Sensex Opens in Green; ONGC & HUL Top Gainers

Tue, 24 Oct 09:30 am

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Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.17% while the Hang Seng is up 0.10%. The Shanghai Composite is trading up by 0.09%. US stocks fell from record levels on Monday as a decline in General Electric shares weighed on investor sentiment.

Back home, share markets in India have opened the day on a positive note. The BSE Sensex is trading higher by 90 points while the NSE Nifty is trading higher by 16 points. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.2% & 0.4% respectively.

Barring automobile stocks and energy stocks, all sectoral indices have opened the day in green with stocks from realty sector and metal sector leading the pack of gainers. The rupee is trading at 64.76 to the US$.

Telecom stocks have opened the day on a mixed note with Tata Teleservices and MTNL being the most active stocks in this space. As per an article in a leading financial daily, Reliance Communication (RCom) has received an approval from the Department of Telecommunication (DoT) for demerger of the wireless business of Sistema Shyam Teleservices (SSTL) into RCom.

With this, RCom will acquire approximately 2 million customers and additional annual revenues of around Rs 7 billion.

In addition, RCom will acquire 30 MHz of the most valuable and superior 800 / 850 MHz band spectrum, ideally suited for 4G LTE services, to complement its own unique nationwide footprint.

Reportedly, this will result in extension of the validity of RCom's spectrum portfolio in the 800 / 850 MHz band in eight important Circles (Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP-West and West Bengal) by a period of 12 years - from 2021 to 2033.

As a result of the demerger, SSTL will receive a 10% equity stake in the fully diluted equity share capital of RCom. In addition, RCom will assume the liability to pay the DoT installments for SSTL's spectrum, amounting to Rs 3.9 billion per annum for the next 8 years, the reports noted.

Moving on to the news from IPO space. Mahindra and Mahindra Ltd announced that it has set a price band of Rs 425-429 per share for the initial public offering (IPO) of its logistic unit Mahindra Logistics Ltd.

The public issue of Mahindra Logistics comprises 19.3 million equity shares that are up for sale. This includes 9.7 million shares, amounting to 13.7% stake, by parent firm Mahindra and Mahindra Ltd.

The IPO will run from 31 October to 2 November. Last week, Mahindra Logistics had received go-ahead from markets regulator for the initial share sale.

However, it should be noted that the IPO activity in FY17 is mainly driven by Offer for Sale (OFS) rather than fresh issues. An OFS is a route through which existing promoters and private equity investors offload their stake.

As per Prime Database, in FY18, Rs 224.5 billion or nearly 85% of the IPO has been raised through OFS issuance. The increasing proportion of OFS can be clearly seen in the chart above.

One of the key reasons for this surge in OFS offering is due to a surge in the Indian equity market backed by liquidity and increasing investor demand for financial assets.

With several big IPOs in the pipeline in the last few months of 2017, it looks like the OFS will dominate the IPO proceedings.

The Rising proportion of OFS

During such a time, it's beneficial to be very selective when investing in IPOs. Carefully analyze each company for its own merits and don't give in to the hype surrounding the public offering.

That's Ankit Shah's approach at Equitymaster Insider. He keeps a sharp eye on the developments in the IPO space and keeps his readers up-to-date on the big-ticket IPOs.

Ankit and his team of researchers constantly reference this handbook on investing in IPOs. You can download a copy for yourself. It's free. Just click here.

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

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