Month: February 2021

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Sebi chief Ajay Tyagi says the disconnect between financial markets, real economy a global phenomenon

Capital markets regulator Sebi chairman Ajay Tyagi on Thursday acknowledged the systemic risk concerns raised by the RBI and Financial Stability Board over a disconnect between financial markets and the real economy, but said that this is a global phenomenon.

He said the heavy fall in markets, followed by quick gains on the equity benchmarks since the onset of the pandemic is the sharpest V-shaped recovery in the last 30 years. ”Typically, stock markets have been the barometers of the economy and move in the direction in which the economy moves or is expected to move. However, after the onset of pandemic, several institutions including FSB and RBI have raised concerns of an increasing disconnect of financial markets with the real economy and a possible risk it may pose to systemic stability,” Tyagi said. ”It is not just India which has been witnessing such unprecedented market movements, but similar trends have been there across many global markets i.e. movements one can clearly attribute to effects arising out of the pandemic and the efforts to tackle the pandemic,” Tyagi said, speaking at an NISM event.

It can be noted that in the last few months, a slew of concerns have been raised about the disconnect wherein the markets have rallied by over 80 per cent from the lows of April post a sharp correction following the declaration of the pandemic, even as the economy went into a contraction zone.

In the Financial Stability Report, RBI Governor Shaktikanta Das flagged risks to overall financial stability and asked lenders to be cautious about the same.

According to some experts, a liquidity glut induced by economy-boosting measures taken by countries following the pandemic has resulted in the surge in markets.

Tyagi on Wednesday said the pandemic has been rare and catastrophic, and has led to never-before jump in volatilities. The volatility index has come down in the last few months, but continues to be higher than five year averages.

He said a defining trend in FY21 has been the direct retail play in the markets, which has seen an increase in both the number of demat accounts and also investments by individuals. Corporates have adopted a newer way of working, with annual general meetings and board meetings being held online.

Tyagi said there is a possibility of many of these new practices continuing even after the end of the pandemic, but said issues over confidentiality and security on virtual board meets will have to be assessed going ahead.

He also pondered whether shareholders are getting adequate time to pose their questions at the annual general meets.

Tyagi welcomed the focus on environment, social and governance themed investing and added that Sebi is looking at introducing newer regulations for having more granularity in disclosures.

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Sona Comstar to raise Rs 6,000 cr via IPO

Auto component maker Sona BLW Precision Forgings (Sona Comstar) on Wednesday said it has filed papers to raise Rs 6,000 crore via an initial public offering (IPO). The public issue of shares of face value of Rs 10 each, comprises a fund raise via fresh issue amounting to Rs 300 crore and an offer for sale aggregating up to Rs 5,700 crore by selling shareholder Singapore VII Topco III Pte Ltd, an affiliate of the Blackstone Group Inc, Sona BLW Precision Forgings said in a statement.

The portion reserved for Qualified Institutional Buyers will be up to 75 per cent of the offer, non-institutional investors to have up to 15 per cent of the portion reserved while up to 10 per cent will be reserved for the retail investors, it added. As stated in the DRHP, the Blackstone promoted company intends to utilise the proceeds from the fresh issue to repay/prepay Rs 225 crore of its borrowings besides general corporate purposes, the Gurugram headquartered company said.

The company is into designing, manufacturing and supplying highly engineered critical automotive systems and components such as differential assemblies, differential gears, conventional and micro-hybrid starter motors, BSG systems, EV traction motors and motor control units.It supplies components to automotive OEMs across the US, Europe, India and China, for both electrified and non-electrified powertrain segments and is not dependent on a single product, vehicle segment, customer or geography.

The company is also one of the two largest exporters of starter motors from the country besides being the largest manufacturer of differential gears for passenger vehicles, commercial vehicles and tractors in India. Some of its key OEM customers include a global OEM of EVs, a North American passenger vehicle and commercial vehicles maker, Ashok Leyland, Daimler, Escorts, Mahindra & Mahindra, Mahindra Electric, Maruti Suzuki, Renault Nissan, Volvo and Volvo Eicher.

Kotak Mahindra Capital Company, Credit Suisse Securities, JP Morgan India, JM Financial and Nomura Financial Advisory and Securities are the book running lead managers (BRLM) of the issue.

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Sebi imposes Rs 1 cr fine on Alchemist Infra Realty, 4 others for unregistered investment activities

Markets regulator Sebi has slapped a total fine of Rs 1 crore on Alchemist Infra Realty Ltd and four individuals for illegally mobilising funds from the public through a collective investment scheme.

The individuals who have been fined are Brij Mohan Mahajan, Narayan Madhav kumar, Balvir Singh and Chandra Sekhar Chauhan.

In an order passed on Monday, the watchdog said the company and individuals were engaged in fund mobilising activity from the public, which was in the nature of a Collective Investment Scheme (CIS). They had collected money from investors in the name of developing land.

As per the order, the company had mobilised funds to the tune of Rs 54.1 crore, Rs 449.41 crore and Rs 1,087.68 crore as on March 31, 2009, March 31, 2010 and March 31, 2011 respectively.

Sebi’s Adjudicating Officer K Saravanan said the three balance sheet figures on records establish with certainty that the company was carrying out CIS activities atleast in the financial years 2008-09, 2009-10 and 2010-11 while Alchemist was incorporated in the year 2008.

“I note that Alchemist was carrying on unregistered CIS activities at least for three financial years,” he added.

The total fine is payable by them jointly or severally.

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Dodla Dairy files IPO papers with SEBI, a public issue largely an offer-for-sale

Hyderabad-based Dodla Dairy Ltd has filed a draft red herring prospectus for the initial public offering (IPO) with the capital market regulator Sebi. The public issue comprises a fresh issue of equity shares worth up to Rs 50 crore and an offer for sale (OFS) of up to 1 crore equity shares by promoters and an investor. The OFS consists of 83 lakh equity shares by TPG Dodla Dairy Holdings Pte Ltd and up to 4.16 lakh equity shares by Dodla Sunil Reddy and up to 10.41 lakh equity shares by Dodla Family Trust and up to 3.27 equity shares by Dodla Deepa Reddy.

The company plans to utilise the net proceeds of the fresh issue towards repayment and/ or prepayment, in full or part, of certain borrowings availed by the company; funding capital expenditure requirements, and general corporate purposes. The company will join listed peers such as Hatsun Agro Products, Heritage Foods and Parag Milk Foods. Hatsun Agro Products has a price to earnings (P/E) ratio of 102.3 x while Parag Milk Foods has a P/E of 9.7x. ICICI Securities Ltd and Axis Capital Ltd are the book running lead managers to the issue, while KFin Technologies Private Ltd is the registrar.

For the six months ended on September 30, 2020, Dodla Dairy posted a profit of 74.7 crore while in the financial year, its profit stood at Rs 49.8 crore. India is the largest milk producer globally and milk production is growing at a healthy rate. Per capita availability (PCA) of milk in India has grown at 5.2% CAGR over FY15-19. According to the DRHP, even before a nation-wide lockdown was announced on March 24, 2020, many urban cities had ordered a closure of restaurants and public eateries to contain the spread of COVID-19. This created supply chain disruption temporarily up to June 2020.

The strengthening of the co-operatives model has aided the growth of the milk processing segment. a subsidy of Rs.4-5 per litre of milk supplied to the farmer by the co-operative dairies, has also encouraged new farmers to enter milk production, enabling co-operative organizations to establish a strong foothold of their brands. To counter this, private players like Nestle and Britannia are investing in differentiated products like high-quality tetra pack ultra-high-temperature processed milk (UHT) and flavored milk. These products sell at a 50-60% premium compared with milk sold in pouches and cater mainly to very health-conscious consumers.

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