Wednesday, 17th February 2021

The two IPOs of the week have been oversubscribed well before the closure date. As of Tuesday, the Rs.820-crore IPO RailTel Corporation was subscribed 2.6 times with the retail portion getting subscribed 5 times. The IPO has been priced in the band of Rs.93-94 and is likely to give RailTel an opening market cap of Rs.3,000 crore. RailTel is a profit making company with net margins of 13%. The other IPO was the Rs.100 crore IPO of Nureca. This issue is much smaller and the anchor investor interest had also been robust due to the small size of the issue. The Nureca IPO was already subscribed 15 times as of Tuesday.

Cairn Energy is now looking for quick actioning of the compensation payable by the Indian government as ordered by the Special Tribunal. Cairn Energy has filed a case in a US district court to enforce the $1.2 billion arbitration award in the issue of retrospective taxation. Cairn had secured a favorable ruling in the order and has requested the US court to recognise and confirm the award, including payments of $1.2 billion due since 2014 plus interest. A favorable ruling by the US district court will give Cairn the leeway to seize global Indian assets to recover dues. India’s overseas assets like bank accounts, airplanes and ships can be seized. Meanwhile, the CEO of Cairn Energy will be meeting Nirmala Sitharaman next week. Cairn has been under pressure from institutional investors. This is similar to the Vodafone case.

L&T Finance raised Rs.2,999 crore via rights issue. The rights issue was oversubscribed 15%. The rights shares will be allotted on 23 February and the listing of these shares will happen on 26 February. L&T Finance has AAA credit rating and the advantage of the backing of a parent with deep pockets. The rights issue will allow L&T Finance to boost its capital adequacy and also build the asset book in the process. Some of the key lead managers to the issue included Axis Capital, BOB Capital, Citigroup, Credit Suisse, HSBC Securities and ICICI Securities. NBFCs are also preparing for more stringent regulation.

Tata Group has confirmed that it will buy 68% in online grocery start-up, Big Basket, for Rs.9,500 crore. This deal would be in sync with the Tata group’s plan to also launch a “super app” that will tie in all its consumer facing businesses under one single platform. This will give the Tata group the ability to take on the competition from the likes of Reliance, Amazon and Wal-Mart in India’s booming e-commerce market. Big Basket specializes in fresh merchandize and competes with Flipkart in Bengaluru. This deal will assign an enterprise value of Rs.13,500 crore for Big Basket. Existing promoters will stay on for now.

In the midst of the Amazon battle, creditors of Future Group may be getting jittery. Banks are already exploring options to recover $2.5 billion of loans, amid worries that the deal between FEL and RRIL could fail to take off. If Reliance walks out of the deal, then Future group would face certain liquidation and put most of the creditors in a state of limbo. Banks are open to a one-time restructuring option including easier repayment tenure and fresh capital infusion. Reliance Retail has been patient but banker fear that if the imbroglio continues, Reliance may run out of patience. SBI has largest exposure to Future group.

Nestle India reported a marginal rise in net profit for Dec-20 quarter but top line and bottom line were below street expectations. Net profit at Rs.483 crore was almost flat on a yoy basis. The sales revenues surged 9.2% to Rs.3,418 crore on the back of strong off-take in the domestic market. Domestic business contributes 90% towards top line and grew 10.1% while exports contracted 7.7% in the Dec-20 quarter. The domestic market got a big boost from rapid rise in in-home consumption of ready-to-cook and ready-to-eat products. The firm said nearly two-thirds of its portfolio grew in double digits due to higher demand for such products. Nestle leads the local market in instant noodles, dairy whiteners, wafers and confectioneries. According to the Nestle management, the growth was an outcome of volumes and mix.

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