Month: January 2024

Markets in Dussehra spirit

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Indian markets got into the festive mood on Tuesday, a day before Dussehra, with equities gaining more than 2% amid positive global cues. Weak manufacturing data in the US raised hopes that the Federal Reserve would slow its pace of policy tightening.

The BSE Sensex closed 2.25% higher at 58,065, while Nifty50 settled at 17,274, up 2.29%.

All 20 sectoral gauges compiled by BSE advanced, with metal and financial services indices surging the most at 3.1% and 2.8%, respectively. The market breadth was positive with 2,572 stocks advancing compared with 874 that fell.

Also read: Myntra rolls out new festive campaign featuring Ranbir Kapoor and Kiara Advani

FPIs shopped for equities worth `1,344 crore on Tuesday, provisional data showed. Year to date, they continue to be net sellers to the tune of $22.3 billion.

“We believe the worst of the FPIs outflow is now behind us as the strong earnings growth and economic recovery will play out for the remaining months of 2022. The market will continue to be driven by macro-economic factors such as direction of the dollar index, bond yields, direction of inflation, growth in the developed world, and trend of commodity prices,” said a strategy note by Axis Securities.

The brokerage has set a target of 18,400 for Nifty for March 2023, valuing it at 20x FY24 earnings versus 22x earlier, indicating an upside of 6.5% from the current levels. “We cut the Nifty multiple to accommodate the rising interest rate scenario. Though aggressive policy tightening will help in curbing inflationary pressure, persistently elevated oil and commodity prices would continue to pose challenges to the market multiple in the next few quarters,” the brokerage said.

Asian and European stocks rallied on Tuesday after Wall Street soared overnight, fuelled by hopes that weakening US economic data would lead to a change in global central bank policy. Nikkei 225 rose 2.9% while Taiwan Weighted and Kospi gained more than 2% each on Tuesday. Britain’s decision to let go of its controversial plan to cut taxes for the highest earners, just 10 days after announcing it, boosted investor confidence.

India is the only market other than the US where equity valuations are extended versus domestic bonds, according to CLSA. At about 2 percentage points, the difference between India’s 10 year GSec yield and the Nifty’s earnings yield is at a point at which negative equity returns usually ensue. “The Nifty’s absolute PE is slightly below one standard deviation of its historical average and at levels where positive equity returns are usually not forthcoming. At the 98-99th percentile, India’s relative valuation to EMs and Asia ex-Japan is also near record highs. A simple mean reversion could drive a deep pullback,” the brokerage cautioned in a recent note.

Also read: PMGKAY extension: FCI wheat stocks to fall to buffer by January

Cool-off in the key commodity prices coupled with the central bank’s actions on front-loading the interest rates have changed the market style in the last two months. Banks, automobiles, hospitals, discretionary consumption, and domestic industrial themes look attractive in the near term over export and commodity sector themes, said Axis Securities. “Local or domestic-oriented themes are likely to perform better in the near term. We continue to believe that profitability will shift from commodity producers to commodity consumers going forward,” the brokerage said.

A long bull candle was formed on the daily chart with gap up opening. This indicates an upside breakout of the larger consolidation movement around 16,800-17,200 levels, according to analysts.

“The short-term trend of Nifty has turned up sharply after a broader range movement of the last few sessions. A decisive move above 17,300 levels is likely to pull Nifty towards the next crucial resistances of around 17,600 and next 18,000 levels in the near term. Immediate support is placed at 17,150 levels,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

Why, When, Where, How of IPOs: How companies raise money from share markets

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By Sandip Khetan

Indian stock markets and many around the world are touching historic highs. Boardrooms of unlisted companies are discussing ways and means to assess the timing of their Initial Public Offers (IPOs). An IPO is a landmark event in the life of any company. Every promoter dreams to make the company public.

Why IPO?

Management needs to consider several matters before rolling out an IPO. These include:

Investors are keen on investing in companies which operate in a high growth area or have been able to demonstrate with their business model the ability to operate in an environment which offers sustainable growth over a longer term. So, companies need to be very comfortable in addressing the ‘why’ of an IPO with a compelling equity strategy in their business, including considerations of other sources of capital.

Many companies with strong business models and ability to generate and source growth capital wish to take out an IPO to create shares as a currency for future mergers and acquisitions. This helps them provide a way to monetize their existing stock options as offered to employees and key management personnel, create a better brand in the marketplace to attract customers and better talent, and expand in different geographies.

When to do an IPO?

The question that often arises with regards to an IPO pertains to its timing. It is never an easy answer as markets are often volatile. Hence, it is important for a company to look at its business model and spend time to prepare for listing at a short notice. Some of the key factors which contribute towards deciding the timing of an IPO are listed below:

When the management can demonstrate significant visibility in terms of its business model and positive cash flows or very strong growth in near- to medium-term, it adds to a company’s compelling equity strategy. Investors often like to invest in growth businesses so that they can reap higher returns as compared to matured businesses that are already listed and are available for investments.

Which sector is the company operating in and what is the flavor of the market at a particular point in time. For example, currently businesses in pharma, technology, fintech and renewable energy are high in terms of investors focus and companies operating in these sectors should look at mining investors interest sooner than later.

Where to list?

It is important to consider the regulatory environment of the company, its long term-strategies and its outlook before deciding the markets to list. Some of the key matters that can help in decision-making are:

Tax and valuation considerations: This can often determine the markets in which companies eventually list their shares. Companies which are incorporated in India, look at India as the obvious choice to raise capital. Indian capital markets offer significant amount of depth and several companies have raised billions of dollars successfully.

Purpose of the roll-out: Some of the companies in renewable, media, technology, ecommerce and fintech sectors are actively looking at raising capital overseas. Valuation considerations and profiles of existing investors influence these companies’ decision-making skills.

Meeting requirements of the market that company’s plans to list an IPO: To determine which stock exchange to list is a key decision that companies need to take early in the journey of the IPO process as every destination requires (though overlapping on many fronts) different things. Companies may miss the opportunity to time the market, if they are not clear on the exchange they want to eventually list.

How to list?

Once a company has crossed the hurdle of decision-making around the purpose, timing as well as exchange on which they want to potentially list, the bulk of the work starts in terms of the preparation towards the listing. Some of the key factors which the company needs to keep in mind are outlined below:

The company needs to reassess existing governance framework to ensure that it is in line with regulatory requirements. It essentially involves inducting independent directors on the board, setting up committees (e.g., audit committee, risk management committee and nomination committee) and also putting together the framework to ensure integrity in the whole process of decision-making and external reporting.

The company is required to dedicate a significant amount of time to consolidate financial statements in the form and shape as required for a listed company. It also needs to assess this based on the market in which it wishes to list its IPO. It is also essential for the company to reassess its historical financial statements and reports issued by its auditors.

A significant amount of time and effort may be required to align reporting and legal entity structure. This may involve a legal process or externalization of the holding company. Thus, the company needs to plan this appropriately and may require to incur significant costs to achieve the optimal legal structure for eventual listing.

Overall, an IPO is one of the most exciting milestones in the lifetime of a company. It requires a significant amount of time and bandwidth from the management’s end. It is almost an irreversible decision; hence, it is important for management and company’s board to evaluate all options and consult appropriately while planning this journey.

(Sandip Khetan is Partner and National Leader, Financial Accounting Advisory Services at EY India. The views expressed are his own.)

Suzlon to raise Rs 1,200 cr via rights issue

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Wind energy player Suzlon said on Sunday it was offering existing investors in the company five shares for 21 fully paid-up shares in bid to raise Rs 1,200 crore via a rights issue.

The decision was taken at a board meeting, the company said in a release to the exchanges.

Also Read: Accenture: Revenue rises 15% in fourth quarter

Suzlon’s shareholder funds were a negative Rs 653 crore in June, 2022, as per an investor presentation. In March, 2022, the shareholder funds were a negative Rs 3,562 crore, an audited number.

Suzlon reported a net loss of Rs 176.55 crore in FY22.

The company reported revenues of Rs 1,378 crore in Q1 FY23, a year-on-year (y-o-y) growth of 21%.

It recorded an exceptional gain of Rs 2,469 crore. The profit before tax (PBT) before exceptions was Rs 7 crore.

The Earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin was 15.6%, leading to an Ebitda of `214 crore, up 39% y-o-y.

Ireland is among popular study abroad destinations for the Indian students; Study 

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Ireland is among the popular study abroad destinations for Indian students and 4,735 Indian students were enrolled in the Irish institutions between 2022 and 2023, sighted the recent insights from the ApplyBoard.

According to the Irish Higher Education Authority (HEA), In 2022/23, Ireland set a new all-time high for the number of international students studying at Irish universities. 33,480 students were enrolled at Irish universities last year, an increase of nearly 12% compared to 2021/22, according to the report.

According to the Higher Education Authority (HEA) 4,735 Indian students were enrolled in the Irish institutions between 2022 and 2023. India’s student population in Ireland has grown by a significant 17.8%, reflecting a surging trend. As a result, India is well-positioned to soon surpass the United States as the leading population of international students for Irish institutions, as claimed in the report.

The preference for fields of study remains consistent, with STEM subjects maintaining their dominance at 43% of all international students. With one in every five international students in 2022/23 enrolling in sought-after programmes including nursing, social work, medicine and childcare demonstrating the demand for healthcare-related careers.

Master’s programmes are on the ascent, accounting for 29.5% of international students in 2021/22, up from 20.8% in 2016/17. Ireland’s Third Level Graduate Scheme, offering extended work opportunities for master’s graduates, makes these programmes increasingly attractive.