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Are Adani Stocks On A Comeback Trail?

The Adani group and its shares have been under tremendous pressure over the last five weeks since the report from Hindenburg hit the markets. 2nd March was a great day — a big comeback of sorts for Adani. GQG Partners Emerging Markets Equity Fund invested Rs 15,500 cr approx. in four of Adani’s companies. These shares were bought from the Adani family. The price at which these shares were bought are Rs 1,408.25 for Adani Enterprises, Rs 504.60 for Adani Green Energy, Rs 596.20 for Adani Ports and SEZ, and Rs 668.40 for Adani Transmission. These prices at which the deal was done would become a benchmark for valuation going forward. In the near foreseeable future these prices would not break unless a new disaster hits the stock markets. On the same day, the Supreme Court appointed a six-member panel to look into the allegations against the group and submit a report in a sealed cover within two months. This would clear doubts raised by Hindenburg, the continuous disruption in Parliament would now stop and alleged cronyism, a charge raised by the Opposition would also be resolved. The proof of the pudding is in the eating and at the time of writing this article the share prices of three of the four stocks mentioned have gained between 11.13% to 11.32% (as they are subject to a 5% circuit filter) and the fourth has gained a staggering 29.8%.

New Subscription Rules By RBI, SEBI For IPO To Hit HNIs, See Grey Market Vanish

Come April 1, 2022, the IPO market will witness three major changes that will immensely benefit retail investors. First, as per RBI stipulation, investors cannot borrow over Rs 1 crore from NBFCs to apply for an IPO. Second, SEBI has split the current HNI category into two. The first part, 1/3 of the bucket size of HNI portion, is for Rs 2-10 lakh and, the second bucket size of Rs 10 lakh and above  is for HNI-Non-Institutional Investors. Third: change in lock-in period for anchor investors from current 30 days in two bucket groups: 50% shares will have 30-day lock-in and balance 50% for 90 days. Clearly, institutional investors are uncomfortable with the 90-day lock-in with good reason. The last three months saw all new age companies losing around 50% values since their listing. Allotment for HNI category, in case of oversubscription, would be similar to the retail category with one lot per applicant.  For example, in the Rs 2 lakh plus category it would be just Rs 2 lakh. Similarly, it would be Rs 10 lakh in the Rs 10 lakh plus category. The new rules will see unrealistic over subscriptions by over 200-300 times disappear to more realistic levels in turn, making grey markets vanish. It will also force promoters to price IPOs more realistically.

RBI’s New IPO Rule To Hit HNIs, Grey Market Hard

Currently, IPO subscription in India is skewed to favour the leveraged HNI and subject to a very high degree of money power. Come April 1, 2022, this is set to undergo a major change with the RBI directing that no individual can be lent more than Rs 1 crore to apply for shares in an IPO. The immediate ramifications will be huge. Firstly, the number of times the HNI portion is subscribed will fall sharply from the present 100-800 times to maybe 5-10 times. The present grey market premiums which decide the subscription level will no longer exist at these levels as the subscription will not match. The reverse math will not allow such premiums to remain. The pricing of issues will go through a downward pressure as merchant bankers, promoters and PE Investors will no longer have the luxury to depend on leveraged HNI to back them. The standard practice of every issue opening at a premium of 20-30% of the issue price will simply stop.  What would the new scenario look like? Probably more subdued and balanced. IPO price band would be realistic and listing gains of 10% would be a great number. HNI subscription being in single digit would be the new norm as SEBI would also have notified the new norms of splitting the HNI bucket into two. For retail investors it is a welcome move.

Photo : Punit Goenka, Shallu Jindal and Siddharth Lal

Rising Shareholder Activism Keeping Promoters On The Hook

Shareholder activism has been gaining currency and managements have to think twice before proposing resolutions to be approved and voted by shareholders. SEBI is also ensuring that it becomes difficult for promoters to push anything just because of their majority stake. For every negative vote, you now need three positive votes to approve the resolution. In some cases, the promoter is not allowed to vote and the minority shareholders decide the outcome. Readers would recall that Eicher Motor shareholders rejected a pay hike to Sidharth Lal, its MD & CEO. Similarly, IDFC shareholders rejected the reappointment of Vinod Rai as independent director. In the case of Zee Entertainment, two directors stepped down on the eve of the AGM as proxy advisors had asked the shareholders to vote them out. Meanwhile, the company which announced a non-binding agreement sale to Sony Entertainment has been directed by NCLT Mumbai bench to consider shareholder Invesco’s request for EGM to oust MD Punit Goenka. Jindal Steel & Power wants its shareholders to approve payment of one-time remuneration to its four independent directors. Proxy holders are advising shareholders to oppose the same as it violates terms of an independent director. Further an investor has rejected the reappointment of Shallu Jindal, wife of Naveen Jindal and a director on the board of the company for nine years. Indeed, it is a tough time for promoters.

Shareholders’ Plea: Quit The Board, As Moral Turpitude Is Implicit In Disgorgement

SEBI, the capital markets regulator, has been aggressively issuing orders against entities found violating rules and making illegal gains using unpublished price sensitive information or ‘UPSI’. These orders involve consent terms for the violation and settling without admitting guilt, and also a component of ‘Disgorgement’. The term ‘disgorgement’ is defined as “the act of giving up something (such as profits illegally obtained) on demand or by legal compulsion. This brings us to a bigger and more important point of moral turpitude. Does an individual who sits on a board of a listed company as an independent director and has disgorged an amount to a regulator along with the promoter of the same company for illegally benefiting from USPI committed moral turpitude? The fact that he has used the same information as the promoter has, is testimony to the fact that he is no longer independent. Similarly, when a senior officer of an I-banker acts in a similar manner and disgorges money, the fact that he has settled consent terms amounts to having committed a breach of confidentiality. In such cases without exception, strictest of action needs to be taken and the concerned person should be asked to leave. It is time for Corporate India and minority shareholders to take the matter of ‘UPSI’ seriously and demand that action be taken against erring individuals.

Will Sensex Make New History In June?

Covid-19 has been affecting the global economy for about 15 months now, yet global markets seem to be doing well. Dow Jones is at a lifetime high and the Indian markets too have been doing reasonably well. The BSE SENSEX is a mere 600 points shy of its lifetime high of 51,259 points made on February 16, while NIFTY is 234 points away from the level of 15,431 points. In India, companies have learnt how costs can be controlled. Travel and travel related expenses have come down significantly. FMCG and consumer companies have also adopted WFH with unbelievable savings and performance. The bulls have complete control of the markets and there are many factors which support them: 1) The FIIs or FPIs continue to invest in India; 2) the second wave appears to have been arrested in a major way and the infrastructure has improved significantly in the intervening period; 3) the monsoon forecast is positive; 4) inflation is under control and interest rates are quite soft; 5) there is enough liquidity in the system in India to spur growth. There is a talk of a third Covid wave happening and hopefully we would be well prepared for the same. The fact that there is a huge trust deficit about China post the pandemic, more and more companies globally are putting in place a policy of China plus one supplier. India is an automatic choice for the one spot and we are seeing traction on this front. Considering all these factors, it becomes almost a certainty that the stock markets would see a new lifetime high in the month of June 2021. That would give us another six months before the calendar year ends and the possibility that markets moving another 5-7% looks distinctly possible.
black money

How Politicians Find Newer Ways To Take ‘Speed Money’

Speed money is a term regularly used to get work done when dealing with the various government agencies. ‘Green Tax’ was the term used to get work done from the environment ministry in the previous government. With the current government bringing in more transparency and plugging loopholes to make it tougher to make ‘money on the side’, the politicians too are becoming smarter –finding ‘legitimate’ ways to take speed money. I learnt of one such method while interacting with an industrialist of a leading diversified listed conglomerate. This group was to set up a new manufacturing plant in one of the states and was given two options by the politician. The first was the conventional cash. The second option was to invest in the equity capital of an unlisted company at ridiculously high valuations. Since he did not hoard black money, the industrialist chose the second option. The modus operandi was simple. His group invested in a company that had no operating business, hence was basically a paper company or a shell company. On paper it looked like a fraudulent transaction but would never get questioned. This company had many such ‘investors’ who invested to get their work done. ”I am willing to spend money and pick shares in such shell company, even if at a later date I have to write off the investments,” he explained. Ingenuity thy name is politicians!


Editor’s Note: Big Punch In Small Pack

It is the Third Anniversary of Short Post and as a news media startup launched during the Covid-19 pandemic it certainly feels better than good to find ourselves where we are today. Here, I must cite the unstinted support of our seasoned contributors, all senior editors in the country, who brought a great degree of maturity and sagacity to the Short Post newsroom. But for them, our tagline “Authentic Gossip”, an Oxymoron, would not have matured viably. Our user numbers may be small but our stories have created the desired impact among people who matter — decision makers and influencers. We offer a big punch in a small pack and Short Post with its 225-word stories has been punching above its weight category. Having posted close to 3,000 stories in the last 36 months, Short Post, I feel, is an idea whose time has come.
And this is vindicated by our two marquee advertisers – IDFC FIRST Bank and ICICI Lombard. Both believed in our story and have supported us from Day one. A big thank you to both.
If you look at the media landscape – print, TV and digital — it is a mixed bag. There are job losses as some outfits have closed down while a lucky few were bailed out by large corporate houses. Yes, there is a lot of action in the digital space. However, the entry of corporate houses has raised the question of independence of news media outfits. Sadly, there are just a handful of independent media outfits in the country that are highly respected for their neutrality. At Short Post, our credo is not to take sides, prejudge issues or be biased but, informing readers of behind-the-scenes happenings. In essence, Short Post strives to be a neutral editorial platform — neither anti-establishment nor pro-establishment.
As I said last year, disruptions in the media world are moving at a fast and furious pace. Technology is playing a very big role in how content is generated and consumed. But, we are neither alarmed nor perturbed as it is all a part of the evolution process. What gives us comfort is that AI is unable to create original gossipy content. And that is the news arena where we have achieved a distinction.