Zee Refuses to Call for EGM at the Request of Invesco Fund
On 01st October, the NCLT passed an order urging Zee Entertainment to call an extraordinary general meeting (EGM) of shareholders as demanded by Invesco Fund and OFI Global China. These 2 funds hold 17.88% stake in Zee Entertainment and are the single largest holder in Zee. The Subhash Chandra family holds just 3.44% in Zee Entertainment.
Invesco and OFI Global China had called for the EGM with a 2 point agenda. They wanted a vote on the removal of Punit Goenka from the post of MD and CEO as well as appointing 6 of their nominees to the board of Zee Entertainment to reflect their holdings in Zee. Invesco wants even the merger with Sony Pictures to be debated afresh by the new Board.
Check - What does the Zee merger with Sony mean?
Over the weekend, Zee Entertainment has expressed its inability to call for an EGM and has termed the demand by Invesco as being illegitimate. Zee has also filed a petition with the court to strike down the NCLT order urging Zee to call the EGM on the demand of Invesco. Under Section 100 of the Companies Act 2013, an EGM has to be called if shareholders with more than 10% paid up capital demand for an EGM.
Zee’s argument is that any management changes need the prior approval of the Ministry of Information & Broadcasting (MIB). Hence, convening the EGM at the behest of Invesco will amount to breach of the MIB Uplinking Policy Guidelines. The one option in front of Invesco now is to request NCLT to call for EGM under Section 98 of the Companies Act. However, that could imply overruling the I&B Ministry.
The other option in front of Invesco is to itself call for EGM under Section 100 of the Companies Act on the grounds that the current board was oppressive to the interests of shareholders. However, that may be practically more complicated. For now, it is turning out to be a battle of wits between Zee management and Invesco Fund. It could end up being a case of “Who Blinks First”.
Also Read :- Invesco Approaches NCLT to Call EGM for Change of Zee Board
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Oravel Stays (OYO) Files for Rs.8,430 Crore IPO
Ritesh Agarwal is already India’s youngest self-made dollar billionaire at the age of 27. But he has bigger plans to take the company public. Oravel Stays, the company that operates OYO Rooms, has filed the draft red herring prospectus (DRHP) with SEBI for its proposed Rs.8,430 crore IPO. That is roughly equivalent to $1.2 billion at current rates.
OYO has already emerged as the leading travel and stay syndicator in India and is largely built on the lines of Airbnb of the United States. OYO is already among the leading Unicorns in India (digital plays valued at above $1 billion) and the current IPO is expected to value OYO at $12 billion enterprise value. That is 25% higher than the last round of funding.
If the OYO IPO goes through at the proposed valuations, it will be among the handful of Indian digital start-ups to secure valuations in excess of $10 billion. Some of the other members in the list include Byju’s, Flipkart, Paytm, Zomato etc. OYO wants to ride the huge success of the Zomato IPO in July, where the massive Rs.9,375 crore IPO was subscribed more than 38 times, with bulk of the demand coming from institutional investors.
Check:- OYO IPO: 12 things to know about one of the most keenly awaited IPOs
The proposed IPO of OYO will consist of a fresh issue of Rs.7,000 crore and an offer for sale (OFS) of Rs.1,430 crore. Interestingly, neither the promoter, Ritesh Agarwal, nor the key early investors in OYO (like Lightspeed Ventures, Sequoia, Microsoft and HT Media) plan to divest their stake via the OFS.
The fresh issue of Rs.7,000 crore will be used by OYO to repay some of its debt and also to bankroll some of its organic and inorganic expansion plans. Out of the total fresh funds raised, OYO will use Rs.2,441 crore for repayment or for prepayment of debts. Another Rs.2,900 crore will be used for expansion. OYO plans to aggressively expand its presence across India, Malaysia, Indonesia and Europe.
The OYO app has over 100 million downloads as of date and it is still growing. For FY21, the total revenues of OYO was 70% lower at Rs.4,157 crore, but that was understandable due to a sharp fall in tourism and travel. Post restructuring, OYO has improved its gross margins 3-fold to 33.2%.
Indian Power Companies Face Worst Ever Coal Shortage
India has traditionally struggled to produce enough coal to meet demand. However, the crisis of coal has never been this bad. According to reports coming in from the thermal power plants in India, coal stocks are critically low. This is all the more worrying since more than 70% of the total power produced in India is coal-fired thermal power.
Let us look at the magnitude of this coal shortage. Out of the 135 coal-fired power plants in India, around 16 plants had zero coal stocks and were running on a coal-in coal-out basis. But the overall condition is worse. Around 70 of these plants had coal stocks that would last for just about 3 days and 105 plants did not have coal for more than 10 days.
The Central Electricity Authority has prescribed 21 days coal as the ideal inventory but that is not the case with nearly 90% of the power plants. In the past, Indian power companies would import coal from countries like Australia and Indonesia. However, global coal prices have spiked in the last few months, forcing Indian power companies to rely on local coal.
India’s largest coal producer, Coal India, accounts for 82% of the local coal produced and it is almost operating at full capacity. Any further ramp-up will take time. In the current year, the unseasonal and erratic rainfall has badly impacted coal production and worsened the coal shortage in India. Indian coal prices are artificially low due to its inflationary potential.
Check - Power Crisis a Huge Problem for the Global Economy
The problem is also global, to an extent. The revival from the pandemic has led to a global surge in power demand. From UK to EU to China, there is an acute power shortage. Like India, China also relies extensively on thermal power, and its surge in demand for coal is pushing up prices in the global market.
In India, the low power prices have created a vicious cycle. Due to the low power prices, the state boards are forced to subsidize and power producers are bound by long term PPAs. The payment crisis gets transmitted from state electricity boards to power producers and onwards to the coal mines. It is this vicious cycle that needs to be broken.
BSE All Set to Launch Trading in Electronic Gold Receipts (EGR)
A little over a week after SEBI approved the setting up of the gold exchange and trading in electronic gold receipts (EGRs), the BSE appears to be all set to go. According to a statement given by the BSE, the exchange was technologically ready to launch trading of Electronic Gold Receipts on its existing trading platforms. SEBI approval is still awaited.
In its last board meeting, SEBI approved setting up of gold exchanges that would permit trading in EGRs in lieu of physical gold. The EGRs will be similar to the warehouse receipts used to trade in commodities. The idea of EGR trading on a gold exchange was to ensure a uniform trading price for gold at a national level via a transparent market mechanism.
Check - SEBI Approves Setting Up Gold Exchange
Currently, the EGRs will be the third gold-linked product to trade on the exchanges. Gold derivatives (futures and options) as well as gold exchange traded funds (ETFs) are already permitted to be traded on the exchanges. Gold EGRs have already been classified as securities under the SCRA. Hence, the trading, clearing and settlement of EGRs will happen on the exchange platform itself.
EGRs can be held in the regular demat account. Clearing and settlement of EGRs will entail a multi-level interface of banks, vaults, importers, exporters, retailers, depositories, DPs etc. EGR clearing and settlement will also be guaranteed by the clearing corporation, like in the case of equities and F&O. The settlement guarantee fund (SGF) protection will also be available to EGR trading.
The gold exchange will offer the facility to convert gold into EGRs, trading in EGRs and reconverting EGRs back to gold. For this purpose, the exchange will work closely with vault service providers (VSP). These VSPs will be instrumental in converting gold to EGRs and back. They will also offer safe custody of physical gold backing such EGRs plus valuation and reconciliation.
To begin with, BSE is likely to launch EGRs in denominations of 1KG and 100 grams denomination for convenience. However, subsequently there would be addition of smaller denominations like 5 grams, 10 grams and 50 grams to attract retail investor interest. EGRs are fungible both ways and also fungible among the VSPs.
Also Read :- Gold Price Today
Automobile Sales Numbers Present a Mixed Picture for Sep-21
It was a tale of two stories for the auto sector sales in the month of September. Despite the upcoming festive season, the chip shortage has hit the sales numbers of most of the large passenger car companies. Smaller passenger car companies were better off, showing growth. Among other auto players, tractors and heavy commercial vehicles had a weak month while two wheelers remained under pressure. Here is the story.
Let us look at the large passenger vehicle manufacturers. Maruti Suzuki reported -54.91% lower Sep-21 passenger vehicle sales at 68,815 units. The other major player, Hyundai India, saw -23.6% fall in total vehicle sales for the month to 45,791 units while domestic sales in particular were down -34.2% at 33,087 units. Microchip shortages hit them hard.
Tractor sales remained under pressure due to delay in Rabi season sowing and an erratic Kharif cropping pattern. For the month of September 2021, Mahindra & Mahindra reported -7% fall in tractor sales to 40,331 units. The Nanda group owned Escorts reported -25.6% fall in tractor and farm equipment sales at 8,816 units in Sep-21.
Among the two-wheeler manufacturers, Bajaj Auto reported -16% fall in domestic sales and a -9% fall in overall sales, largely on the strength of better export performance. While domestic sales of two-wheelers stood at 192,348 units, overall sales for the month of September stood at 402,021 units. Exports continue to be the saving grace for Bajaj Auto.
Among the HCV and MCV manufacturers; both Tata Motors and Ashok Leyland put up a good show in September. Tata Motors reported 55% growth in overall global sales, largely driven by JLR thrust. However, even overall domestic sales were up 26% at 55,988 units. Ashok Leyland reported overall growth of 12% in total vehicle sales. However, sales of medium and heavy commercial vehicles (M&HCV) were up 39% in Sep-21.
Among the passenger car manufacturers, smaller players were not hit too hard by the chip shortage and managed to grow September sales. For Sep-21, MG Motors reported 28% growth in sales, Toyota grew sales by 14%, Skoda grew sales by 131% and Nissan grew sales nearly 3-fold. In all these cases, the growth was on a very small base.
Bharti Airtel Rights Issue - How to Apply for Rights Issue Online
The Rs.21,000 crore rights issue of Bharti Airtel opened on 05-Oct and will close on 21-Oct. Effective 05-Oct the Bharti Airtel Rights Entitlement (RE) has also started trading on the stock exchanges under the NSE symbol "AIRTEL-RE". These RE or rights entitlement can be either bought or sold in the exchanges just like you buy stocks.
The company had fixed 28-Sep as the record date for entitlement to the rights issue so investors must have bought the shares of Bharti Airtel at least 2 trading days prior to 28-Sep to be entitled to the rights shares. The rights will be in the ratio of 1:14 i.e. 1 rights share for every 14 shares held. Each RE represents 1 rights share of Bharti.
The rights price was fixed at a steep discount to the market price at Rs.535. The rights is normally priced at a steep discount to make to attractive to existing shareholders. While the rights issue will be open till 21-Oct, the RE trading will only be permitted till 14-Oct after which the RE trading will cease. Hence RE can only be bought or sold till 14-Oct.
To understand how the RE gets priced, we will look at a real time price snapshot. Remember that RE is a right without an obligation. To that extent, it is more like a call option.
The closing price of Bharti Airtel on 04-Oct was Rs.681.40, which represents a premium of Rs.146.40 over the rights price. The Bharti Airtel RE is locked 40% higher at Rs.204.95 and the Rs.58.55 appreciation that you see in the RE price is over the theoretical price of Rs.146.40. The RE price will keep changing on a real time basis based on the outlook.
Investors can either exercise the right or they can just sell the RE in the market at the current market price. Such REs were already credited to the demat accounts of eligible shareholders as on 04-Oct.
Interestingly, the entire rights price of Rs.535 per share is not payable on application, in case you subscribe to the rights at Rs.535. Only 25% of the total price or Rs.133.75 per share is payable on application, while the balance will be payable in two tranches in the future. The specific deadlines for payment of the remaining instalments will be intimated separately.
Steps to invest in Bharti Rights issue via Registrar & Transfer Agent (RTA)
This can be done by going through the following steps. KFIN Technologies (formerly Karvy Computershare is the registrar to the Bharti Rights issue)
Step 1: You can visit the website page of Bharti rights issue on KFINTECH at the link below.
For demat holders in Bharti, click on the "Email & Mobile Registration" link
Step 2: Select the depository NSDL / CDSL or select physical in case you are holding physical shares.
Step 3: Enter important details like DP ID, client ID and Captcha Code and click on Submit.
Step 4: If your email id and mobile is not registered, you can registered them here.
Step 5: As per the terms of the rights offer, an amount equivalent to 25% of the rights amount can be paid online via NEFT online or through the Unified Payment Interface (UPI). Full money will be debited and to the extent not allotted, your money will be refunded.
When the rights shares are allotted around 18-Oct, you will be intimated by email and also by mobile SMS.
Steps to invest in Bharti Rights issue via Internet Banking Account - ASBA Facility
If you have the ASBA facility with a bank, then applying for the Bharti rights is just like applying for any IPO via ASBA. Here are the steps.
Step 1: You must login to your net banking account and click on "Demat & ASBA Services".
Step 2: Click on the Bharti Airtel Rights issue link
Step 3: Fill in details like PAN, Depository Name, DEMAT ID (Depository ID + Client ID)
Step 4: Make ASBA payment. The money is not debited in the case of ASBA but only blocked and the actual debit happens to the extent of allotment on the allotment date.
In both cases, if the shares are not allotted to you, the money gets refunded to your bank account.
Important Note: If your bank does not support ASBA, the RTA would have sent you Composite Application Form (CAF), which you can fill up and submit to the branch of any self-certified syndicate bank (SCSB). You can also pay via cheque / DD.