Daily Market Update – Dec 10th 2020

unnamed Daily Market Update   Dec 10th 2020

The Rs.16,000 crore buyback program of TCS will commence on December 18, 2020 and close on January 01, 2021. Shareholders have already approved the buyback of 5.33 crore shares at a maximum price of Rs.3,000 per share. As stipulated by SEBI for such buybacks, the letter of offer will be sent to eligible shareholders by 15 December. TCS has fixed 28 November as the record date for the buyback. There was a virtual lull in buyback of shares after the government imposed buyback tax in 2018 Union Budget. However, with dividends being taxed at peak rates, buyback of shares are back in vogue.

Along the lines of statement in the last monetary policy, the RBI has moved in quickly to tighten regulation of NBFCs. To begin with, only NBFCs with minimum 15% capital adequacy and gross NPAs below 6% for last 3 years will be eligible to declare dividends from FY21. The RBI would make an exception on capital adequacy if the gross NPAs were less than 4%. NBFCs can only pay dividends only out of current year profits and the dividend payout cannot exceed 50%. In fact, the RBI has underlined that deposit-taking NBFCs and systemically important entities should have CRAR of 15% for 3 years. The conditions for non-deposit taking NBFCs will be less stringent. They can pay out dividends if leverage ratio is less than 3X. This regulation shift will force NBFCs to become more accountable like banks.

Supreme Court has asked SEBI to appoint an observer for overseeing the e-voting process at Templeton Mutual Fund for winding up of its 6 schemes that have been shut since late April 2020. In addition, the SC has also stipulated that the results of the e-voting should not be announced. On the other hand, these results will have to be produced before the court in a sealed cover along with the report of observers. The stay on payment of any redemption proceeds to unit holders will continue. Templeton MF had summarily shut down 6 debt funds in late Apr-20 due to illiquidity and redemption pressures.

In a bid to add heft to its divestment push, government will sell 20% stake in IRCTC via an OFS on Thursday and Friday. The total fund raised will be Rs.4,374 crore approximately. While the non-retail bids will be entertained on Thursday, the retail investors can put in their bids on Friday. IRCTC has been one of the stellar performers on the stock exchange in the last one year after the first round of OFS in 2019. Government currently holds 87.4% stake in IRCTC and post the deal their stake will come down below 75%. OFS will help the government inch closer to its full year target of Rs.2.10 trillion.

As the farmer’s protests have picked up steam, the Adani group has strongly denied that it would be in, any ways, a beneficiary of the opening of the agricultural sector to private sector. However, Adani clarified that it neither buys food grains from farmers nor decides the pricing of food grains. Adani group underlined that it only operated grain silos for FCI. Adani also clarified that the FCI bought food grains from farmers and stored them in silos built through a public-private partnership. Apart from the fee income, players like Adani had little say as everything was owned, operated and decided by the FCI.

The Tata-Mistry case took an interesting turn on Wednesday after Harish Salve, the counsel for the Tatas, clarified that the Mistry family had immensely benefited from their holding the Tata Group. For example, value of the Mistry family holding in Tata Sons had grown from Rs.69 crore in 1965 to Rs.58,000 crore in 2016. Hence Salve clarified that the allegations made by Mistry group about mismanagement were largely unfounded. The Mistry family owns 18.4 per cent in Tata Sons and there is a $13 billion gap in valuation of the story by the two entities. Salve also pointed out that the real issue was not Tata mismanagement but a backdoor attempt by Cyrus Mistry to undermine the role of the Tatas in Tata Sons despite Tata Trusts owning 66% in Tata Sons. The hearing will continue on 10-Dec.

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