GIC RE issue to propel retail investors and help market momentum

The week gone by had four trading days and markets gained on three of them. A serious effort to regain lost ground and touch the previous highs. If that happens around Diwali and the ensuing result season does not give pleasant surprises one wonders whether Diwali 2010 would be repeated? Coal India listed at that time and markets peaked. The BSESENSEX clocked gains of 530.50 points or 1.67% to close at 31,814.22 points while NIFTY gained 191.10 points or 1.91% to close at 9,979.70 points.

Dow Jones hit yet another record lifetime high and closed at 22,773.67 points, gaining 368.58 points or 1.62% in the process.

Markets seem to be on a massive fund-raising exercise currently. There are back to back issues and last week was no exception. Last week saw two issues listing with SBI Life Insurance listing on Tuesday the 3rd October. The share closed with gains on that day but by weekend the share was trading with losses of about 3/4th of a percent. Shares were issued at Rs 700 and the company had raised through an offer for sale Rs 8,400 crs.

The second company to list was Indore based snack maker Prataap Snacks which makes potato chips, extruded products and Indian namkeen under the brand Yellow Diamond. Shares were issued at rs 938 and gained 25% on debut day and 36% by the end of the week.

The issue from Godrej Agrovet Limited opened and closed for subscription during the week and was subscribed an overall 95 times. The issue comprised of a fresh issue ad offer for sale in a a price band of Rs 450-460.

The mother of all issues from General Insurance Corporation of India Limited opens on Wednesday the 11th of October and closes on Friday the 13th of October. There would be no anchor as is the practice of the Government of India. The issue consists of a fresh issue of 1.72 cr shares and an offer for sale of 10.75 cr shares in a price band of Rs 855-912. The issue would garner between Rs 10,661.85 crs at the lower price band to Rs 11,372.64 crs at the top end of the band. There is a discount of Rs 45 per share for retail investors and eligible employees.

GIC RE is in the business of reinsurance and is a insurance company which underwrites insurance and therefore risk of other insurance companies. While a SBI Life Insurance or LIC or ICICI Lombard would issue insurance to an individual or company and take the risk on themselves, they would have the same passed on or in turn underwritten by GIC RE.

If theoretically an insurance business was to go down under it would never be a underwriter as his risk is geographically and business wise distributed. GIC RE for example does business with 162 countries and across businesses.

The issue is priced at a PE multiple of 24.97 times making it far more attractive than the recent issues from general insurer ICICI Lombard and life insurer SBI Life.

The issue size is large and there would be effectively firm allotment for retail investors based on mathematical calculation. You need 27 lakh applications for the issue to be subscribed on lot basis and the largest application size was in Cochin Shipyard which was about 20.5 lakh applications. In this issue HNI interest would not be there because of the discount offered to retail. It makes sense to apply for this reinsurer and participate in the growth story of Indian and global insurance companies.

RBI at its review meet kept policy rates unchanged. It did however tweak the SLR rates to give some relief to banks and effectively reduce their cost of borrowing.

Immediately after Diwali one will see results for the July to September quarter being declared. One hopes and prays that there are surprises this time around or the extreme valuations are likely to give way. Even the liquidity with mutual funds may not be enough to hold them thereafter.

Markets are likely to make another attempt to cross the all-time highs. Ride the rally till the same continues.

Indian Energy Exchange Limited – Completes Allocation to Anchor Investors

Indian Energy Exchange Limited (IEX) which is tapping the capital markets with its offer for sale completed allocation to anchor investors. The company is offering 60,65,009 shares through an offer for sale in a price band of Rs 1645-1650.
The company allotted 18,19,501 equity shares to 25 anchor investors comprising of 28 entities.

The highest allocation has been made to Smallcap World Fund who has been given 13.32% of the anchor allocation. Domestic mutual funds collectively have been given 33.38% of the total allocation.

The issue is being offered at a PE multiple of 43.81 times based on financial year ended March 2017 earnings. The issue opens on Monday the 9th of October and closes on Wednesday the 11th of October
The full list of anchor allotment is given below: –
Indian Energy Exchange Limited – Completes Allocation to Anchor Investors

Prataap Snacks Limited – Great Debut closes with gains of over 25%

Prataap Snacks Limited better known by its Yellow Diamond brand of snacks, potato chips and extruded products listed on the bourses and had a great debut. Shares were issued at a price of Rs 938. They opened at a level of Rs 1250 on the BSE and Rs 1270 on the NSE.
The high was Rs 1317.05 and Rs 1318.80 respectively. The lows were Rs 1137 and Rs 1133.70. The final close at Rs 1178.50 and Rs 1180.65 respectively, a gain of Rs 240.50 or 25.64% on the BSE and Rs 242.65 or 25.87% on the NSE.

The company had tapped the capital markets with its simultaneous offer to raise fresh equity for Rs 200 crs and an offer for sale of 30.05 lakh shares. The company had allotted 15.28 lakh shares to 15 anchor investors comprising of 25 entities. The public issue was very well received and was subscribed an overall 47 times with the QIB portion subscribed 76.89 times, HNI 101.15 times and Retail 8.48 times.

The traded volume was 109.30 lakhs which was 2.12 times the IPO size. Delivery volume was 26.78 lakhs which was 24.50% of the traded volume and 52.13% of the IPO size. Adjusted for only non-anchor portion the delivery was a massive 74.21% which implies that even QIB’s have booked profits on day one.

Exchange Open High Low Close Net Change % Gain/ Loss Wt.Avg Volume Delivery Del %age
BSE 1250.00 1317.05 1137.00 1178.50 240.50 25.64 1231.36 1785742 396028 22.18
NSE 1270.00 1318.80 1133.70 1180.65 242.65 25.87 1236.14 9144860 2282236 24.96
Total 10930602 2678264 24.50

From the table above one can see that the weighted average of the day’s trade was Rs 1231.36 on the BSE and Rs 1236.14 on the NSE substantially higher than the close of the day, indicating that there was selling pressure in the last hour of trading. The days close was Rs 1178.50 and Rs 1180.65 respectively which means that the net gain for the day was a good Rs 240.50 or Rs 242.65 on the two exchanges. In percentage terms this was 25.64% and 25.87% respectively. Good performance by all standards.

In terms of institutional trade there were two on the buy side where SBI Mutual Funds bought 4.40 lakh shares at Rs 1272.68 and Smallcap Wonder Fund bought 4,25,525 shares at Rs 1245.67 respectively.

The share is likely to gain from current levels in the coming days.

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