Stock Market Investment Shot, 4th January 2023

Stock Market Investment Shot, 22nd February 2023

Stock Market Investment Shot, 22nd February 2023

In a move that was long called for, the Union Budget 2023 is likely to shift the tax liability on the buyback of shares from companies to individual shareholders who participate in the buyback. This will avoid the double taxation of buyback proceeds and bring it at par with dividend income. Even SEBI had suggested this in a recent consultative paper since the company paying the tax also hit the shareholders who did not participate in the buyback. The lower rate of tax on capital gains would also be a major benefit of the shift.

According to the think tank, Global Trade Research Initiative (GTRI), Indian exports were likely to be hit by weak global demand and a likely recession in large economies in 2023. It has suggested that India should look to reduce its energy import bill to make up for lower exports. Today, India pays nearly 40% of its total merchandise import bill to buy crude. GRTI suggests that India should now focus more on exploration of local oil fields. A sharp cut in the energy bill for India would substantially improve India’s current account.

Government confirmed that public sector entities will be exempted from Minimum Public Shareholding (MPS) norms which call for minimum 25% public float for all listed companies. This would be applicable, irrespective of whether the government holding is direct or indirect. That should largely clarify on the IDBI case, where LIC is the largest shareholder, but LIC is 97% owned by the government of India. The SCRA has been amended appropriately. The government and LIC plan to jointly sell 60.72% stake in IDBI Bank.

A total of 40 Indian companies raised a sum of Rs59,412 crore through mainboard IPOs in 2022. That is nearly half of the Rs118,723 crore raised across 63 IPOs in 2021. Out of this, a little over a third or Rs20,557 crore was raised by LIC itself. Apart from LIC, the other big ticket IPOs in 2022 were Delhivery Ltd and Adani Wilmar. The average deal size for 2022 stood at Rs1,485 crore; with 2 out of 40 issues ending up undersubscribed. The average retail applications in 2022 dropped to 5.92 lakhs from 14.25 lakhs in 2021.

As per reports coming in, India may look to cut food and fertiliser subsidies in FY24 by 26% to $44.6 billion to contain the fiscal deficit further. Food and fertilizer subsidies account for 12% of total budgeted spend. Such moves are normally politically sensitive and it remains to be seen if the government would venture to do something like this ahead of an election year. The savings are likely to come largely from the COVID era free food scheme. Fiscal deficit at 6.4% in FY23 is way above the ten year average of less than 4.5%.

Adani Enterprises will raise the amount paid to NDTV minority shareholders who tendered their shares in the open offer. The idea here is to match what it paid to the promoters to buy out their stake. Thus, Adani will pay another Rs48.65 per share to the shareholders taking the total pay-out to Rs342.65 per share. This matching is mandatory under the extant SEBI regulations. It may be recollected that a total of 53 lakh shares were tendered in the open offer at Rs294 per share. Adani now holds over 65% stake in NDTV Ltd.

There are the first signs that the rupee has bottomed out as exporters are showing enthusiasm to sell dollars and repatriate them back to India. Most exporters prefer to keep dollars abroad if they expect the INR to weaken further. Average daily dollar sales by exporters beyond the spot date rose to $1.2 billion in November and December. There appears to be more willingness among exporters to cover. With the INR holding above Rs83/$ and the RBI also lending support via dollar sales, exporters are a lot more confident.

LIC may not be a very fancied stock, but not Kotak Institutional Equities has put out a Buy rating on LIC with fair value target of Rs1,000 per share. Kotak has been impressed by LIC’s 37% APE market share in FY2022 plus margin expansion. In the last few months, LIC has been consistently doing better than its private sector insurance peers. Kotak has also pointed out that LIC has unrealized equity gains to the tune of 59% of its FY22 EV, which should support valuations. Scale and robust agency fore are major positives.

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