The week gone by shook the very floor on which traders and investors were standing on. Friday saw a tsunami hit the markets with multiple-shocks and after effects. It consisted of Yes Bank, Dewan Housing, Housing Finance Companies and ILFS. Markets fell over 1100 points on the BSESENSEX and 350 points on NIFTY before recovering sharply. Incidentally markets fell on all four trading days during the week. While markets recovered sharply, it was just not enough.
BSESENSEX lost 1,249.04 points or 3.39% to close at 36,841.60 points while NIFTY lost 372.10 points or 3.34% to close at 11,143.10 points. The lows of the day made on Friday were 35,993.64 points on the BSESENSEX and 10,866.45 points on NIFTY.
During the week one saw SEBI come out with direction on expenses of AMC which saw the two listed players in the AMC space correct. Both HDFC AMC and RNAM were down sharply with HDFC AMC losing Rs 255 or over 23% and Reliance Nippon losing 34% at 189. Insurance companies to saw a sell off and were down quite sharply with HDFC Life, ICICI Prudential and SBI Life losing between 8.8% – 10.50%.
Yes Bank touched an intra-day low of Rs 210.10 before recovering to close at Rs 227.05, a loss of Rs 96.05 or 42.30%. This fall was accompanied by huge volumes which was a tenfold increase over normal volumes. The volume on BSE was 2.07 crs while it was 29.35 cr shares on the NSE.
The other share in very sharp action was Dewan Housing which saw its price crash from Rs 610.60 to an intra-day low of Rs 246.25 before recovering to close at Rs 351.55. The loss for the day was a whopping Rs 259.05 or 42.42%. This too was accompanied by unheard of volumes.
Yes Bank fell on the previous day’s directive from RBI that Rana Kapoor the present MD and CEO, would not be permitted to continue at the post beyond a few months that triggered the sell-off. In the case of Dewan Housing there were rumours of default which triggered the same, which were denied later. Another thing that did happen was that ILFS sold some bonds issued by Dewan Housing and so did a mutual fund from DSP Blackrock. This was enough to hit a panicked market and cause enough mayhem. Incidentally another company from the Dewan Housing stable, is in the process of raising money through bonds currently.
There were other rumours as well and it appears that RBI has put restrictions on housing finance companies from giving loans to developers and loan against property popularly known as LAP. This too added fuel to the already raging fire and caused mayhem in the market place.
In primary market news the issue from PSU Ircon International Limited was oversubscribed 9.90 times. The company had tapped the capital markets with its offer for sale of 99.05 lakh shares in a price band of Rs 470-475. The issue which had opened on Monday the 17th of September closed on Wednesday the 19th of September. QIB portion was subscribed 12.29 times, HNI portion 4.92 times and Retail portion 10.07 times. There were 9.18 lakh application which meant that the retail portion in terms of lots was subscribed 8.37 times.
There are two issues opening during the week with the first being that from Shipyard, Garden Reach Shipbuilders and Engineers Limited. The offer for sale of 2.92 cr shares opens on Monday the 24th of September and closes on Wednesday the 26th of September. The price band is Rs 115-118 with a discount of Rs 5 per share to retail and employees. The company had a top line of Rs 1,346 crs for the year ended March 2018 with an EPS of Rs 7.14. The company has an order book of Rs 20,313 crs as of July 2018 which consists of warships for the Indian Navy and patrol vessels for the coast guard. Almost all the ships on order except the three stealth frigates P17-A would be delivered in the next 18-24 months. The company has added new dry docks and is poised to significantly ramp up its ship building capacity. The PE multiple of the company is 16.11 – 16.53 times based on its EPS for March 2018. What is interesting is the fact that the company has developed the capabilities of handling the building of over 20 ships concurrently.
The second issue is from housing finance company Aavas Financers Limited which opens on Tuesday the 25th of September and closes on Thursday the 27th of September. The issue comprises of a fresh issue of Rs 400 crs and an offer for sale of 1.62 cr shares in a price band of Rs 818 – 821. The company is offering shares at a PE multiple of 51.8 – 53.82 times based on the EPS for March 2018. The price to book value or Net Asset value is at 5.22 times which is substantially higher than its peers HDFC, Can-Fin Homes, PNB Housing and Repco Home Finance. It is however substantially cheaper than Gruh Finance Limited. The company has roughly a fourth of its AUM from loan against property, which is at the centre of the crisis triggered on Friday. The issue looks expensive in the given circumstances and could be looked at on listing.
Markets have turned super volatile and though one may argue that there is money to be made, I am not sure whether that happens that way. Use sharp dips to buy and rallies to sell.
