Indian Indices Continue Momentum; Metal Stocks Witness Buying

Fri, 6 Oct 11:30 am

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After opening the day on a positive note, stock markets in India have continued their momentum. Sectoral indices are trading on a positive note with stocks in the metal sector and power sector witnessing maximum buying interest.

The BSE Sensex is trading up 200 points (up 0.7%) and the NSE Nifty is trading up 75 points (up 0.8%). The BSE Mid Cap index is trading up by 0.9%, while the BSE Small Cap index is trading up by 1.1%. The rupee is trading at 65.23 to the US$.

As per an article in the Economic Times, the committee on corporate governance established by the Indian share market regulator under the chairmanship of Uday Kotak has proposed sweeping changes aimed at tightening corporate standards.

A major recommendation made is that listed companies with more than 40% public shareholding should separate the roles of chairperson and MD or CEO from April 1, 2020.

Presently, of the 50 companies on the benchmark index Nifty, at least 12, including Power Grid, NTPC, Reliance Industries, ONGC and Wipro, have the same person occupying both posts.

Many experts, however, believe that the above recommendation should not be made a legal requirement as it would mean two power centres at the corporate helm.

Apart from the above, the committee recommended improvements in transparency, keeping large shareholders informed about unpublished information and stricter rules on board composition among others.

It also has made several recommendations to strengthen the role of directors. As per the recommendations, companies would need to induct at least six directors, up from the current minimum of three under the Companies Act, with at least one independent woman director.

As regards related-party transactions, the panel suggested that companies should disclose in the annual report certain key financial ratios or sector-specific equivalent ratios. It also proposed the release of consolidated results every quarter and cash-flow statements every six months.

As per us, the above developments are a step in the right direction. They will reinforce corporate governance and also inspire new governance codes. Moreover, they will protect minority shareholders' interest by tighten the lid on unfair share practices and make managements more accountable.

In the news from GST space, a revamp of the Goods and Services Tax (GST) is on the agenda of the GST Council today.

The agenda is a part of efforts to address the grievances of small-scale industries, traders and exporters.

As per the news, there are many measures that the council may introduce today which include an increase in the threshold limit for the composition scheme to Rs 1-1.5 crore from Rs 75 lakh to aid micro, small and medium enterprises, a more liberal exemption limit, and a lower compliance burden with quarterly rather than monthly filing.

In the news from the IPO space, MAS Financial Services is set to open its initial public offer (IPO) today. The company is estimated to raise Rs 4.6 billion and the subscription of the same will be open till 10th of October.

MAS Financial Services is a Gujarat headquartered NBFC, pre-dominantly engaged in lending to micro and small and medium enterprise. The company has adapted a unique business model, enabling it to grow its balance sheet at a robust pace while keeping its asset quality in check.

Assets Under Management (AUM) of the company has increased at a compounded annual growth rate (CAGR) of 33.3% in the preceding five years. Also, robust credit assessment process and clear understanding of the target market have helped to keep the gross non-performing assets in check. The GNPAs have hovered around 1% in the preceding three years.

Over a period of five years, the companies Micro Enterprise Loans and SME Loans have grown at a compounded annual growth rate (CAGR) of 32% and 137% respectively. The company is adequately capitalized. Its capital adequacy ratio as at 30 June 2017 stood at 23.8%, way above the statutory requirement of 15%. The ratio is further set to improve on the back of the proceeds from the fresh issue.

The company has been in operation for more than two decades and has more than 5,00,000 active loan accounts across more than 3,165 customer locations in six states. Fundamentally, the company looks decently placed as compared to its peers.

That said, is the company leaving enough money on the table for investors? We recently released our IPO note for the above IPO. You can access the same in our IPO section.

Speaking of IPOs, 2017 is set to be a record year for initial public offerings, as can be seen from the chart below.

2017 Set to be Record Year for IPOs

To know which IPOs to subscribe to, you can download our FREE report - How to Get Rich with IPOs. This report will show you how to safely profit from the 2017 IPO rush.

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