Daily Market Update FEB 18

unnamed Daily Market Update FEB 18

Bharti Airtel will buy back 20% of its stake in the DTH arm from Warburg Pincus for a consideration of Rs.3,126 crore. In 2017, Warburg had acquired the 20% stake in Bharti Telemedia, the DTH arm of the Airtel group. The deal will be consummated through the issuance of 3.647 crore shares of Airtel at a price of Rs.600 per share and an additional Rs.1,038 crore in cash. The issuance of shares will be done via preferential allotment. The focus of Airtel will be on a converged one-home solution and the DTH business fits into that strategy. Interestingly, Warburg Pincus was also an early investor in Bharti Airtel.

Lodha developers have revived their IPO plans for the third time with a grand plan to raise Rs.2,500 crore through the IPO, as per filings with SEBI. The funds so raised with be used for debt reduction and for land acquisition. In 2010, Lodha had planned to raise Rs.2,800 crore through IPO but had to put off its plans. Subsequently, in 2018 Lodha Developers once again tried to come out with an IPO worth Rs.5,500 crore but had to again shelve it due to turbulent market conditions. Out of the total sum of Rs.2,500 crore raised, the company will utilize Rs.1,500 crore to reduce its debt and Rs.375 crore to acquire land and land rights. The Lodha group is the largest real estate developer in India by sales with annual collections exceeding Rs.9,000 crore. Lodha group has also forayed in the London market.

In a significant move, the government has announced product linked incentives or PLI scheme worth Rs.12,195 crore for telecom equipment manufacturers. This is likely to result in output value of Rs.244,000 crore and provide direct and indirect jobs to nearly 40,000 personnel. Out of this incremental output worth Rs.244,000 crore, exports are expected to be worth Rs.195,360 crore, giving a big boost to the “Make in India” program. This specific scheme is also expected to bring in foreign flows of Rs.3,000 crore. This will also reduce the current dependence on imports for telecom equipment.

In what could be the first step to smoothen the IPO process for LIC, SEBI has eased listing norms for large companies. Under the proposed new rules, large companies will be allowed to divest 5% instead of the mandatory 10% in all cases. Instead of the current 3 years, these large companies will get 2 additional years to touch 10%- and 5-years’ time frame to touch 25% public ownership. These new set of rules will be applicable for companies with a potential market cap post listing of above Rs.100,000 crore. This will pave the way for removal of regulatory hassles when LIC is divested during the current fiscal.

The Nureca which closed for subscription on 17 February has seen a tremendous response to its issue with the issue being oversubscribed by nearly 39.92 times overall. The retail portion was oversubscribed 167 times, QIB portion 3.10 times and the non-institutional HNI portion got subscribed 31.59 times as of close of the issue. The shares were offered in the price band of Rs.396-400 and with the current level of oversubscription, one can expect price setting at the upper end of the band. At the end of the second day of its IPO, RailTel had seen its issue subscribed 6.64 times. RailTel IPO closes on 18 February.

For the month of January 2021, SBI Mutual Fund has been among the biggest buyers in the PSU space. For example, SBI MF added PSU stocks like SAIL, NHPC, Indian Oil, NTPC and Bank of Baroda during the month of Jan-21. In addition, the fund has also been selectively picking private banking names like ICICI Bank, Axis Bank and HDFC Bank. Clearly, SBI MF appears to be betting on a re-rating of PSU stocks in the next few months as the government proceeds with aggression on privatization. In addition, the state is also putting pressure on the PSUs to reward shareholders through dividends and buybacks and that is making the yields on these stocks a lot more attractive. SBI also noted that in the last 10 years, EM stocks have been underperformers compared to US equities and PSUs could trigger the catch up now.

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