As many as 117 companies have garnered a staggering Rs 62,736 crore through IPOs in the first eight months of Financial Year 2017-18, much higher than the cumulative amount raised in the last five fiscals, Parliament was informed on Friday.
These 117 initial public offers (IPOs) include 28 main- board public offers and the remaining for small and medium enterprises (SMEs), Minister of State for Finance Pon Radhakrishnan said in a written reply to Lok Sabha.
During April-November of 2017-18 fiscal, a total of 117 companies raised Rs 62,736 crore through IPO route. This was much more than the cumulative amount of Rs 62,147 crore garnered in the last five financial years.
Besides, the ongoing fiscal has witnessed the highest IPO activity since 2007-08, when companies had mopped up Rs 52,219 crore through the route.
The IPO chart in this fiscal is led by General Insurance Corporation of India (GIC) that garnered over Rs 11,176 crore. This was the largest public float by any firm after the October 2010 offer by Coal India which raised Rs 15,000 crore.
GIC is followed by New India Assurance Company that raised Rs 9,467 crore, HDFC Standard Life Insurance Company (Rs 8,695 crore) SBI Life Insurance Company (Rs 8,386 crore) and ICICI Lombard General Insurance (Rs 5,700 crore).
Individually, a total of 106 firms had garnered Rs 29,104 crore in the entire 2016-17, while 74 companies had raised Rs 14,185 crore in 2015-16.
Further, 46 firms had mopped up Rs 3,039 crore in 2014- 15, 40 companies had raised Rs 8,692 crore in 2013-14 and 33 firms had raked in Rs 6,497 crore in 2012-13.
SEBI has tightened the noose on listed companies not adhering to norms with regard to minimum public shareholding (MPS). Those that are non-compliant will have to pay a fine of Rs.5,000 a day. In addition, the entire promoter holding, except for compliance to MPS, will be frozen by depositories, and the promoter group and directors of the particular company will not be allowed to hold any position in other companies.
According to MPS norms, any listed company must have at least 25 per cent as public share holders while the remaining 75 per cent can be held by promoters. Government-promoted companies were given time till August 2018 to comply with these norms. Newly listed companies are given a three-year window to comply.
De-listing
Further, if the non-compliance continues for over one year the amount of fine per day will double to Rs.10,000 and such companies may even face compulsory de-listing of their shares from stock exchanges. Stock exchanges have been asked to share all the details of non-compliant companies on their website.
“Mandating penalties for non-compliance of MPS norms will surely act as a deterrent for the violators,” said Anjali Aggarwal, Partner & Head, Capital Market & Stock Exchange Services at Corporate Professionals, a law firm.
“But for any listed company, there may be many corporate actions such as forfeiture of partly paid shares/ buybacks/ takeover offers, etc, wherein promoter holding crossing the threshold of 75 per cent is beyond that company’s control, as it can’t be ascertained as to how many shareholders may tender their holding. A distinction needs to be carved for routine defaulters and for lapses that may happen because of any such corporate actions.”
In the past, SEBI has taken action against non-compliant firms but the penalty was not specified in the rule book.
In 2013, SEBI had first cracked the whip on 105 companies, including Adani Ports, BGR Energy Systems, Tata Teleservices and Videocon, for not complying with the MPS norms by freezing voting rights and corporate benefits of promoters, the promoter group and directors of these companies, until they complied.
The government crackdown against 331 “suspected shell companies” has hit several investors, including mutual funds and small investors, who hold shares worth nearly Rs 9,000 crore in these companies.
In a late circular on Monday, market regulator Securities and Exchange Board of India (Sebi) directed stock exchanges to immediately restrict trading in 331 companies identified as “shell companies” by the Ministry of Corporate Affairs in consultation with the Serious Fraud Investigation Office (SFIO) and the income-tax (I-T) department.
While, by definition, a shell company is one without any business operations or assets, several companies with active business dealings too were part of the list with 331 names. At least five companies in the list have market capitalisation (m-cap) of over Rs 500 crore each, with diverse shareholding from institutional as well as retail investors.
These companies have been placed in the so-called graded surveillance measure (GSM) stage VI, where trading in the security is allowed only once a month with “surveillance deposit” of three times the trade value.
Companies, including J Kumar Infraprojects (m-cap of Rs 2,150 crore), Prakash Industries (Rs 2,124 crore), Parsvnath Developers (Rs 1,036 crore), and multinational company SQS India BFSI (Rs 535 crore), termed the “shell company” classification as wrongful and urged Sebi and exchanges to reconsider the directions.
“It is hereby clarified J Kumar is not a shell company and the suspicion of the regulator is uncalled for. Our company’s compliance track record, both with the exchanges and Registrar of Companies, has been impeccable,” said the Mumbai-based infra developer, highlighting the various projects it currently working on, including some government contracts.
Sebi sources said over three dozen companies in the list technically don’t fall under the definition of a shell company and the circular maybe revised to correct the nomenclature. “The regulator is verifying the companies who have raised grievances. However, a rectification may take some time as the exchange needs to conduct an audit and submit a report to Sebi. If there is an all-clear given by the auditors and the regulatory authorities involved, Sebi can lift the ban,” said a source.
Another source said the Ministry of Corporate Affairs has widened the scope of shell companies. Those with cases against them in the SFIO or those that have evaded taxes are part of the list. A finance ministry official said concerns of investors in these companies will be looked into.
Several companies made detailed representations to Sebi and corporate affairs ministry, stating they can’t be termed as shell companies. “There could be a possibility that companies who are listed in the shell categories are genuine. In that case, they can always approach Sebi and stock exchanges to remove the ban. This is more of a preventive action and could be rectified if an entity is not found guilty,” said J N Gupta, managing director at Stakeholders Empowerment Services (SES).
Experts said the while all companies may not be shell companies, it is possible that the enforcement agencies may have found some dubious links and decided to take action.
“This is in continuation of strong messages being sent to corporate entities that frauds of any nature will face strong action. Greater vigil and networking of several databases would throw up more malpractices and stricter action,” said Prithvi Haldea, founder-chairman at Prime Database.
Government’s fight against market manipulation to evade LTCG
Several probes by the I-T department and Sebi have shown that listed shell companies were being used to launder money by using the stock exchange route. The typical modus operandi has been to buy shares of shell firms, jack up the prices and sell shares after a year to claim long-term capital gains (LTCG) exemption.
The government decided to crack down on such sham transactions after the Special investigation teams (SIT) on black money suggested a mechanism to detect shell companies and put in place checks and balances to curb stock market abuse.
In the last three years, the I-T department has identified over 1,155 shell companies which were used as conduits by over 22,000 beneficiaries. The amount involved in non-genuine transactions of such beneficiaries was over Rs 13,300 crore. So far, the I-T department has launched criminal prosecution complaints against 47 persons. The SFIO, too, has undertaken the exercise of preparing comprehensive digital database of shell companies and their associates. Based on the SFIO report, the MCA has removed 162,618 companies from the Registrar of Companies.
The bull run was driven by hopes of earnings growth and continued buying by domestic investors. Rising global optimism on French elections results and likely announcement of tax reforms by Donald Trump in the US also pushed the markets higher.
With mixed positive sentiments among investors and unabated funds inflows in both global and domestic rallies, markets created yet another milestone in the stock trading history on Wednesday. The benchmark Sensex ended with new and all-time high of 30,133.35 for the first time, while the broader Nifty scaled a new peak at 9,351.85 points.
Similarly, energised by positive global cues in line with a spectacular rally in equities, the rupee also surged by another 15 paise to close near a fresh 21-month high of 64.11, the third straight session of gains. This is the highest closing for the rupee since August 10, 2015, when it had ended at 63.87.
The market momentum also got an additional push on growing expectations for robust foreign inflows to India sparked by a renewed optimism about the US economy and waning anxiety over the European political landscape. Besides, stocks also saw frenzied buying, in line with global shares, which have been on a high after the first round victory of centrist Emmanuel Macron in French presidential elections. Investors are also keeping an eye on US President Donald Trump’s much-awaited tax reforms.
However, traders and market insiders have a different view on this unusual rally, saying that the impressive show by the ruling BJP in Delhi civic polls added to the positivity in the share market.
Keeping the upward trend of the markets, the BSE, however, cautioned the investors not to be carried away by the ‘euphoria’ and refrain from investing in penny stocks. BSE Chief Executive Ashish Chauhan appealed to investors to invest only in good companies or opt for the mutual funds’ route to invest in the markets. “As an exchange, we advice investors not to be carried by the 30,000 mark euphoria and they should not invest in penny stocks nor do they fall prey to fly-by- night operators,” Chauhan said after celebrating the milestone at the Dalal Street towards the end of the trading hours in Mumbai.
As far as Sensex is concerned, the BSE 30-share index opened on a strong footing and surged to a lifetime high of 30,167.09 points in intra-day trade, before settling at 30,133.35, up 190.11 points, or 0.63 per cent. This surpassed its previous record close of 29,974.24, reached on April 5. The gauge had hit its previous intra-day high of 30,024.74 on March 4, 2015. The Sensex has gained 768.05 points or 2.62 per cent in three days.
Similarly, the broader 50-issue NSE Nifty scaled a new high of 9,367 before finally settling 45.25 points, or 0.49 per cent higher at 9,351.85, a new record closing.
Its previous closing high of 9,306.60 was hit in Tuesday’s trade. It also broke the previous intra-day record of 9,309.20. “Market has made a higher high on account of rising global optimism due to ease in political risk in Eurozone and expectation of tax reform in the US. “Volatility emerged during the late hours due to profit booking but short covering ahead the expiry navigated the direction back to north. Optimism on earnings and continued buying by local investors is directing the recent rally in the market,” said Vinod Nair, Head of Research, Geojit Financial Services.
Overseas, Asian indices also ended higher following overnight rally in US stocks on strong earnings announcements and expectations surrounding US President Donald Trump’s impending tax reforms. Tokyo’s Nikkei ended up 1.1 per cent, while Hong Kong’s Hang Seng rose 0.5 per cent, its fifth straight day of gains. Shanghai Composite Index edged up 0.2 per cent.
Key indices in Europe, however, were mixed in their morning deals, with Paris CAC 40 rising 0.1 per cent, London’s FTSE slipping 0.06 per cent and Frankfurt’s DAX 30 declining 0.03 per cent. Back home, of the 30-share Sensex pack, 18 scrips ended higher while 12 closed lower.
Major gainers were ITC 3.36 per cent, M&M 3.29 per cent, HDFC 2.36 per cent, HUL 1.78 per cent, ICICI Bank 1.61 per cent, Tata Motors 1.17 per cent, Bharti Airtel 1.14 per cent, Maruti 0.88 per cent, HDFC Bank 0.73 per cent and Asian Paints 0.73 per cent.
The total turnover on BSE amounted to Rs 5,021.73 crore, higher than Rs 4,006.89 crore registered during the previous trading session.
Private equity investors make big money in IPO exits. This is well known. But what is less known is that retail and other investors have also been making decent money after the exits. The largest IPO exits in the last three years made 1-14 times returns for private equity firms. But after listing, retail, HNIs and institutional investors have gained 9-156% in these firms, thanks to a strong stock market, data from Venture Intelligence show.
If the market rises further, the gains will only increase and private equity-like, super sized returns may still be possible. Investment bankers attribute this to the rising interest in equity market as well as strong fundamentals. “Stocks being valued attractively and appetite for IPOs have helped these companies,“ said Dharmesh Mehta, MD, Axis Capital. Financial stocks have obviously beaten the rest with RBL Bank surging 156% since listing in August 2016 followed by Ujjivan Financial Services with a gain of 87%.
Other gainers include Dr Lal PathLabs which has jumped 76% and Dilip Buildcon which has moved up 71%. In FY17, PE firms sold their complete stakes in 14 IPOs, as compared to 16 in FY16 and seven in FY15. According to Ajay Saraf, executive director, ICICI Securities, a PE exit augurs well for investors as the company could be expected to have better corporate governance and better fundamentals.
PE firms usually enter into sectors that have potential to do well and this gives comfort to investors while buying these stocks, said Saraf. “The PE exit trend is likely to gain further momentum going ahead,“ added Saraf.
– Nifty surpasses March 2015 peak, Sensex gains as much as 2.1%. – Bigger-than-expected victory seen as endorsement of reforms
Indian equities rallied to a record and the rupee climbed the most since 2013 after Prime Minister Narendra Modi’s resounding victory in state elections boosted expectations for a continuation of his reform agenda.
The NSE Nifty 50 Index climbed 1.7 percent to 9,087, crossing its March 2015 record close, as the market reopened after a holiday. The India VIX Index, a gauge of expected stock-price swings, touched an all-time low. The rupee surged 1.2 percent to 65.8175 per dollar, the strongest level since November 2015. The central bank was seen buying dollars in early trade to cap gains but moved away later, Mumbai-based traders said.
“This win will give Modi the confidence to push ahead with more reforms and not pursue populist policies,” Sampath Reddy, chief investment officer at Bajaj Allianz Life Insurance Co., said by phone. The insurer, which oversees 480 billion rupees ($7.3 billion) of assets, is bullish on financial-services companies and metal producers, he said.
Modi’s Bharatiya Janata Party won 312 seats in the 403-member assembly of Uttar Pradesh, according to the Election Commission of India, up from 47 in 2012. The results in India’s largest state were seen as a litmus test of Modi’s popularity and reforms, including opening up the country to more foreign investment and seeking to introduce a goods and services tax, ahead of general elections in 2019.
While exit polls released last week suggested a large BJP victory was possible in Uttar Pradesh, the scale of the win was stark in a state that has long been divided along religious and caste lines. It is also a repudiation of political foes who assumed that Modi’s disruptive Nov. 8 move to junk high-value currency notes would be politically unpopular.
“Uttar Pradesh is a state where mandates have tended to be mostly divisive, so the result is a mandate for development, which has been sorely missing in the state,” Gautam Sinha Roy, a fund manager at Mumbai-based Motilal Oswal Asset Management Co., said by phone. “Markets will now start assigning higher probability to a BJP victory in the 2019 polls.”
India’s economic growth has been 7 percent or more in each of the last four quarters, which has helped lure $3.4 billion of foreign funds into local stocks and bonds this year. Mutual funds bought shares for seven months through February, including a record $2.1 billion in November. The S&P BSE Sensex has risen 11 percent in 2017, and the rupee is up 3.2 percent against the dollar.
“We expect the Reserve Bank of India to more actively cap further rupee gains given the sharp swing higher in the real effective exchange rate in recent months,” Divya Devesh, an Asia FX strategist at Standard Chartered Bank in Singapore, said by e-mail. He forecasts the rupee at 69 rupees to the dollar by year-end.
Pricey Valuations
The Nifty came off an intraday high of 9,122.75 as investor focus turned to a near-certain interest rate hike from the Federal Reserve this week and expected revival in corporate profitability. The Nifty and the Sensex are valued at about 21 times forward earnings, the highest level since April 2010.
“Valuations look stretched and investors are cautious with the Fed meeting round the corner,” said Sushant Kumar, a fund manager at RAAY Global Investments Pvt. in Mumbai. “Stocks have priced in the expected increase in rates. The focus is on Fed’s outlook.” The Nifty may reach 10,000 by March 2018, accompanied by as much as 14 percent expansion in earnings of its 50 members, he said.
Still, the scale of the BJP’s victory paves the way for further reforms and should lead to more inflows, supporting asset prices, according to Vikas Gupta, chief investment strategist at OmniScience Capital Pvt. in Mumbai.
“For international investors, India is one of the few emerging markets that has everything going for it: demographics, economics and politics,” he said. “With elections settled, it is clear that the federal government is now going to be fully in charge of the parliament.”
Of Rs 10,869 crore, top 10 defaulters together owe the bank Rs 3,554 crore
Close to a third of Punjab National Bank’s gross non-performing assets (NPAs) of Rs 34,338 crore have resulted from willful defaults, the lender has said. Of this amount of Rs 10,869 crore, the top 10 willful defaulters together owe the New Delhi-headquartered bank Rs 3,554 crore.
As at the end December last year, PNB had identified 904 companies as being willful defaulters and filed cases against some of them. The number at the end of September 2015 was 764 companies and the value of unpaid loans then was Rs 9,204 crore.
Following a speedy clean-up of its portfolio in the wake of a directive from the Reserve Bank of India (RBI), PNB reported slippages of Rs 17,655 crore in Q3FY16 and a pre-tax loss of Rs 858 crore. The slippages left the public sector bank’s impaired loans at 17.4%, comprising 8.5% gross NPAs and 8.9% standard restructured loans.
PNB has made loan loss provisions of Rs 18,758 crore in the three years 2012-13, 2013-14 and 2014-15.
In the current year provisions are expected to be of the order of Rs 9,800 crore; in the nine months to December the amount provided was Rs 7,089 crore. Between FY11 and FY15, the government infused Rs 3,457 crore of capital.
The PNB stock’s market value has been eroded by approximately Rs 12,000 crore since the start of September. The stock closed at Rs 75.65 on the BSE on Monday, down 0.66% over Friday’s close. The stock is trading at a price to book value (P/BV) of 0.29 times for estimated FY17 book value.
PNB’s top 10 wilful defaulters include names like Winsome Diamonds & Jewellery (Rs 900.37 crore), Forever Precious Jewellery & Diamonds, Zoom Developers (Rs 747.98 crore), National Agricultural Cooperative Marketing Federation of India or Nafed (Rs 224.26 crore) and S Kumar Nationwide (Rs 146.82 crore). While the bank did not comment on the classification of these exposures, all the accounts are understood to have been classified as NPAs and provided for.
Last year in June, the Enforcement Directorate (ED) had attached 1,280 acres of Zoom Developers’ land in the US worth Rs 1,000 crore. According to reports, Zoom has allegedly diverted funds borrowed from banks to 350-odd subsidiaries, related parties based in India and abroad, and to purchase jewellery for the wife of its promoter, Vijay Chaudhary. In a separate case, several PNB board members were questioned about loans to Winsome Diamonds and its subsidiaries.
Interestingly, the list as on December 31, 2015, does not include Kingfisher Airlines, which PNB recently said has been declared willful defaulter. “The company is in consultation with its legal counsels to challenge the decision by taking appropriate legal action that may be required in this regard,” UB (Holdings) had said in a stock exchange filing.
According to RBI guidelines, a borrower is termed a willful defaulter if he has defaulted in meeting the repayment obligations to the lender even when he has the capacity to repay, or has not utilised the money from the lender for the specific purposes for which finance was availed and has diverted the funds for other purposes.
KC Chakrabarty was chairman and MD of the bank between 2007 and 2009 and KR Kamath was CMD between 2009 and 2014.
As many as 117 companies have garnered a staggering Rs 62,736 crore through IPOs in the first eight months of Financial Year 2017-18, much higher than the cumulative amount raised in the last five fiscals, Parliament was informed on Friday.
