Benchmark Gains in the Share Market due to New Launched IPO’s

As investors chase companies running niche businesses and newly launched public companies the S&P BSE IPO Index, has risen more than three times the amount of the S&P BSE Sensex Index this year.

Crux of the Matter
  • India Mart, IRCTC, Metropolis Healthcare Ltd are among 11 companies that went public this year.
  • IRCTC more than doubled on its debut which ranks as the best listing in two years. It is due to its monopoly over the Indian Railways.
  • IndiaMart the country’s largest online platform for businesses has been trading 78% higher than its July IPO.
  • Metropolis Healthcare Ltd. soared more than 60% from its offer price in April.
  • It has been a rough ride for the Sensex, which had hit a six-month low in mid-September amidst a slow-moving economy.

Initial Public Offering (IPO) is the first time that the stock of a private company is offered to the public and IPOs are often issued by younger, smaller companies seeking capital to expand, but they can also be done by large privately-owned companies. After the IPO, shares are traded freely in the open market. Although IPO offers many benefits, there are also significant costs involved, chiefly those associated with the process such as banking and legal fees, and the ongoing requirement to disclose important and sometimes sensitive information. Details of the offering are disclosed to potential purchasers in the form of a document known as a prospectus. More Info

Tejas Express Posts Rs 70 lakh Profit in First Month

Railways’ plan to make private trains running seems to have received a green signal as the Lucknow-Delhi Tejas Express, the first privately run train in India, posted a profit of Rs 70 lakhs from ticket sales in its first mont of operation, October. It generated a revenue of Rs 3.7 crore through an occupancy rate of 80-85%.

Crux of the Matter
  • Tejas Express is Indian Railways’ first private train run jointly by a non-railway operator and its subsidiary IRCTC.
  • In the month of October, the train ran for 21 days.
  • Railway had to spend an average of Rs 14 lakh to keep the train running, while it earned approximately Rs 17.5 lakh daily from ticket sales.
  • With the advent of the private sector trains, IRCTC has announced a plethora of benefits – customized meal service, insurance up to Rs 25 lakh as an add-on benefit, and compensation for delays.

The Tejas Express is India’s first semi-high speed fully air-conditioned train Introduced by Indian Railways. It features modern onboard facilities with automatic doors. Tejas means “sharp”, “lustre” and “brilliance” in many Indian languages. These trains are among the fastest trains in India along with Rajdhani Express, Gatimaan Express, Shatabdi Express, Vande Bharat Express and Duronto Express and get the highest priority on the Indian railway network. Read More

US-China Trade War: India’s Export Pie Bigger by $755mn

US-China trade war, in the first half of 2019, has benefitted India of $755 million in exports as China’s share of exports to the US is dissipating between European Union, Mexico, Canada, Korea, India, and others. The UN trade and investment body had concerns regarding the global economy on account of such lose-lose trade wars.

Crux of the Matter
  • China’s Exports to the USA worth $35 bn, 25% of total exports, has been hit due to US-China Trade War. Communication Equipment and Office Machinery exports fared the worst, fell by 55%, among reduced Chinese exports.
  • Of the total export loss of China, around $21 bn worth exports have been routed to other countries, whereas of $14 bn some has been soaked by US manufacturers and some lost.
  • In exports to the US, India gained $243 mn in Chemicals, $181 mn in Metals and Ore, $83 mn in Electricity Machinery, $68 mn in Misc. Machinery, and in Textiles, Office Machinery, Precision Instruments, Agri-Food, Transport Equipment as well.
  • “We hope a potential trade agreement between the US and China can de-escalate trade tensions. …it [trade war] also compromises the stability of the global economy and future growth” said UNCTAD.

The China–United States trade war is an ongoing economic conflict between the world’s two largest national economies, China and the United States. Analysis conducted by the Peterson Institute for International Economics found that China imposed uniform tariffs averaging 8% on all its importers in January 2018, before the trade war began. The analysis also found that average American tariffs on Chinese goods increased from 3.1% in 2017 to 24.3% by August 2019. Read More

ICICI Puts a Lid on Project Finance Dept Amid Slacked Infra Growth

Soon after the Govt. announced the plan to revive the Real Estate sector with a fund of Rs 25k crores, ICICI, the largest lender to the infra sector till 2013, has decided to reorganize by putting the lid on its Project Finance Dept. The slack market and it’s shifting focus on retail banking pushed ICICI for this move.

Crux of the Matter
  • ICICI, encompassed by the sluggish growth, decided to transfer employees in the Project Finance Dept. to other departments, reorganizing the firm’s focus on retail banking and unsecured loans.
  • The slowdown can be interpreted from the downturn of Rs. 52,135 crore of outstanding credit by scheduled commercial banks to the infrastructure sector.
  • Asset-Liability mismatch – acquiring short term funds for long-term projects, NPA’s or bad loans, and time delay in getting statutory permits are the issues haunting this sector.
  • ICICI had reported a 28% drop in its net profit for the quarter ended September, while its gross NPA’s stood at 6.37%.

Asset-Liability Mismatch – Another factor believed to contribute to financial crises is asset-liability mismatch, a situation in which the risks associated with an institution’s debts and assets are not appropriately aligned. For example, commercial banks offer deposit accounts which can be withdrawn at any time and they use the proceeds to make long-term loans to businesses and homeowners. The mismatch between the banks’ short-term liabilities (its deposits) and its long-term assets (its loans) is seen as one of the reasons bank runs occur. Likewise, Bear Stearns, a New York-based Investment firm, failed in 2007–08 because it was unable to renew the short-term debt it used to finance long-term investments in mortgage securities. Read More

‘Special Window Fund’ for Stalled Housing Projects

Union Cabinet on 6th November approved a ‘Special Window’ fund to provide priority debt financing upto Rs. 10,000 crore for the completion of stalled housing projects that are in the Affordable and Middle-Income Housing sector.

Crux of the Matter
  • The fund will be set up as a Category-11 AIF (Alternate Investment Fund) debt fund registered with SEBI.
  • For the first AIF under the Special Window, it is proposed that SBICAP Ventures Limited shall be engaged to be the Investment Manager.
  • This fund is set to provide relief to developers that require funding to complete unfinished projects and is expected to have a positive effect on the real estate sector.
  • This decision has been taken after a number of Inter-ministerial consultations and several consultations were held with Housing Finance Companies, Banks, NBFCs, Investors, and Real Estate Developers.

Middle-income housing affordability is affordable access to quality housing which is pivotal to the democratisation of prosperity that occurred in the last century in most high-income nations. Middle-income is different from low – income housing as it relies on public subsidies to serve the needs of households unable to afford the house prices or rents prevailing on the open market. More the housing affordability means fewer households seeking housing subsidies through affordable housing programs.