Indian Indices Trade Strong; IndusInd Bank Surges on Merger News

Mon, 11 Sep 01:30 pm

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After opening the day in green, share markets in India continued the uptrend and are trading in green. Sectoral indices are trading on a positive note with stocks in the capital goods sector and stocks in the power sector leading the gains.

The BSE Sensex is trading up by 210 points (up 0.7%), and the NSE Nifty breached the 10,000 mark, and is trading up by 74 points (up 0.7%). Meanwhile, the BSE Mid Cap index is trading up by 0.9%, while the BSE Small Cap index is trading up by 0.8%. The rupee is trading at 63.94 to the US$.

In news from stocks in the banking sector. IndusInd Bank share price is in focus today after the bank entered into an agreement with Bharat Financial Inclusion for a potential merger.

The agreement provides for a mutually agreed exclusivity period for due diligence and discussions to evaluate a potential strategic combination between the two companies.

The transaction will be subject to due diligence approval of the boards, shareholders, statutory/regulatory and other third-party entities, as required under the applicable laws.

The two financial firms had long been speculated to be interested in a deal, with multiple media reports saying previously, it could come in the form of a share swap.

IndusInd Bank is India's sixth-largest private sector lender by assets and has a market value of about $16 billion, while Bharat Financial Inclusion, formerly known as SKS Microfinance Ltd, is valued at more than $2 billion.

The development comes at a time when Bharat Financial is facing stiff competition from banks, both universal and small finance banks.

If the deal goes through it would be interesting to see how both the institutions are able to match their synergies and grow in the long term.

At the time of writing, IndusInd Bank share price was trading up by 5.1%.

Note that mergers and acquisitions activity was seen to pick up in the previous year, at an all-time high.

The value of M&As that have taken place last year - at US$ 69.8 billion - are the highest on record for the country. This even beats the previous record of US$ 66.9 billion set in 2007.

Indian M&A Activity at an All Time High

In a year of otherwise sluggish economic activity, what does this trend indicate?

The slowdown in the economy had led to many corporates seeing stress on their balance sheets due to a reduced capacity to service debt. Thus, many wanted to sell off assets in a bid to reduce debt. However, they've been wanting to do so for a few years know.

So why this sudden pickup in activity in 2016? Yes, sellers of assets abounded. But just having sellers isn't enough for a transaction. You need buyers too. Thus, perhaps this big bump up in buyer interest during 2016, which led to many big deals taking place, was an indication of increased confidence in the Indian economy.

With the macroeconomic environment clearing up with a slew of structural reforms, it remains to be seen whether 2017 will be another bumper year for M&A activity.

In news from stocks in the IPO space. Matrimony.com's Rs 5 billion IPO opens for subscription today. The firm, which runs online match maker BharatMatrimony.com, has fixed a price band of Rs 983-985 per share.

Ahead of the IPO, the company raised over Rs 2.3 billion by alloting shares to institutional investors as a part of its anchor book allottment.

A total of eight investors bought 2.3 million shares at the upper end of price band at Rs 985 per share.

The IPO closes on 13 September. The company is looking to raise Rs130 crore in primary capital through the IPO, while some existing shareholders are selling shares in a secondary offering.

Proceeds from the issue will be used for advertising and business promotion activities, purchase of land for construction of office premises in Chennai and repayment of overdraft facilities.

We have analysed and reviewed the IPO have released its recommendation note. You can check the same on them IPO page.

With multiple offerings lined up, it becomes difficult to evaluate and pick out the best opportunity, if any exists. Not all IPOs will have fortunes like the D-Mart IPO, as the IPO game is inherently rigged against the retail investor.

We don't need to back all the IPOs to get rich. But a few good IPOs could certainly become the multibagger in your portfolio in a few years.

We have come out with a special report titled, How to Get Rich with IPOs. It is a comprehensive report that aims to cut through all the hoopla surrounding IPOs. This guide will show you how to safely profit from the 2017 IPO rush.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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