What the FED Meeting Outcome Mean for Global and Indian Markets?

FED Meeting Outcome
by 5paisa Research Team 23/09/2021

When the meeting of the Federal Open Markets Committee (FOMC) concluded on 22nd September, nothing really conclusive was really expected. To that extent, the FED did not disappoint.

FED chair, Jerome Powell, refrained from making any commitment on the timelines of the taper or on interest rate hikes. However, Jerome Powell did indicate that the “Taper may soon be warranted”. That was as ambiguous as it could get.

There are two events that may have triggered this statement. Firstly, the US is still contending with the debt ceiling and is unlikely to make any commitment on taper till that is resolved.

Secondly, with Evergrande of China on the throes of bankruptcy, there is a pall of uncertainty surrounding global markets. The statement is intended to give the FED an escape route, should the global market situation worsen in the coming weeks.

The FED has constantly harped on two key factors to decide on the taper and the rate hike; inflation and full employment. For August, the headline inflation was 5.3% with core inflation at 4%, well above the FED target of 2% inflation.

However, FED considers this inflation spike driven by transitory factors and should taper once supply lines are restored. Joblessness at 5.2% is still way above pre-COVID rate of 3.5%, indicating lakhs of missing jobs.

Tapering will depend on substantial further progress on inflation and labour data. That is still elusive. Till the time joblessness gets to 3.5%, FED is unlikely to consider rate hikes and till the Evergrande issue and debt ceiling is resolved, there will likely be no tapering.

For global markets, it means a semblance of stability for now. India stands to benefit in 3 ways. Firstly, the liquidity flows will continue as tapering look still some time away with indications only likely in November.

Secondly, delayed tapering and rate hikes mean rupee will remain strong, or at least stable for the time being. Above all, it gives Indian economy more time to set itself on an assured growth path by year end.

In economics, quite often, doing nothing is the best decision. The FED appears to have perfected that art!

Also Read: Will the Indian Rupee be Under Pressure this Week?

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Data Patterns files DRHP for Rs.700 crore IPO

Data Patterns Files DRHP for Rs.700 Crore IPO
by 5paisa Research Team 23/09/2021

With the success of the Paras Defence IPO, there are likely to be more defence service companies that are likely to hit the market. The latest case is Data Patterns that has just filed its DRHP with SEBI for a proposed Rs.700  crore IPO. The IPO will comprise of Rs.300 crore raised by way of fresh issue plus an offer for sale (OFS) of 60.707 lakh shares by the promoters and other shareholders.

Promoted nearly 30 years back, Data Patterns, is a reputed defence service provider based out of Chennai. Its core strength areas include design and development across hardware, software, firmware, mechanical and product proto types. The company is also into functional testing and validation. Its solutions are used in the Tejas LCA, light utility helicopters, BrahMos Missiles, precision radars and electronic intelligence systems.

The client list of Data Patterns largely includes PSU defence companies as well as government advanced research organizations like the DRDO and ISRO. It also works with PSU defence companies like Bharat Electronics and Hindustan Aeronautics, among others. Its order book stood at Rs.178 crore in 2018 and has since grown rapidly to touch a level of Rs.582 crore in the month of August 2021.

For the financial year ending FY21, the company reported revenues of Rs. 224 crore and net profits of Rs.56 crore implying a healthy net profit margin of 25%. The profits have grown nearly 2.5 times on a YoY basis. Data Patterns has gained immensely from the government decision to in-source as much as feasible of defence orders domestically as part of its Make in India and Atma Nirbhar programs.

The promoters of the company hold 59.95% stake in the company before IPO and the company is backed financially by Florintree Capital Partners. Incidentally, Florintree Capital was floated by Matthew Cyriac, the former India head of Blackstone Capital. He was one of the early investors in the company.

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Paras Defence & Space Technologies IPO Subscription Day 3

Paras Defence & Space Technologies IPO Subscription Day - 3
IPO
by 5paisa Research Team 23/09/2021

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 fully subscribed on Day-1 itself and by the end of Day-3 it was heavily oversubscribed. As per the combined bid details put out by the BSE, Paras Defence & Space Technologies IPO was subscribed 304.26X overall at the close of Day-3 of the IPO. The bulk of the demand came from the HNI segment followed by QIBs and retail. The issue closed on Thursday, 23rd September.

Check: Paras Defence & Space Technologies IPO Subscription Day-2

As of close of 23rd September, out of the 71.41 lakh shares on offer in the IPO, Paras Defence & Space Technologies saw bids for 21,726.32 lakh shares. This implies an overall subscription of 304.26X. The granular break-up of subscriptions saw all the 3 segments robust at the close of Day-3. QIB bids surged on the last day of the IPO.

Paras Defence & Space Technologies IPO Subscription Day - 3
 

Category

Subscription Status

Qualified Institutional Buyers (QIB)

169.65 Times

Non Institutional Investors (NII)

927.70 Times

Retail Individuals

112.81 Times

Employees

N.A.

Overall

304.26 times

 

QIB Portion

The QIB subscription was subscribed 169.65 times at the close of Day-3. 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 3,423.38 lakh shares, implying a subscription ratio of 169.65X for QIBs at the close of Day - 3. QIB bids, as usual, got bunched on the last day but the net impact was still positive.

HNI Portion

The HNI portion got subscribed 927.70X (getting applications for 14,257.44 lakh shares against the quota of 15.37 lakh shares). This issue saw robust response from Day-1 and this phenomenal response could be due to the small size of the IPO. Bulk of the funded applications and corporate applications came in on the last day.

Retail Individuals

The retail portion was subscribed a whopping 112.81X at the close of Day-3, showing strong retail appetite. For retail investors; out of the 35.86 lakh shares on offer, valid bids were received for 4,045.49 lakh shares, including bids for 3,066.90 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.165-Rs175) and has closed 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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Realty Index Touches All Time High After Record Home Sales by Godrej

Realty Index All Time High
by 5paisa Research Team 23/09/2021

In a market that has been largely obsessed with the rally in metal, FMCG and financial stocks, the realty story has been ignored. But the returns on some of realty stocks have been amazing. The Nifty Realty Index gained 8.6% on 22-Sep and it gained nearly 15% in 3 days. To top it all, the Nifty Realty Index is already trading at an all-time high. In the last 1 year, the Nifty Realty index is up 122%.

The table below captures the spike in major realty stocks from the lows of last one-year.
 

Stock Name

CMP (23 Sep)

52-Week Low

Returns from low

DLF Ltd

Rs.402.90

Rs.142.50

182.74%

Godrej Properties

Rs.2,182.05

Rs.819.75

166.18%

Macrotech Developers

Rs.1,105.00

Rs.422.60

148.46%

Prestige Estates

Rs.454.40

Rs.222.20

104.50%

Sobha Ltd

Rs.812.00

Rs.200.25

305.49%

Brigade Enterprises

Rs.421.00

Rs.154.55

172.40%

 

Data Source: NSE

The outperformance of realty companies in the last one year has been absolutely emphatic. The latest trigger came when Godrej Properties managed to sell property bookings worth Rs.575 crore in a single day, on launching its NCR project. The outperformance has been visible across companies that are prominent in key realty markets of India like Mumbai, NCR and Bengaluru. These are the companies that benefited the most.

The state governments have also helped the cause. For example, Mumbai alone is expected to see about 7,000 property registrations in Sep-21. Karnataka state has cut stamp duty on mid-range flats from 5% to 3%. Mumbai had adopted a similar strategy of waiving registration charges for properties some time ago.

Are there more fundamental triggers?

Rates are at historic lows with home loans available at around 6.6% for high-rated borrowers. There are a lot of global credit funds that have become active in India and are trying to fill the void left by NBFCs in realty funding. The net result is that Indian realty is finally looking up after a long spell of quiescence. That is good for asset classes overall.

Also Read: NSE Revises Stock Selection Criteria for Nifty Indices

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Sansera Engineering IPO lists at 9.07% premium but holds above Rs.800

Sansera Engineering IPO
IPO
by 5paisa Research Team 24/09/2021

Sansera Engineering had a sound listing on 24th September as it listed at a better premium than indicated by the GMP and managed to hold on to the gains. Sansera Engineering listed at a premium of 9.07% 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 11.47X, listing response was in line with the sound subscription. Here is the Sansera Engineering listing story on 24 September.

The Sansera Engineering IPO price was fixed at the upper end of the band at Rs.744 after the 11.47X subscription. The price band for the IPO was Rs.734 to Rs.744. On 24 Sep, the stock of Sansera Engineering listed on the NSE at a price of Rs.811.50, a premium of 9.07% over the issue price. On the BSE, the stock listed at a price of Rs.811.35, a listing premium of 9.05%.

On the NSE, Sansera Engineering closed on 24-Sep at a price of Rs.818.05, a first day closing premium of 9.95% over the issue price. On the BSE, the stock closed at Rs.818.70, a first day closing premium of 10.04% over the issue price. On both the exchanges, the stock of Sansera managed to hold and marginally build on its listing premium quite effectively.

On Day-1 of listing, Sansera Engineering touched a high of Rs.841.95 on the NSE and a low of Rs.801. On Day-1 of listing, the Sansera Engineering stock traded a total of 125.20 lakh shares on NSE amounting to value of Rs.1,028.89 crore. On Day-1, Sansera Engineering was the fourteenth most liquid stock on the NSE by trading value.

On the BSE, Sansera Engineering touched a high of Rs.842 and a low of Rs.800.80. On BSE, the stock traded a total of 11.43 lakh shares amounting to value of Rs.94.15 crore. On Day-1, Sansera Engineering was the thirteenth most liquid stock on the BSE by trading value.

At the close of Day-1 of listing, Sansera Engineering had a market capitalization of Rs.4,206 crore with free-float market cap of just Rs.1,010 crore. 

 

Also Read: 

Sansera Engineering IPO - 7 Things to Know

Upcoming IPOs in 2021

IPOs in September

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Subhash Chandra Takes Up a Good Deal on his Zee Stake

Subhash Chandra Takes Up a Good Deal on his Zee Stake
by 5paisa Research Team 24/09/2021

One week is a long time in the history of any business. We saw that live in the previous week as the erstwhile controlling promoters of Zee moved from a defensive position to a position of strength. Let us first rewind to Monday, 13th September.

That was the day, the stock of Zee saw a sudden rally. There were reports that two large institutional investors of Zee, viz. INVESCO and OFI China Fund wanted Punit Goenka, the son of Subhash Chandra, to resign from the position of MD and CEO. 

Their contention was that for the 3.44% holding in Zee Entertainment, the Subhash Chandra family was exercising inordinate clout. It was also confirmed that two directors; Ashok Kurien and Manish Chokhani had already resigned from the Zee Board.

If that looked like end-game for the Subhash Chandra family, that would have been a gross misjudgement. By 20th September, Zee Entertainment had announced a mega merger with Sony Pictures.

The idea was to combine the sports and general entertainment franchise of Sony Pictures with the strong regional content franchise of Zee. The term sheet also specified that Punit Goenka will continue as MD & CEO for 5 years.

Also Read :- What does the Zee merger with Sony mean?

If that looked like a symbolic victory for Subhash Chandra, more is on the way. The family stake was to get diluted from 3.44% to 2% due to the deal. However, Sony has topped up with an additional 2% stake to Subhash Chandra as part of the non-compete clause. 

This 2% will be given to Subhash Chandra out of the Sony Pictures stake. Effectively, Sony will end with just about 50.93% stake. In addition, Subhash Chandra also gets the option to increase this stake from 4% to 20% subject to terms and conditions. 

Sony has had it good too. While they are infusing $1.4 billion in cash into the new entity, they get access to the vast library and regional content stack of Zee. That is the perfect launching pad for its OTT initiatives and to take on the might of Disney Hotstar in India. In a way, it is good that the promoter does not lose control over his brainchild.