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From Khadim to S Chand & Co: 11 cos’ market-cap slips below IPO issue size



Mid, small cap funds continue to disappoint investors amid market meltdown

Coffee Day Enterprises, the parent company of India’s largest coffee chain Cafe Coffee Day (CCD), has lost Rs 2,400 crore market capitalisation (market-cap) in past eight days after the its founder chairman V G Siddhartha passed away.

The stock is trading at Rs 77, the lowest level since its listing on November 2015, and has slipped 77 per cent from its initial public (IPO) price of Rs 328 per share. If the current trend sustains, there are chances that the market-cap, which now stands at around Rs 1,630 crore, slips below Rs 1,150 crore – the amount it had raised via the IPO route.

The current weakness in the market, especially the mid-and small-cap segments, has dented the fortunes of nearly a dozen companies that raised funds via IPOs during last five years with their market-cap slipping below their respective issue size.

The market-cap of 11 companies, including S Chand & Company, Khadim India, UFO Moviez India, Navkar Corporation, Bharat Road Networks and Manpasand Beverages, has slipped below the issue size. These 11 companies had collectively raised Rs 5,032 crore from public issues and currently have a combined market-cap of Rs 2,961 crore. The stocks have plunged between 65 per cent and 98 per cent against their respective issue price.

There could be more pain in store for these stocks as analysts expect the markets to remain under pressure for some more time given the domestic and global developments.

“The Nifty and the broader markets have corrected substantially from the recent highs, led by deepening economic pressures, weak earnings growth and certain policy decisions in the Budget on taxation. Also, tepid commentaries from corporates suggest more legs to earnings downgrades. Mid-caps are more vulnerable to the ongoing liquidity and credit availability pressures in the economy, in our view,” says Gautam Duggad, head of research at Motilal Oswal Financial Services.

Besides weak market sentiment, these stocks have been dented by sub-par earnings of these companies. On a combined basis, these 11 companies have posted a net loss of Rs 150 crore for financial year 2018-19 (FY19), as against a combined profit of Rs 327 crore in FY18.

Among individual stocks, S Chand & Company, for instance, has plunged 91 per cent to Rs 61 as against its issue price of Rs 670 per share. The company had raised Rs 728 crore via IPO and currently has a market-cap of Rs 219 crore. The issue got a good response from investors and was subscribed 59 times.

As regards corporate earnings, Sunil Tirumalai, head of research at Emkay Global, believes the markets at the current juncture are factoring in a steep 20-30 per cent growth rate for FY20/FY21. Despite the recent correction, he says, the Nifty valuation (17.5x one-year forward) is not factoring in further earnings risks.

“The earnings cut momentum is also broadening, with 38 of 50 Nifty stocks seeing cuts in July’19. In this context, the elevated price-to-earnings (PE) levels of the Nifty suggest that further earnings cuts are not yet priced in. This underpins our overall cautious stance on the market,” Tirumalai says.

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Sitharaman’s sops for NBFCs may perk up lending, ease liquidity stress



Illustration by Binay Sinha

To further ease the liquidity stress in the non-banking sector and nudge them to revive their lending activities, Finance Minister (FM) Nirmala Sitharaman on Friday announced a slew of measures for non-banking financial companies (NBFCs) and housing finance companies (HFCs). The government hopes this will result in more credit support for purchase of houses, vehicles, and consumption goods.

The government has provided additional support of Rs 20,000 crore to the stressed housing finance companies from National Housing Bank (NHB). With this, the additional liquidity support for the HFCs from NHB has gone up to Rs 30,000 crore.

In the Union Budget last month, the FM had encouraged public sector banks (PSBs) to buy high-quality pooled assets of NBFCs up to Rs 1 trillion for which the government would provide a one-time six-month partial credit guarantee for the first loss of up to 10 per cent.

The Reserve Bank of India (RBI) had also chipped in by tweaking banks’ bond-holding norms. This will allow banks to borrow an additional Rs 1.34 trillion exclusively for buying such pooled assets and giving loans to NBFCs. The FM on Friday said this partial credit guarantee scheme will be monitored at the highest level in each bank. Through this, it is expected that many of the assets will get quickly pooled and NBFCs will receive the necessary liquidity. “NHB has already settled some of the issues. NBFCs are receiving money from the banks and are moving towards funding,” said Sitharaman.

Sanjaya Gupta, managing director, PNB Housing Finance, said “This will support growth and ease the liquidity crunch. HFCs will now get an additional Rs 20,000 crore from NHB. The initiatives have potential to kick start the real estate sector.”

The government has also permitted NBFCs to use Aadhaar-authenticated bank KYC to avoid repeating the same process when a customer approaches it for credit. This has been a long-standing demand. The necessary changes in the Aadhaar regulations and Prevention of Money Laundering Act rules will be made, the FM said.

“This will streamline the process and also reduce frauds,” said Raman Aggarwal, chairman, Finance Industry Development Council.

The government has also asked PSBs and NBFCs to fast-track their collaboration to provide credit to micro, small and medium enterprises, small traders, self-help groups, and micro finance industry client borrowers.

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PACL Case: Sebi panel invites expression of interest for 28,974 properties




A committee headed by Justice R M Lodha has invited expression of interest (EoI) from prospective buyers for a total of 28,974 properties belonging to PACL Group.

Market regulator Sebi had set up a committee headed by former Chief Justice of India R M Lodha following a Supreme Court order to refund money to investors in the matter of PACL Group.

As per the notice issued by Sebi, the committee has divided the total 28,974 properties belonging to PACL group in four zones — east, west, north and south — with maximum properties being located in the southern zone.

Regarding PACL properties, the apex court’s order dated July 30 observed “we also leave it open to the committee to receive any further offers and to explore them after duly publishing a further notice on the website,” the notice said.

In pursuance of apex court’s order, the committee “invites Expression of Interest from prospective buyers clearly indicating therein, list of properties in each zone, its circle rate, the offer amount and other relevant details,” the Friday notice said.

“The proposal should be for properties in each zone aggregating in value not less than Rs 1,000 crore,” the notice added.

The notice further said that the last date of receipt of proposals is September 9.

PACL, also known as Pearl Group, had raised Rs 60,000 crore from public in the name of agriculture and real estate businesses and was found by Sebi to have collected these funds through illegal collective investment schemes over 18 years.

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Improved market access for domestic retail investors with Aadhaar-based kYC



Markets, Investors, Indices, Stocks

The government will allow Aadhaar-based KYC for domestic retail investors, and necessary amendments to the rules under the Prevention of Money Laundering Act will be issued.

Announcing a slew of measures to boost the economy, the government said the Depository Receipt Scheme 2014 is expected to be operationalised soon by Sebi. “This will give Indian companies increased access to foreign funds through American Depository Receipt (ADR)/ Global Depository Receipt (GDR),” she said.

In order to improve market access for the domestic retail investors, Aadhaar-based KYC will be permitted for opening of demat account and making investment in mutual funds. In this regard, necessary notification for amendments in PMLA rules would be issued.

Besides, steps would be taken with regard to offshore rupee market.

“To bring offshore rupee market to domestic stock exchanges and permit trading of USD-INR derivatives in GIFT IFSC, Ministry of Finance is working with RBI to introduce this measure shortly,” the government said.

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