Mehul Shah & Ashish Rukhaiyar
Mumbai, 15 December 2011
The Securities and Exchange Board of India (Sebi) has transferred quite a few officials who were probing irregularities done during initial public offers (IPOs).
The move has surprised many in the markets, as the regulator is in the midst of looking into subscription details and trading patterns of several recent issues. Sebi is probing the role of merchant bankers, brokers and companies after questions were raised over the way some recent public issues were subscribed, amid talk of a tacit understanding between merchant bankers and promoters, as well as post-listing fluctuations in stock prices.
“Sebi has transferred quite a few officials involved in IPO investigations. It’s a surprising decision,” said a source familiar with the developments.
When contacted, a Sebi spokesperson said the regulator “undertakes transfer of officers from time to time, according to the laid-down policies. A few officials who have completed their tenure in a particular department were transferred to another department. This exercise involved officials in various departments, including the investigations department”.
The subscription details would help Sebi get clues about the names of investors who subscribed to these issues. If the same people had applied in most issues, there could be a trend.
Similarly, looking into the trading pattern would indicate if there was a concentration of volumes from a particular segment of brokers. The trading volumes in newly listed companies were several times higher than the number of shares issued by companies in IPOs, indicating there could also have been some circular trading in these.
Shares of half the companies that came out with IPOs this year had fallen 30 per cent from their issue prices till on Wednesday, data compiled by the BS Research Bureau showed. Not just that, some of these stocks like RDB Rasayans, Taksheel Solutions, Bharatiya Global, Indo Thai Securities, Shilpi Cable, Paramount Printpackaging, Acropetal Technologies Brooks Laboratories and Servalakshmi Paper have slumped 84 per cent from their issue prices.
There are allegations that some of the promoters pre-sold their issues at a 30-50 per cent discount to operators to get subscriptions. And, once the stock was listed, operators scrambled to exit, leading to wild fluctuations in prices of these stocks.
Thursday 22 December 2011
Mobile trading picks up speed
Ashish Rukhaiyar
Mumbai, 17 November 2011
Mobile trading, approved by the capital market regulator late last year, has seen a nearly fourfold jump in turnover in the past few months.
Market players say an increasing number of retail investors are embracing the new platform to deal in equities. The availability of trading applications across mobile platforms has acted as a catalyst, they say.
Mobile trading, in simple terms, refers to investors placing buy/sell orders using their mobile phones. The Securities and Exchange Board of India (Sebi) gave its go-ahead to mobile trading in August last year. The regulator allowed brokerages to introduce applications for mobile phones, which clients could download and trade through. Stock exchanges provide their own versions of trading applications.
According to the National Stock Exchange (NSE), the total monthly turnover of mobile trading has risen to Rs 2,606 crore in October from Rs 715 crore in April — a 264 per cent rise in just six months. Initially, when mobile trading was launched, the monthly turnover was in the range of Rs 10-12 crore on NSE. In fact, the monthly turnover has registered a steady rise since April as more investors have started to adopt the new platform. Meanwhile, in the current year, the Bombay Stock Exchange has seen its monthly mobile trading volume more than double from Rs 6 crore to Rs 14 crore.
An NSE spokesperson said the exchange had launched applications for all smartphones and tablets along with “reasonable phones with GPRS connections”. “Volumes from mobile trading have been growing and we are confident the trend will pick up further,” said the spokesperson.
Market players, meanwhile, say the availability of trading applications across platforms — Android, BlackBerry, Windows, etc — has led to investors warming up to mobile trading. “Mobile trading is much simpler than internet trading as a simple handheld device does the trick. So, clients who are on the move use it extensively. While the percentage of investors opting for mobile trading is still minuscule, the trend is encouraging,” says Vinay Agrawal, executive director, Angel Broking.
Prior to the regulatory approval, most of the large brokerages were already providing mobile platforms through which their clients could access live quotes and portfolio details. These applications were tweaked to meet regulatory norms and buy/sell functionalities were added.
Mumbai, 17 November 2011
Mobile trading, approved by the capital market regulator late last year, has seen a nearly fourfold jump in turnover in the past few months.
Market players say an increasing number of retail investors are embracing the new platform to deal in equities. The availability of trading applications across mobile platforms has acted as a catalyst, they say.
Mobile trading, in simple terms, refers to investors placing buy/sell orders using their mobile phones. The Securities and Exchange Board of India (Sebi) gave its go-ahead to mobile trading in August last year. The regulator allowed brokerages to introduce applications for mobile phones, which clients could download and trade through. Stock exchanges provide their own versions of trading applications.
According to the National Stock Exchange (NSE), the total monthly turnover of mobile trading has risen to Rs 2,606 crore in October from Rs 715 crore in April — a 264 per cent rise in just six months. Initially, when mobile trading was launched, the monthly turnover was in the range of Rs 10-12 crore on NSE. In fact, the monthly turnover has registered a steady rise since April as more investors have started to adopt the new platform. Meanwhile, in the current year, the Bombay Stock Exchange has seen its monthly mobile trading volume more than double from Rs 6 crore to Rs 14 crore.
An NSE spokesperson said the exchange had launched applications for all smartphones and tablets along with “reasonable phones with GPRS connections”. “Volumes from mobile trading have been growing and we are confident the trend will pick up further,” said the spokesperson.
Market players, meanwhile, say the availability of trading applications across platforms — Android, BlackBerry, Windows, etc — has led to investors warming up to mobile trading. “Mobile trading is much simpler than internet trading as a simple handheld device does the trick. So, clients who are on the move use it extensively. While the percentage of investors opting for mobile trading is still minuscule, the trend is encouraging,” says Vinay Agrawal, executive director, Angel Broking.
Prior to the regulatory approval, most of the large brokerages were already providing mobile platforms through which their clients could access live quotes and portfolio details. These applications were tweaked to meet regulatory norms and buy/sell functionalities were added.
Q&A: Abhay Laijawala, Deutsche Equities India
'There is still a lot of investor goodwill for India'
Ashish Rukhaiyar & Mehul Shah
Mumbai, 15 November 2011
India’s economy is slowing but that will not lead foreign investors to capitulate, unless there is an event of significant risk, says Abhay Laijawala, head of research, Deutsche Equities India. In an interview with Ashish Rukhaiyar and Mehul Shah, he said India was still attractive for fundamental investors with a long-term horizon and that foreign flows would remain steady. Edited excerpts:
You talked about a slowdown in gross domestic product (GDP) trend growth to seven per cent in your latest report. How strong is the probability and what is the view among the investor community?
The general belief (among investors) is it’s still too early to say that. However, the risks of a slowing GDP growth trend are rising. Our report is a what-if analysis. Our economists are still maintaining an eight per cent GDP growth rate. But, clearly, with some headwinds on policy inaction, compulsions of a popular democracy and a slowing global economy, many investors are convinced GDP growth will slow down for a year. There is still a lot of investor goodwill for India and its structural drivers are very much intact. We believe the government recognises the need for reforms. What we are not certain is the timing, and timing is everything.
But does the timing of the report indicate there is a higher probability of going down to seven per cent, rather than staying above that?
That is anyone’s guess whether GDP will go down to seven per cent on a trend basis. But, as I said earlier, the risks of this happening are rising. I do think at least for the next couple of quarters, there is a possibility GDP growth might slip. I guess we have to wait and watch. However, we are increasingly being asked as to what would be the impact of a seven per cent GDP growth trajectory on earnings, market multiples and different sectors.
What impact will a slowing GDP have on the market?
If GDP slows only for 2012-13, then we think the markets have discounted it. That is because we have seen a 260-basis points compression in valuation multiples for the Sensex. If one believes the slowdown will be on a trend basis, there is potential for a further de-rating of the markets.
Your last report predicted a Sensex target of 21,000 for this year-end. It looks highly unlikely...
It’s difficult to answer this question with a high degree of certainty, given volatile global markets, rising risk aversion and a challenging macro economic situation in India. However, with most funds underweight on India, any return of risk appetite could lead to a short-term rally in the markets in the run-up to the next year.
The investor community has been talking a lot about policy inertia.
India is not the only country seeing policy inertia, which has become a phenomenon in all democracies. But we believe there are certain policies the government is working on. For example, we are already hearing the ‘no go’ criterion in coal mining has been dropped and the ministry of environment and forests is taking up projects on a case-by-case basis. So, it’s a question of timing. We believe the government’s inclination to move ahead on long pending reforms remains high, but compulsions of a popular democracy, coalition politics and a busy state election may delay its ability to move ahead.
How do you see the European crisis impacting the Indian market?
As far as Europe is concerned, it is anyone’s guess. We remain confident the governments in Europe will be responsible and try and prevent a systemic collapse akin to the Lehman moment. But it is difficult to say what would be the contours of a European package because it is a dynamic process. Markets will remain volatile until a more concrete solution comes out. We all thought the announcement that came some days before would assuage sentiments until Greece said it would be holding a referendum. Such situations will continue and, therefore, we will see markets being swayed between bouts of risk aversion and risk appetite.
Ashish Rukhaiyar & Mehul Shah
Mumbai, 15 November 2011
India’s economy is slowing but that will not lead foreign investors to capitulate, unless there is an event of significant risk, says Abhay Laijawala, head of research, Deutsche Equities India. In an interview with Ashish Rukhaiyar and Mehul Shah, he said India was still attractive for fundamental investors with a long-term horizon and that foreign flows would remain steady. Edited excerpts:
You talked about a slowdown in gross domestic product (GDP) trend growth to seven per cent in your latest report. How strong is the probability and what is the view among the investor community?
The general belief (among investors) is it’s still too early to say that. However, the risks of a slowing GDP growth trend are rising. Our report is a what-if analysis. Our economists are still maintaining an eight per cent GDP growth rate. But, clearly, with some headwinds on policy inaction, compulsions of a popular democracy and a slowing global economy, many investors are convinced GDP growth will slow down for a year. There is still a lot of investor goodwill for India and its structural drivers are very much intact. We believe the government recognises the need for reforms. What we are not certain is the timing, and timing is everything.
But does the timing of the report indicate there is a higher probability of going down to seven per cent, rather than staying above that?
That is anyone’s guess whether GDP will go down to seven per cent on a trend basis. But, as I said earlier, the risks of this happening are rising. I do think at least for the next couple of quarters, there is a possibility GDP growth might slip. I guess we have to wait and watch. However, we are increasingly being asked as to what would be the impact of a seven per cent GDP growth trajectory on earnings, market multiples and different sectors.
What impact will a slowing GDP have on the market?
If GDP slows only for 2012-13, then we think the markets have discounted it. That is because we have seen a 260-basis points compression in valuation multiples for the Sensex. If one believes the slowdown will be on a trend basis, there is potential for a further de-rating of the markets.
Your last report predicted a Sensex target of 21,000 for this year-end. It looks highly unlikely...
It’s difficult to answer this question with a high degree of certainty, given volatile global markets, rising risk aversion and a challenging macro economic situation in India. However, with most funds underweight on India, any return of risk appetite could lead to a short-term rally in the markets in the run-up to the next year.
The investor community has been talking a lot about policy inertia.
India is not the only country seeing policy inertia, which has become a phenomenon in all democracies. But we believe there are certain policies the government is working on. For example, we are already hearing the ‘no go’ criterion in coal mining has been dropped and the ministry of environment and forests is taking up projects on a case-by-case basis. So, it’s a question of timing. We believe the government’s inclination to move ahead on long pending reforms remains high, but compulsions of a popular democracy, coalition politics and a busy state election may delay its ability to move ahead.
How do you see the European crisis impacting the Indian market?
As far as Europe is concerned, it is anyone’s guess. We remain confident the governments in Europe will be responsible and try and prevent a systemic collapse akin to the Lehman moment. But it is difficult to say what would be the contours of a European package because it is a dynamic process. Markets will remain volatile until a more concrete solution comes out. We all thought the announcement that came some days before would assuage sentiments until Greece said it would be holding a referendum. Such situations will continue and, therefore, we will see markets being swayed between bouts of risk aversion and risk appetite.
Q&A: Bharat Iyer, JPMorgan
'Indian markets unlikely to slip below Oct lows'
Mehul Shah & Ashish Rukhaiyar
Mumbai, 4 November 2011
A meaningful correction in global oil prices and/or progress on key reforms would be important re-rating triggers for the Indian stock market, says Bharat Iyer, executive director and the head of India equity research at JPMorgan. He says interest in Indian equities among foreign investors remains keen. Edited excerpts from an interview with Mehul Shah and Ashish Rukhaiyar:
We have seen a rebound in global markets after leaders announced a deal to contain the euro zone debt crisis. In the US, Q3 GDP numbers have reduced fears of a double-dip recession. Is the rally sustainable?
There was extreme pessimism regarding US and Chinese growth, and the European debt crisis. All it took were modest improvements in the US and China economic outlook and ambiguous plans out of Europe to drive markets higher. Where do we go from here? Sideways, most likely, with more volatility to come. Considerable work remains to achieve a resolution on the credit crises in Europe and the outlook for global growth remains patchy.
Do you expect Indian markets to hold their October lows in the near future? What are the major risks for the market in the next three to six months?
It would take a lot of bad news for the Indian markets to go below the October lows. This would, in all probability, have to be due to a global shock. From a local perspective, the Reserve Bank signalling a pause to monetary tightening should put a floor to market valuations. A meaningful correction in global oil prices and/or progress on key reforms would be key re-rating triggers to look forward to.
FII (foreign institutional investor) flows have been moderate so far this year. How are they viewing the Indian market?
We believe FIIs have gradually raised their India stance from Underweight early in the year to Neutral at present. Interest levels in Indian equities remain keen, particularly given the uncertain global growth outlook and the correction in commodity prices.
What’s your view on the corporate results for the quarter ended September 30? Could we expect further earnings’ downgrades for the Sensex/Nifty in 2011-12?
Halfway into the Q2 reporting season, it has been a so-far-so-good case. On aggregate, corporate earnings show about 12 per cent year-over-year (yoy) growth, versus our expectations of a 10 per cent yoy growth for the universe. Companies with better performance typically report early in the season and we could see signs of stress from those announcing later.
On balance, current consensus expectations of a 16 per cent earnings growth for FY12 do appear optimistic. Growth of 10-12 per cent would be a reasonably good outcome in the backdrop of the stresses the corporate sector is subject to.
RBI has indicated a pause in its monetary tightening cycle. Has there been any change in your sectoral preferences after RBI’s announcement?
Going into the policy review, we were recommending an overweight stance on financials. The slowdown in growth has become meaningful in the recent past and with inflation showing signs of peaking, we anticipated RBI was nearing the end of the tightening cycle.
Which sectors are you overweight and underweight at present?
We prefer local sectors to global cyclicals at this stage. The outlook for local growth is much better and policy makers in India have more ammunition as compared to counterparts in the developed world.
Within local sectors, early stage cyclicals – particularly financials — appear appealing. Valuations are appealing and inflation rolling over or an end to monetary tightening is a trigger for outperformance. Near-term data points on discretionary spending could be weak and valuations are not cheap, so we await a better entry point in this space. Industrials are cheap, but lack catalysts to outperform, unless we see signs of policy action.
We are underweight on global sectors. Bottom-up, there are interesting opportunities in IT services, healthcare and metals.
Mehul Shah & Ashish Rukhaiyar
Mumbai, 4 November 2011
A meaningful correction in global oil prices and/or progress on key reforms would be important re-rating triggers for the Indian stock market, says Bharat Iyer, executive director and the head of India equity research at JPMorgan. He says interest in Indian equities among foreign investors remains keen. Edited excerpts from an interview with Mehul Shah and Ashish Rukhaiyar:
We have seen a rebound in global markets after leaders announced a deal to contain the euro zone debt crisis. In the US, Q3 GDP numbers have reduced fears of a double-dip recession. Is the rally sustainable?
There was extreme pessimism regarding US and Chinese growth, and the European debt crisis. All it took were modest improvements in the US and China economic outlook and ambiguous plans out of Europe to drive markets higher. Where do we go from here? Sideways, most likely, with more volatility to come. Considerable work remains to achieve a resolution on the credit crises in Europe and the outlook for global growth remains patchy.
Do you expect Indian markets to hold their October lows in the near future? What are the major risks for the market in the next three to six months?
It would take a lot of bad news for the Indian markets to go below the October lows. This would, in all probability, have to be due to a global shock. From a local perspective, the Reserve Bank signalling a pause to monetary tightening should put a floor to market valuations. A meaningful correction in global oil prices and/or progress on key reforms would be key re-rating triggers to look forward to.
FII (foreign institutional investor) flows have been moderate so far this year. How are they viewing the Indian market?
We believe FIIs have gradually raised their India stance from Underweight early in the year to Neutral at present. Interest levels in Indian equities remain keen, particularly given the uncertain global growth outlook and the correction in commodity prices.
What’s your view on the corporate results for the quarter ended September 30? Could we expect further earnings’ downgrades for the Sensex/Nifty in 2011-12?
Halfway into the Q2 reporting season, it has been a so-far-so-good case. On aggregate, corporate earnings show about 12 per cent year-over-year (yoy) growth, versus our expectations of a 10 per cent yoy growth for the universe. Companies with better performance typically report early in the season and we could see signs of stress from those announcing later.
On balance, current consensus expectations of a 16 per cent earnings growth for FY12 do appear optimistic. Growth of 10-12 per cent would be a reasonably good outcome in the backdrop of the stresses the corporate sector is subject to.
RBI has indicated a pause in its monetary tightening cycle. Has there been any change in your sectoral preferences after RBI’s announcement?
Going into the policy review, we were recommending an overweight stance on financials. The slowdown in growth has become meaningful in the recent past and with inflation showing signs of peaking, we anticipated RBI was nearing the end of the tightening cycle.
Which sectors are you overweight and underweight at present?
We prefer local sectors to global cyclicals at this stage. The outlook for local growth is much better and policy makers in India have more ammunition as compared to counterparts in the developed world.
Within local sectors, early stage cyclicals – particularly financials — appear appealing. Valuations are appealing and inflation rolling over or an end to monetary tightening is a trigger for outperformance. Near-term data points on discretionary spending could be weak and valuations are not cheap, so we await a better entry point in this space. Industrials are cheap, but lack catalysts to outperform, unless we see signs of policy action.
We are underweight on global sectors. Bottom-up, there are interesting opportunities in IT services, healthcare and metals.
Management rejig likely at united stock exchange
Palak Shah & Ashish Rukhaiyar
Mumbai, 2 November 2011
With the exit of T S Narayanaswami and Saurav Arora, the exchange is scouting for currency specialists.
Just a year after launching operations, the United Stock Exchange (USE) is looking at a makeover of its management team. The exchange has lost significant market share in the recent past and two of its key officials have also quit. People familiar with the development say the exchange is considering getting persons with proven expertise in the currency derivatives segment.
While chairman and managing director T S Narayanaswami resigned from the exchange in early October, Saurav Arora — designated as president in-charge of business development & marketing — has also moved out of the currency bourse, which marked its entry with record volumes in September last year.
USE was launched on September 20, 2010, with an opening-day volume of 9.88 million contracts, a world record for first-day trading at any new exchange.
The resignations have come as a body blow to the exchange, known to leverage on the expertise and reach of both the officials. Saurav Arora is the son of Gaurav Arora, owner of Jaypee Capital, one of the founder promoters and the largest volume generator at USE. After the de-mutualisation of the exchange, Jaypee currently holds five per cent stake in USE.
When contacted, both T S Narayanaswami and Saurav Arora declined comment. Meanwhile, a source close to Jaypee Capital said the entity would not be selling its stake in USE and further elaborated that Saurav’s appointment at USE was for a “limited period”. Arora, an alumni of Harvard and Delhi University, was “looking for other opportunities”, it added.
Meanwhile, USE has seen its fortunes dwindle in the recent past, especially after reports of it coming under the regulatory scanner for concentration of volumes. Further, the exchange, that pitched itself as ‘India’s newest stock exchange’, saw the volumes fall at a time when its rivals — MCX Stock Exchange (MCX-SX) and National Stock Exchange (NSE) — managed to hold on to their respective market shares.
According to data compiled by the BS Research Bureau, in October, USE’s share in the total currency futures segment fell to under 13 per cent, which, at its peak, hovered around 30 per cent. The daily average volume in the month shrunk to Rs 3,541 crore, from Rs 7,994 crore the previous month.
The month of August saw USE commanding an average daily turnover of Rs 15,597 crore, marginally lower than those of MCX-SX and NSE. Incidentally, in May, USE’s share in the currency segment was nearly 30 per cent, with an average daily volume of nearly Rs 14,000 crore. The exchange currently operates in the currency derivatives space and offers currency futures in all the four currency pairs permitted by the Securities and Exchange Board of India. Also, it is only one of the two stock exchanges in the country to offer currency options in the dollar-rupee pair.
USE was in the news recently on account of a regulatory probe for alleged concentration of trades by a single member. Reportedly, only a few brokers accounted for the majority of volumes registered on the exchange. More importantly, Gaurav Arora-owned Jaypee Capital, also a shareholder in USE, accounted for nearly 80 per cent of the entire turnover.
Mumbai, 2 November 2011
With the exit of T S Narayanaswami and Saurav Arora, the exchange is scouting for currency specialists.
Just a year after launching operations, the United Stock Exchange (USE) is looking at a makeover of its management team. The exchange has lost significant market share in the recent past and two of its key officials have also quit. People familiar with the development say the exchange is considering getting persons with proven expertise in the currency derivatives segment.
While chairman and managing director T S Narayanaswami resigned from the exchange in early October, Saurav Arora — designated as president in-charge of business development & marketing — has also moved out of the currency bourse, which marked its entry with record volumes in September last year.
USE was launched on September 20, 2010, with an opening-day volume of 9.88 million contracts, a world record for first-day trading at any new exchange.
The resignations have come as a body blow to the exchange, known to leverage on the expertise and reach of both the officials. Saurav Arora is the son of Gaurav Arora, owner of Jaypee Capital, one of the founder promoters and the largest volume generator at USE. After the de-mutualisation of the exchange, Jaypee currently holds five per cent stake in USE.
When contacted, both T S Narayanaswami and Saurav Arora declined comment. Meanwhile, a source close to Jaypee Capital said the entity would not be selling its stake in USE and further elaborated that Saurav’s appointment at USE was for a “limited period”. Arora, an alumni of Harvard and Delhi University, was “looking for other opportunities”, it added.
Meanwhile, USE has seen its fortunes dwindle in the recent past, especially after reports of it coming under the regulatory scanner for concentration of volumes. Further, the exchange, that pitched itself as ‘India’s newest stock exchange’, saw the volumes fall at a time when its rivals — MCX Stock Exchange (MCX-SX) and National Stock Exchange (NSE) — managed to hold on to their respective market shares.
According to data compiled by the BS Research Bureau, in October, USE’s share in the total currency futures segment fell to under 13 per cent, which, at its peak, hovered around 30 per cent. The daily average volume in the month shrunk to Rs 3,541 crore, from Rs 7,994 crore the previous month.
The month of August saw USE commanding an average daily turnover of Rs 15,597 crore, marginally lower than those of MCX-SX and NSE. Incidentally, in May, USE’s share in the currency segment was nearly 30 per cent, with an average daily volume of nearly Rs 14,000 crore. The exchange currently operates in the currency derivatives space and offers currency futures in all the four currency pairs permitted by the Securities and Exchange Board of India. Also, it is only one of the two stock exchanges in the country to offer currency options in the dollar-rupee pair.
USE was in the news recently on account of a regulatory probe for alleged concentration of trades by a single member. Reportedly, only a few brokers accounted for the majority of volumes registered on the exchange. More importantly, Gaurav Arora-owned Jaypee Capital, also a shareholder in USE, accounted for nearly 80 per cent of the entire turnover.
I-bankers' track record disclosure: Investors to gain little
Mehul Shah, Ashish Rukhaiyar & Ronak Shah
Mumbai, 14 October 2011
Which is a better merchant banking entity? Enam or JM Financial? Or, those owned by institutions, such as ICICI Securities, IDFC Capital or SBI Capital Markets?
Come November 1, investors will get a chance to judge the track record of investment bankers, based on how the issues managed by them fared. However, the short duration mandated by the Securities and Exchange Board of India (Sebi) means long-term investors will not get much insight, experts say.
Based on the parameters laid out by Sebi in its circular last month, Business Standard analysed the performance of India’s top 10 investment bankers in terms of the number of initial public offers (IPOs) managed by them over the last three financial years.
According to Sebi, from November 1, while filing documents for new issues, merchant bankers will have to disclose data for all the issues managed over the last three financial years. The disclosures would include the issue price, performance on the day of listing and the price movement on the 10th, 20th and the 30th day. The same has to be compared with the movement of the benchmark index.
A closer look at the data compiled by the BS Research Bureau shows that most issues managed to close above their respective issue prices on the listing day. Over the previous three financial years, a total of 132 issues were managed by the top 10 bankers, of which 77 offerings stayed above the issue price on the day of listing. However, the picture changed over a one-month period, when the number of issues trading at a discount rose to 71 and those trading at a premium declined to 61. (See table)
For instance, of the 12 offerings managed by ICICI Securities, eight stayed above the issue price on the first day. Over a month, however, only two traded above the issue price.
Officials at investors’ associations favour the move to include the track record of investment bankers in the prospectus, but believe the time period to judge the issue should be longer.
“This will be an additional tool for investors. If a merchant banker has consistently done bad, investors will be cautious while selecting an issue,” said A K Narayan, president of the Tamil Nadu Investors’ Association. “The listing day or 30 days after listing is too short a period to judge the issue. They should definitely include one-year performance, too,” he added.
“The listing day performance is not a good indication. Performance should be judged after at least a 3-6 month period,” said G S Sood, president of the New Delhi-based Society for Consumers’ and Investors’ Protection. “The entire exercise should be conducted with a view to take corrective action against the erring investment bankers and curb the nexus between promoters and investment bankers indulging in manipulative practices,” he added.
Merchant bankers, meanwhile, are not fully convinced that disclosures in the proposed form would help investors take a better-informed decision, as envisaged by the regulator.
“If I am managing a Rs 1,000-crore IPO, the investor needs to know if I am capable enough of handling such a large offering,” says the director of a domestic merchant banking entity featuring in the top ten list.
"Industry players have conducted surveys which say nearly 90 per cent of the applicants invest only for listing gains and sell the shares on the day of listing. So, why will the investor be interested in knowing what happens to my issue on 20th or 30th day,” he asked.
“Once the company is listed, we don’t have any control over its performance. If the issue is subscribed multiple times, it shows enough appetite among investors at the issue price,” said a Mumbai-based investment banker, requesting anonymity.
Mumbai, 14 October 2011
Which is a better merchant banking entity? Enam or JM Financial? Or, those owned by institutions, such as ICICI Securities, IDFC Capital or SBI Capital Markets?
Come November 1, investors will get a chance to judge the track record of investment bankers, based on how the issues managed by them fared. However, the short duration mandated by the Securities and Exchange Board of India (Sebi) means long-term investors will not get much insight, experts say.
Based on the parameters laid out by Sebi in its circular last month, Business Standard analysed the performance of India’s top 10 investment bankers in terms of the number of initial public offers (IPOs) managed by them over the last three financial years.
According to Sebi, from November 1, while filing documents for new issues, merchant bankers will have to disclose data for all the issues managed over the last three financial years. The disclosures would include the issue price, performance on the day of listing and the price movement on the 10th, 20th and the 30th day. The same has to be compared with the movement of the benchmark index.
A closer look at the data compiled by the BS Research Bureau shows that most issues managed to close above their respective issue prices on the listing day. Over the previous three financial years, a total of 132 issues were managed by the top 10 bankers, of which 77 offerings stayed above the issue price on the day of listing. However, the picture changed over a one-month period, when the number of issues trading at a discount rose to 71 and those trading at a premium declined to 61. (See table)
For instance, of the 12 offerings managed by ICICI Securities, eight stayed above the issue price on the first day. Over a month, however, only two traded above the issue price.
Officials at investors’ associations favour the move to include the track record of investment bankers in the prospectus, but believe the time period to judge the issue should be longer.
“This will be an additional tool for investors. If a merchant banker has consistently done bad, investors will be cautious while selecting an issue,” said A K Narayan, president of the Tamil Nadu Investors’ Association. “The listing day or 30 days after listing is too short a period to judge the issue. They should definitely include one-year performance, too,” he added.
“The listing day performance is not a good indication. Performance should be judged after at least a 3-6 month period,” said G S Sood, president of the New Delhi-based Society for Consumers’ and Investors’ Protection. “The entire exercise should be conducted with a view to take corrective action against the erring investment bankers and curb the nexus between promoters and investment bankers indulging in manipulative practices,” he added.
Merchant bankers, meanwhile, are not fully convinced that disclosures in the proposed form would help investors take a better-informed decision, as envisaged by the regulator.
“If I am managing a Rs 1,000-crore IPO, the investor needs to know if I am capable enough of handling such a large offering,” says the director of a domestic merchant banking entity featuring in the top ten list.
"Industry players have conducted surveys which say nearly 90 per cent of the applicants invest only for listing gains and sell the shares on the day of listing. So, why will the investor be interested in knowing what happens to my issue on 20th or 30th day,” he asked.
“Once the company is listed, we don’t have any control over its performance. If the issue is subscribed multiple times, it shows enough appetite among investors at the issue price,” said a Mumbai-based investment banker, requesting anonymity.
BS People: Bhuvnesh Singh & Neel Shahani
Barclays hires duo with institutional clout
Ashish Rukhaiyar
Mumbai, 13 October 2011
When Barclays Capital announced the appointment of Bhuvnesh Singh and Neel Shahani as part of the institutional desk, the business strategy of the London-headquartered entity was clearly evident.
The institutional desk of Barclays Bank Plc, which has been a late-starter in India, was looking at people who could bring ready business and big-ticket clientele along with them.
Bhuvnesh SinghSingh, who heads the equity research team in India, is known for his analytical capabilities. He has been ranked highly for his research in various sectors, including telecom, technology and industrials.
Singh will be responsible for developing Barclays Capital’s Indian equity research business and will report to Stephen O’Sullivan, head of Asia Ex-Japan equity research. Interestingly, the appointment comes close on the heels of Bhavtosh Vajpayee who joined as managing director and head of equities of the India unit.
Shahani, on the other hand, brings to the table nearly two decades of experience in sales and trading. Prior to joining Barclays, Shahani was managing the sales trading team tracking global markets at India Infoline. Shahani has handled large funds during his earlier stints with CLSA, HSBC, JM Financial.
Neel ShahaniShahani may well be a part of an industry that is looked upon as a symbol of capitalism, but there is also a social side to him. He is a part of the board of trustees of Akanksha, a non-profit organisation involved in education of less privileged children from Mumbai's slum areas. The Lancaster-based Franklin and Marshall College alumnus is also on the board of GiveIndia, which is a donation platform for around 200 NGOs.
The new-look team - which is not yet fully staffed has its goals clearly laid out. Barclays Capital is known for its non-equity capabilities (bond, primary debt offerings and fixed income research) and is aggressively eyeing a slice in the equity segment that is currently in the doldrums.
The hirings also come at a time when many of the global majors are increasing their strength in India. So, it does not come as a surprise that the British major is vying for people that already share a good rapport and relation with some of the biggest and most influential clients looking at India.
Ashish Rukhaiyar
Mumbai, 13 October 2011
When Barclays Capital announced the appointment of Bhuvnesh Singh and Neel Shahani as part of the institutional desk, the business strategy of the London-headquartered entity was clearly evident.
The institutional desk of Barclays Bank Plc, which has been a late-starter in India, was looking at people who could bring ready business and big-ticket clientele along with them.
Bhuvnesh SinghSingh, who heads the equity research team in India, is known for his analytical capabilities. He has been ranked highly for his research in various sectors, including telecom, technology and industrials.
Singh will be responsible for developing Barclays Capital’s Indian equity research business and will report to Stephen O’Sullivan, head of Asia Ex-Japan equity research. Interestingly, the appointment comes close on the heels of Bhavtosh Vajpayee who joined as managing director and head of equities of the India unit.
Shahani, on the other hand, brings to the table nearly two decades of experience in sales and trading. Prior to joining Barclays, Shahani was managing the sales trading team tracking global markets at India Infoline. Shahani has handled large funds during his earlier stints with CLSA, HSBC, JM Financial.
Neel ShahaniShahani may well be a part of an industry that is looked upon as a symbol of capitalism, but there is also a social side to him. He is a part of the board of trustees of Akanksha, a non-profit organisation involved in education of less privileged children from Mumbai's slum areas. The Lancaster-based Franklin and Marshall College alumnus is also on the board of GiveIndia, which is a donation platform for around 200 NGOs.
The new-look team - which is not yet fully staffed has its goals clearly laid out. Barclays Capital is known for its non-equity capabilities (bond, primary debt offerings and fixed income research) and is aggressively eyeing a slice in the equity segment that is currently in the doldrums.
The hirings also come at a time when many of the global majors are increasing their strength in India. So, it does not come as a surprise that the British major is vying for people that already share a good rapport and relation with some of the biggest and most influential clients looking at India.
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