Nifty & sensex (Dec 6th)
Nifty below 17,000, Sensex tanks 949 points; auto, IT, pharma hammered ,Among sectors, IT index fell over 2 percent, while other sectors lost a percent each. The BSE midcap and smallcap indices fell over 1 percent each.
NCLT admits RBI plea for insolvency proceedings against Reliance Capital
The NCLT has admitted the RBI plea to initiate insolvency proceedings against Reliance Capital on concerns over persistent defaults posing a systemic threat to the financial system. Reliance Capital was the third case after DHFL and SREI, where RBI had initiated insolvency proceedings against an NBFC. Meanwhile, Reliance Capital welcomed the RBI move to resolve the debt crisis in accordance with IBC regulations. Some secured lenders had stalled resolution for over 2 years. Nearly 95% of debt is in form of debentures.
NBFCs raise record amount via commercial papers to fund IPOs
In a surprising development, the RBI has informed that a large number of Indian companies and NBFCs had raised a record Rs.175,000 crore via commercial paper in the first half of November. Incidentally, most of these funds were used to fund big-ticket IPOs. Current outstanding CPs stand at Rs.4.50 trillion. Typically, NBFCs with brokerage arms found the CP route very cheap to lend to HNIs. CPs offer flexible tenors ranging from 7 days to a year, with rates as low as 3.38% for higher rated borrowers in the market.
SEBI approved the DRHP of 2 IPOs viz. Sterlite Power and ESDS Software Solution
SEBI approved the DRHP of 2 IPOs viz. Sterlite Power and ESDS Software Solution. They had filed the DRHP 2-3 months back. Sterlite Power looks to raise Rs.1,250 crore and may consider a pre-IPO placement of Rs.220 crore. Sterlite Power will use the proceeds of the IPO to retire debt. The ESDS IPO will entail a fresh issue of Rs.322 crore and an OFS of 2.15 crore shares by existing shareholders. ESDS may consider a pre-IPO placement of Rs.60 crore. It will use fresh funds to buy cloud computing equipment and to repay debt.
Cement companies expect demand to pick up from Dec as rains recede
Unseasonal late rains across India has badly hit cement demand this year. Month on month sales of cement were down -16% due to erratic rains in parts of South India. In terms of cement de-growth in prices in specific regions, South India saw MOM fall of -4.8% while East India saw MOM fall of -3.2%. Prices in the North, West and central region were unchanged, resulting in an all-India price fall of -3% for cement. With power and fuel costs higher, this is not good news for the operating margins of cement companies.
Eris Lifesciences Soars 10%
On 06-December, the stock of Eris Lifesciences rallied 10% in the midst of weak markets after it formed a joint venture with the Mumbai-based MJ Biopharm to foray into the insulin segment. The Eris MJ Biopharm JV will have 70% holding by Eris and 30% by MJ. They will engage in the marketing and distribution of human and analogue insulin including Aspart, Glargine and Lispro and GLP-1. MJ will be responsible for development, manufacturing and supply. This marks the first foray of Eris into biopharma.