Zomato IPO closes with a bang, subscribed 38.25 times
There was not much of a surprise that the Zomato IPO saw substantial interest from the Qualified Institutional Buyers (QIBs). After all, we had seen the huge appetite for Zomato when the company did its anchor investment placement on Tuesday. We will come back to the more elaborate QIB portion later, but let us first look at the other portions. The retail portion got subscribed 7.45 times at the close of the IPO, not much of a change from the end of second day. Nearly 77% of retail bids came at the cut-of price. The HNI allocation of 19.43 crore shares saw bids for 640.56 crore shares, implying an oversubscription of 32.96 times.
Check: Upcoming IPO in July 2021
Let us come back to the QIB subscription. The Zomato IPO had a QIB allocation of 75%, while HNI had 15% and retail just 10%. However, the anchor investors got allocations worth Rs.4,196 crore implying that just about 38.88 crore shares were left in the QIB quota for IPO subscription. Against these shares on offer, Zomato elicited demand for 2014 crore shares, implying an oversubscription of the residual QIB portion by 51.79 times. While the FPIs were the most aggressive among the QIBs, domestic mutual funds and insurance companies also actively applied for the Zomato IPO.
The first signals of QIB appetite for the Zomato IPO was evident in the roadshows and later in the anchor placement on Tuesday. The anchor book, it may be recollected, was subscribed nearly 35 times. The anchor book allocation was made to marquee global investors like Government of Singapore, Morgan Stanley, Tiger Global, Ballie Gifford, Fidelity Funds, Canadian Pensions, New World Fund, Nomura, Goldman Sachs etc. Domestic anchor investors included UTI MF, HDFC MF, ICICI Pru MF, IIFL MF etc.
It is not just Paytm Karo; Ab “Paytm IPO mein Invest Karo”
If everything goes as per plan, you can not only spend through Paytm but also invest in Paytm and participate in the incredible growth of digital payments in India. One97 Communications, the company behind Paytm, has filed for an overall IPO of Rs.16,600 crore. While Rs.8,300 crore will be raised through fresh issue, the balance Rs.8,300 crore will be by way of offer for sale. Paytm will be one more in a slew of internet companies like Zomato and MobiKwik that are on the IPO path. At Rs.16,600 crore, the Paytm IPO will be the largest IPO till date in India beating Coal India IPO, which raised Rs.15,000 crore in year 2010.
Once the public issue is completed, Vijay Shekhar Sharma will be declassified as promoter of Paytm as it requires 20% shareholding. Sharma currently owns just 14.61% in One97 Communications, the company that owns the Paytm platform. However, Mr. Sharma who is almost synonymous with the rise and growth of Paytm, will continue as the chairman and managing director of Paytm. Marquee global investors like Ant Group, Alibaba and Warren Buffett’s Berkshire Hathaway have a stake in Paytm.
Read : Interesting facts on Paytm
Paytm was one of the early ecommerce start-ups in India and has completed 21 years of operations. For FY21, Paytm had clocked revenues of Rs.3,186 crore while the net loss narrowed to Rs.1,701 crore. Like most internet businesses, Paytm is also a business where costs are front-ended and returns are back-ended. As per the last fund raising done in Nov-19 from T Rowe Price, Paytm was valued at $16 billion. However, the IPO valuation is expected to be much higher. Paytm is already India’s second most valuable internet company after Flipkart.
LIC IPO gets once step closer to becoming reality
It looks like the government is setting out on the LIC IPO on a war footing. The Department of Investments and Public Assets Management (DIPAM) has sent out request for proposals for bankers, registrars and legal advisors to the issue. The IPO is proposed to hit the market around January 2022. There appears to be a small change in the IPO structure. Originally, it was supposed to be just an offer for sale by the government. However, now it is proposed to be a combination of new issue and an offer for sale.
The IPO rules were earlier amended too allow companies with indicative market capitalization of over Rs.100,000 crore to sell just 5% of their shares through the IPO. The legal amendments needed in the Life Insurance Corporation Act have already been proposed and passed as part of the Finance Bill in both the Houses of Parliament. Hence, the complex task of approvals for change in ownership, change in investment pattern and a new dividend distribution policy are already in place. Under the new IPO rules, the company can divest just 5% if market cap is more than Rs.100,000 crore subject to 10% divestment within 2 years and 25% dilution in 5 years. This would mean a series of capital raising by LIC.
Also Read: LIC IPO Government Approval
While the final details are awaited, the LIC IPO is expected to be to the tune of around Rs.70,000 crore. That would be substantial progress for the government towards its coveted Rs.175,000 crore disinvestment target for the fiscal year 2021-22. It will also create a listed corporate behemoth that would be larger than Reliance in terms of market cap when it lists.
Solid HDFC Bank creates bad loan scare for investors
Normally, a spike of 15 bps in gross NPAs from 1.32% to 1.47% would be considered normal for banks anywhere in the world. Not so; for India’s most valuable bank, HDFC Bank. When HDFC Bank announced its quarterly results on 17 July, profit growth and revenue growth were taken for granted. What caught the eye was the 15 bps sequential expansion in gross NPAs.
There were some numbers that really worried the market on the loan quality front. For example, HDFC Bank wrote off Rs.3,100 crore of NPAs in the Jun-21 quarter against just Rs.1,500 crore in the Jun-20 quarter. Gross NPAs at 1.47% were higher than 1.36% in Jun-20 quarter and 1.32% in Mar-21 quarter. The restructured loan book (largely retail) went up from 0.6% in the Mar-21 quarter to 0.8% in the Jun-21 quarter.
Also read: Highlights of RBI Monetary Policy
HDFC Bank has offered an explanation for this spike in gross NPAs. According to the bank, COVID 2.0 put restrictions on the bank officials going out to clients for collections. This led to higher NPAs, and this is not expected to be a constraint in the next quarter. However, pressure on the retail book is a reality, albeit minimal.
Over the last 15 years, HDFC Bank built a reputation for rigorous credit appraisal and close credit monitoring. That helped them keep NPAs in check. On 19 July, HDFC Bank stock opened as the top loser in the Nifty. Markets are worried that if COVID 2.0 can hit HDFC Bank, other large banks are unlikely to be spared. Numerically, gross NPAs of HDFC Bank are still very comfortable, but the challenge for HDFC Bank is living up to its credit reputation, amidst its burgeoning asset book.
Tata Power and HPCL to jointly provide EV charging solutions
When the Indian government was drawing plans for a big shift to electric vehicles (EV), the biggest challenge was not about costs or efficiency. It was about EV charging infrastructure. For a rapid spread of EV as a green motor strategy, the biggest challenge is making charging infrastructure easily and readily available for electrical vehicles. It is precisely in this area that Tata Power and Hindustan Petroleum will now collaborate.
Tata Power currently owns a network of over 500 public charging stations spread across 100 cities. But that is too small to support a massive thrust on EVs. To bridge that gap. Tata Power will provide end-to-end EV charging stations at HPCL retail outlets spread across major cities and on key highways. This tie-up will enable Tata Power to set up its EZ charge solutions across HPCL outlets, which number more than 18,000 on an all-India basis.
Read: Maharashtra EV policy
The success of the EV shift will depend on a number of factors that are external to the EV business. For example, robust charging infrastructure, ease of use, quick access from home and office are all important ingredients of scripting an EV success story in India. Tata Power is a pioneer in the charging space and caters to all segments of the EV ecosystem including public charging, captive charging, home/workplace charging and ultra-rapid charging for buses.
The tie-up will help Tata Power to quickly scale up its charging infrastructure riding on the HPCL network. For HPCL, the move positions the company as a facilitator of quality services to a savvier automobile customer base. It is hoped, that it will also favourably impact the valuations of HPCL and Tata power.
Indian steel stocks party as global steel demand surges
Steel has been an unlikely star in the last few months. Since the beginning of 2021, most steel stocks have multiplied 2-3 times and are still looking attractive. Between April and June, foreign portfolio investors were busy adding steel stocks to their portfolio. Behind this sudden appetite for steel stocks, lies an unprecedented surge in demand for steel.
The rally in steel stocks has not been so much about tariffs but about an incredible demand surge. Joe Biden plans to sink a trillion dollars into infrastructure; 5 million TPA of steel demand. EU is making a big shift towards clean energy and clean cars and that is seeing a surge in demand for steel. The recovery in global economies was quicker than anticipated. This led to a sharp spike in demand for steel, even as supply failed to keep pace; spiking prices.
Global supply in the steel export market got impacted by the actions of China and Russia. Both the countries decided to cut down on steel exports and first cater to their domestic demand. Japan and Korea may follow suit. This is likely to sharply reduce global steel supply. While India is the second largest producer of steel in the world, it ranks 13 in terms of steel exports due to huge domestic demand. This also opens up a huge export market for India.
When the post pandemic recovery started, the story of steel was about supply struggling to keep pace with demand. Today, the story is the ability of steel companies to pass on input cost hikes to end consumers. Robust demand, strained supply chains and pricing power is a heady combination and that is exactly what steel companies are enjoying today.