After Secondary markets rally, IPO flurry with 3 issues and a bond issue

December 1st, 2012 Comments Off on After Secondary markets rally, IPO flurry with 3 issues and a bond issue

A week in the markets is a very long time and when there is a mid-week trading holiday the week looks even longer. The last week was no exception with Wednesday the 28th of November being a holiday. The markets turned buoyant and we had three great days of rallies on Tuesday, Thursday and Friday which saw the benchmark indices like the BSESENSEX and NIFTY gain 4.5% each. The SENSEX gained 833.33 points to close at 19,339.90 points while the NIFTY gained 253.25 points to close at 5,879.85 points. This week has been the best weekly gain in the year so far in terms of points gained, beating the one in the first week of June when the markets rose 754 points on the SENSEX. The corresponding number on the NIFTY was 227 points. In terms of percentage gain the week ended 8th June saw the SENSEX gain 4.72% while the NIFTY gained 4.69%. With these sharp gains the benchmark indices are trading at new highs for the year having gained 25.14% and 27.15% respectively. These levels were last seen in April 2011.

The calendar year 2012 has had its impact on the primary markets as well and so far there have been nine issues which have tapped the capital markets. Of these 6 have been listed, 2 issues were withdrawn and the last one Tara Jewels would be listing later this week. The buoyancy in the secondary market has certainly rubbed off on the primary market and it appears to be party time in the primary market as well. There will be three issues opening in the next five days and would be accompanied by a Tax free bond issue. If all goes well by the end of the year assuming all issues sail through the number of 6 listings would almost double to 10. These issues of course do not include the OFS (offer for sale) method of dilution allowed by SEBI and being used by companies.

The issues tapping the markets are as follows:

CARE (Credit Analysis and Research Limited) would be offering 71,99,700 shares by way of offer for sale by existing shareholders in a price band of Rs 700-750. The issue would garner Rs 504crs at the lower end and Rs 540 crs at the upper end of the price band. The issue opens on Friday the 7th of December and closes on Tuesday the 11th of December.

P C Jewellers is tapping the capital markets with its public issue for 4,51,33,500 equity shares. The issue would remain open between Monday the 10th of December and Wednesday the 12th of December. The company is yet to announce the price band but the same would be available by way of release of statutory advertisement in the financial newspapers on Monday the 3rd of December. It is expected that the companies price band would be in the region of Rs 120 or thereabouts with the price band being plus or minus of this price. The company would garner anywhere between Rs 500 and Rs 600 crs.

BhartiInfratel would be the mother of all issues and the company would be raising through a fresh issue and an offer for sale between Rs 3,901 crs at the lower end of the price band of Rs 210 and Rs 4,467 crs at the upper end of the price band of Rs 240. There would be a discount of Rs 10 available to retail investors. The issue would open on Tuesday the 11th of December and close for institutional investors on Thursday the 13th of December and for retail investors on Friday the 14th of December.
The tax free bond issue from REC opens on Monday the 3rd of December and closes on Monday the 10th of December. The issue size is upto Rs 4,500 crs and has a first come first served formula in case of oversubscription. The bonds are offered in two periods of maturity of 10 years and 15 years. There is a coupon rate of 7.22% for non-retail clients for 10 year duration and 7.38% for 15 year duration. The similar rates for retail client who can this year apply for upto Rs 10 lakhs would be 7.72% for 10 years and 7.88% for 15 years.

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Performance of Newly Listed Shares as on 30th November 2012

December 1st, 2012 Comments Off on Performance of Newly Listed Shares as on 30th November 2012
Name Date of listing Issue Price closing  price closing price % gain loss  change over
30th November 23rd November over week lssue price
VKS Projects Limited 18th July 55.00 130.05 131.75 -3.09 136.45
Thejo Engineering Limited SME NSE) 18th September 402.00 379.00 378.80 0.05 -5.72
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Hindustan Copper – Divestment a Disaster

November 28th, 2012 Comments Off on Hindustan Copper – Divestment a Disaster

Hindustan Copper Limited raised Rs 810 crs for the government and kick started the divestment for the financial year 2012-2013. There are about four months to go and the target an ambitious Rs 30,000 crs. The Divestment department expects us to believe that by offering a 41% discount to the closing price of the stock they have offered value for money to investors and that investors have lapped up the issue.

Trading data shows up differently. There was an arbitrage opportunity which has been used by investors and the smart ones have made money. The table below gives detail of traded quantity on the BSE and NSE on the 23rd which was the day the sale (OFS) was made. It also contains traded data of Monday and Tuesday along with delivery made. The data clearly points out that the total delivery made in these three days is a mere 71.26 lac shares which is about 31.40% of the traded volume on these three days. If one compares this with the bids received in the OFS it is a mere 13.78% of the same.

BSE NSE
Date Traded vol Delivery Del %age Traded vol Delivery Del %age
23-Nov 2559195 333963 13.05 7807970 1154825 14.79
26-Nov 125649 125649 100.0   936390 878316 93.80
27-Nov 2603911 1248245 47.94   8662645 3385333 39.08
Total 5288755 1707857 32.29   17407005 5418474 31.13

The final bid quantity of 517.14 lac shares was at an average price of just under Rs 157 against the floor price of Rs 155. The stock has already broken that price and closed at Rs 153.45 on the BSE and at Rs 153.40 on the NSE. The issue was subscribed by LIC and PSU banks led by SBI and PNB. Even at the current price the loss would be negligible and one would hope that state run PSU banks that were cajoled and coerced into applying for these shares are booking losses and exiting. The government needs to sell another 370 lac shares of Hindustan Copper to reach a level of 10% public shareholding. Incidentally the SEBI rule is 25% public shareholding by June 2013.The price for the next round of divestment would be significantly lower than the present level on fundamental grounds. The EPS for Hindustan Copper in the first six months ended September 2012 was Rs 1 per share. Annualising the same the EPS would be Rs 2 for the year and at the offer price of Rs 155 the PE would be a staggering 77.5 times annualised EPS for the year ending March 2013.

This PE is in no way cheap or attractive for investment. Since the last three days the stock has closed at down circuit filter on each day losing 20%, 20% and 10% each day. The circuit filter would remain at 10% unless it again closes at down circuit filter on Thursday, in which case it would change to 5%. I believe retail and HNI investors who bid for the share in the OFS have already exited the counter. The selling would continue from the institutional investors and that would keep the share under pressure. What would be interesting to watch out for would be who the buyers are?

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