platform to buy and sells cars and bikes. Droom Technologies has now filed its DRHP with SEBI for its proposed IPO.
 

Here are seven interesting facts to know about Droom Technology IPO


1. Droom Technology is planning an IPO of Rs.3,000 crore comprising of a fresh issue of Rs.2,000 crore and an offer for sale of Rs.1,000 crore.

Droom is a digital start-up that offers an agnostic platform for buyers to leverage content, comparison and commerce.

2. Currently, the promoters, Sandeep Agarwal and Droom Pte Ltd, Singapore jointly hold 100% stake in Droom Technology. Droom will also look at a pre-IPO placement of Rs.400 crore ahead of the IPO, in which case the size of the IPO size would also be reduced proportionately.

Anchor placement will be done closer to the IPO opening. 

3. Founded in the year 2014, Droom counts amongst its key competitors, names like CarTrade, Cars24, CarDekho, Spinny etc. Of these only CarTrade is listed.

However, CarTrade did disappoint post its listing and still quotes at about 30% discount to the issue price. That could be an overhang for Droom Technology.

Check - Droom Files DRHP for Rs.3,000 crore IPO

4. While the promoters, Droom Pte Ltd and Sandeep Agarwal, will participate in the offer for sale of Rs.1,000 crore, the fresh issue funds of Rs.2,000 crore will be deployed towards organic and inorganic initiatives.

Apart from expanding its presence and reach organically, Droom will also look at niche mergers and acquisitions in the space.

5. Droom has already raised funding twice in the past. In the first round, Droom raised $125 million from investors like Lightbox, Beenext, Digital Garage, Integrated Asset Management, Toyota Tsusho Corp etc.

In Jul-21, Droom also raised $200 million from some of the old investors and new investors like 57 stars and Seven Train Ventures.

6. The second hand car market has picked up solid traction in the last few years and a digital market place is the best fit. Most of the major agnostic automobile commerce portals report huge number of page view and  footfalls.

This is likely to assure rapid growth for the coming quarters.

7. The public issue of Droom Technology will be lead managed by ICICI Securities, Axis Capital, Edelweiss Financial, HSBC Securities and Nomura Financial Advisory as the book running lead manages to the issue.

Also Read:- 

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