MMTC which had launched its OFS for 933.12 lac shares at a floor price of Rs 60 was subscribed. The issue received bids for 358.74 lac shares from non-institutional investors and 1083.86 lac shares from institutional investors. The total bids received were for 1442.61 lac shares and the issue was subscribed 1.54 times. The indicative price was Rs 60.86. The government at this price would garner Rs 568 crs.

The share price of MMTC was locked circuit down at Rs 190.35 down 10% yesterday. Today also the shares are locked circuit down 10% at Rs 171.35. The gap between the floor price and the market price is Roughly Rs 111 and it would take roughly 20 trading sessions of getting locked down 5% each day to match.

A question being asked is whether government panicked in fixing the price at a discount over slightly over 70% or wanted to kick start the divestment? The answer lies somewhere in between as the company has not been doing much in recent years. The company reported a net loss for the year ended March 2013, its revenues for the year have become less than half and gone are the dyas when one had to go to a canalising agency for foreign trade. Today foreign trade is a prerogative of everyone and just about anyone can import or export.

Having some 10 odd companies to divest in the next two months to complete the minimum public shareholding norm to be met, it makes sense to start as early. In any case the subscription pattern of MMTC clearly indicates that the shares applied for were largely by LIC and PSU banks. It would be fair to assume that anywhere between 2/3rd to 3/4th of the issue size has been subscribed by these entities.

One more divestment, one more bailout and this would continue to be the story. One remembers the previous divestments of Hindustan Copper and NMDC and their current market price.

MMTC kicks of the divestment programme of the government for the financial year 2013-14. The government would be selling 933.12 lac shares at a floor price of Rs 60. The closing price of MMTC on BSE was Rs 211.45 and on NSE it was Rs 210.05. The floor price is a discount of 71.62% on the BSE and 71.43% on the NSE. Based on the floor price the government would realise Rs 559.87 crs assuming the offer is fully sold.

MMTC reported revenues of Rs 69,056 crs in the year ended March 2011, Rs 66,325 in March 12 and Rs 28,598 crs in the year ended March 2013. The net profit in March 11 was Rs 121.64, Rs 70.72 in March 12 and a net loss of Rs 70.62 in March 13. The EPS for the same period is Rs 1.22, Rs 0.71 and Rs (0.71).

The market capitalization of MMTC as of yesterday was Rs 21,145 crs which would at the floor price reduce to Rs 6,000 crs. The company as the name suggests is in the business of trading and has in the past done trading in commodities as diverse as gold, iron ore and wheat. At the end of the day it is a trading company and has margins which are as low as 1.07% at the operating level while at the net level they were negative last year and at 0.40% in the previous year. At the floor price of Rs 60 ignoring the EPS for the year ended March 2013 which was negative and considering EPS for March 12 of Rs 0.29 the PE ratio is a staggering 206.89 times.

The price chart of the scrip for last 12 months is given below. One can see the value erosion over time where the share has fallen from over Rs 800 to the current price of Rs 211. In the next few days it would adjust to the offer for sale price of Rs 60.

It makes no sense to apply for the share in the OFS even at this steep discount of 71%. The picture at the end of the day would be that LIC and PSU banks would by force have to bail out the issue and complete the divestment objective of the government.

Just Dial Limited which had tapped the capital markets with its offer for sale listed today on the NSE and BSE. The company had a flying start and closed with gains of over 15%. The offer for sale was in a price band of Rs 470-543 and was issued at Rs 530. There was a discount of Rs 47 for retail investors.

The issue had a few firsts about it. The retail discount was Rs 47 or 10% at the floor price and 8.86% at the issue price. This is the highest discount given to retail. Secondly the company’s promoters had to offer a safety net to retail investors and also deposit the entire amount upfront in an escrow account. Thirdly the QIB portion was 75% and the only reason why the company chose to do so was because it did not want to give a higher allocation to retail and therefore block a higher amount in the safety net.

The good part is that the regulator has been able to achieve the twin objective of ensuring that the primary market issue does not fall flat on its face post the listing as has been the case so far with more than 3/4th of the issues trading at a discount, and secondly ensured that retail investors make money post listing.

Looking at the first day’s success of Just Dial where everybody whether it be QIB’s, HNI’s or retail have all made money on day one. I believe this would be a case after a very long time that people across categories have made money. Even the mega issue from MCX which saw HNI category subscribed by some 150 times, only those people who sold in the beginning made money. Fortunately in the case of Just Dial it was not so and everybody has made money.

From the table above one can see that the weighted average of the day’s trade which was Rs 611.46 on the BSE was identical to the close of Rs 611.45. Similarly the weighted average on the NSE was Rs 611.48 which was marginally lower than the close of Rs 612.35. The volumes on the two exchanges combined were 123.27 lac shares which were 70.45% of the IPO size of 174.97 lac shares. The delivery volume on day one was 40.36 lac shares which was 32.75% of the traded volume and 23.07% of the IPO size.

The share has given decent returns to retail investors who have made Rs 128 based on the weighted average of the day’s trade. This translated into a decent 26% return for retail investors considering the discount. Without the discount the return is 15%.

After a really long timeI would be able to conclude that the listing has been a success and investors have made money post the issue. Let’s hope better sense prevails in the time to come.

Markets have become super volatile and it is becoming more and more difficult to gauge the mood and direction of the market. One does understand that the markets are being driven by the way FII’s trade, but inferences from there also are not clear.

Last week the markets gave us an example of how they behave and what volatility is. From the table below one can see that the net change in the SENSEX for the week was a mere 55.97 points while the net daily change was a massive 992.57 points. Similar levels for the NIFTY were a net change of 2.40 points and a weekly net daily change 292.50 points.

The movement one saw reflects the FII flows, GDP data which was at 4.8% for the fourth quarter 2012-13 and 5% for the year, the political situation and the global markets. The net weekly change in the markets should be viewed in context to the sharp fall in the previous week when the SENSEX fell 2.87% and the NIFTY fell 3.29%.

Coming to FII flows they were at around Rs 3,330 crs for the week. They were buyers for the first four days and turned sellers only on Friday. What is disturbing however is the fact that they have been net sellers for seven trading sessions in a row in the debt market and have pulled out Rs 6,200 crs. The Indian Rupee in the week has depreciated from Rs 55.66 to Rs 56.50. This rupee fall is cause for concern and even though crude prices have been soft, the advantage would now turn to negative because of the fall in the value of the rupee. At current levels one should expect further price hikes in the case of petrol and diesel in the coming weeks. Readers would remember that the prices were hiked from the midnight of 31st May.

In the course of the previous week’s movement the markets have made an inside day on the weekly chart with a long body indicating weakness. The markets need to make a decisive breakout or breakdown from here. The levels for the same are 5936 and 6229 on the NIFTY which are the intra week high and low for the week ended 24th May. Similar levels for the SENSEX are 19568 and 20443. We need a nudge to breakdown and have to climb a mountain to breakout.

Use rallies to exit long positions but expect a rebound before a fall.

Just Dial Limited which had tapped the capital markets with its offer for sale of 174.97 lac shares was oversubscribed 11.63 times. The price band was Rs 470-543 with a fixed discount of Rs 47 to retail investors and also a safety net. The issue had opened on Monday the 20th of May and closed on Wednesday the 22nd of May. The company had earlier allocated 39.37 lac shares to anchor investors at Rs 530.

The issue received excellent response from all sections to whom it was offered. Though the retail portion which was oversubscribed 3.51 times looks lesser than the others the fact to bear in mind is that in retail unlike other categories the allotment is based on the minimum lot to all applicants before pro-rata. This means that the 1.6 lakhapplications which have come indicate that the average application size in this category is 37-38 shares or roughly 1.5 lots. As there are only 69,98,990 lots available, the allotment ratio would be roughly 2 out of 5 applicants getting 25 shares. Secondly it appears from the way the book has been made and keeping in mind the anchor allocation price, the allotment price for the offer for sale would be Rs 530.

The details of the subscription level in various categories are given below: -

The issue has received excellent response from all categories of investors. The cost of finance for the leveraged HNI assuming 9% for eight days works out to Rs 24-25 per share. This means for the successful retail applicant there is an upside of roughly Rs 77-80 (Rs 47 discount plus Rs 30 interest cost) per share or Rs 2000 for 25 shares that would be allotted. This return would be on an

Well the issue has garnered support in the subscription stage; let us see how it fares on listing where an issue with 75% reservation for QIB’s has been oversubscribed over 1o times by QIB’s and over 11.6 times overall.

Just Dial Limited which is tapping the capital markets with its offer for sale of 174.97 lacs in a price band of Rs 470-543 completed the allocation to anchor investors. The company on Friday allotted a total of 39,36,925 shares at a price of Rs 530 to raise Rs 208.65 crs from 20 QIB’s and 15 entities. The issue would open on Monday the 20th of May and close on Wednesday the 22nd of May. The offer for sale would raise Rs 822.38 crs at the lower end of the price band of Rs 470 to Rs 950.11 crs at the upper end of the price band of Rs 543. Retail investors have been offered a flat discount of Rs 47 which is 10% at the lower end and 8.65% at the upper end. In addition there is a safety net for retail investors.

This issue has 75% reserved for QIB, 15% for HNI’s and 10% for retail investors. The full list of anchor investors is appended below: -