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Primary market scenario post April 2022

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4 years ago

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The world has been affected by Covid-19 for over 24 months now. However, capital markets used this opportunity and had a fantastic run during the same whether it be secondary markets or for that matter primary markets. A striking feature of primary market offerings during calendar year 2021 was the fact that the bulk of the offerings, as much as roughly 80 per cent was offer for sale. This OFS was dominated by PE investors who took advantage of the markets and sold their stake at unbelievable valuations. This was also the period when tech platform companies and new age companies hit the market. As usual, the market had its fair share of successes and failures.

The driving force behind the listing gains was the oversubscription witnessed across companies barring a handful. This oversubscription came at a cost- the cost of funding the application and this got built into the listing price. This gave a feeling that the issue did well post listing. In reality, most of these companies have lost sharply from their highs and have given up a large part of their gains. Physical events of companies launching their roadshows had stopped and they had become digital with Zoom webinars being the way. This system had its advantages and disadvantages with time to complete being reduced to just one day. Further it gave an unfair advantage to merchant bankers and promoters as conferences were conducted behind an effective censor board in the form of a moderator and tough questions being simply avoided.

An interesting incident was in the Zomato digital event where the company made its entire presentation in US dollars forgetting the basic fact that in an Indian issue, the currency of subscription is Indian Rupees. Fortunately, no other such event has happened thereafter thankfully.

Let us move to April 2022. The scenario has changed completely. There are new regulations imposed by RBI and SEBI. RBI has introduced a ceiling on the amount of money that can be lent by an NBFC against application at an upper cap of Rs 1 crore. This means every HNI can borrow just one crore each. This would mean in simple terms that the HNI portion which has seen oversubscriptions of 200-600 times would just not happen. The method of controlling this lending would be the PAN card. The second thing would be that this oversubscription came at a cost. The cost of funding. When there is no leveraging, there is no cost of funding. This would have a dramatic impact on the unofficial but rampant grey market. Premiums there would crash and the obnoxious returns made on listing would simply vanish. This would put pressure on subscriptions from other categories as well. The day when an IPO for Rs 1,000 crore garnered subscription across categories of Rs 40,000-60,000 would just stop.

SEBI has split the HNI bucket of 15 per cent into two with the first bucket of 5 per cent for application between 2 lakhs to 10 lakhs. The remaining 10 per cent is for applications which are greater than Rs 10 lakhs. The allotment in these categories in case of oversubscription would be on basis of lots like retail. This implies that allotment would be uniform to all applicants of the base lot size which would be Rs 2 lakhs and 10 lakhs as the case maybe on basis of lottery. In case of undersubscription, allotment would be on normal basis where the applicant would get shares on the basis of his subscription.

The other major change is with respect to anchor allocation and lock-in. Half the shares allotted to anchors would be locked for 30 days while the balance half would be locked in for 90 days. This would make anchor investors seek comfort on the pricing of IPO’s and indirectly seek comfort that the issue is reasonably priced so that they do not go under during the mandatory lock-in period.

Let us look at the HNI bucket with an example. For assumption we take a size of the primary offering which could include fresh issue and offer for sale of Rs 1,000 crore. Fifty per cent of the issue would be for QIB’s, 15 per cent for HNI’s and the balance 35 per cent for retail. Of the 50 per cent for QIB’s, 60 per cent would be for anchors. In this example, Rs 300 crore would be for anchors with Rs 150 crore of shares being locked in for the customary 30 days and balance Rs 150 crore for the new period of 90 days. Any anchor would now take a view that his invested price or issue price should not go below the issue price in 90 days. This would give additional comfort to other investors hopefully.

HNI bucket of 5 per cent for Rs 2 lakhs to 10 lakhs would mean Rs 50 crore. This would require 2,500 applications of Rs 2 lakhs to be subscribed on lots. The larger bucket of 10 per cent or Rs 100 crore would require 1,000 applications of Rs 10 lakhs to be subscribed. When the allotment is capped at this system unlike the earlier proportionate, many large applications would be deterred until and unless on the last day just before closing time there is a feeling that the issue may not get subscribed in the HNI category. Then people would look at the issue and make larger applications than 10 lakhs.

In the new scheme of things there would be two major factors which would see a change. The first is subscription levels where three-digit subscription levels in HNI category would be a thing of the past. Second would be as far as premiums are concerned. They would fall significantly as there is no logical cost of interest which could decide the logical premium. The impact of these two factors combined should put pressure on pricing by merchant bankers and promoters.

As an analyst, a person like me would be very happy that management and merchant bankers would now have to justify valuations rather than take the easy way out of suggesting that there is a 50-60 per cent grey market premium. If you feel the price is high, sell in the grey market.

Interesting times ahead for primary markets which will learn to evolve with these changes as well.

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There is no delay in probe into Air India Boeing crash: Govt

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2 hours ago

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July 27, 2026

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New Delhi, July 27: The Ministry of Civil Aviation informed Parliament on Monday that there has been no delay in the investigation into the Air India Boeing Dreamliner crash at Ahmedabad airport and the inquiry “is progressing as per established procedures.”

The investigations into major aviation accidents depend on several factors and involve multiple variables, making it impossible to specify a fixed timeline for the final report, the ministry said in a written reply to a question in the Upper House.

“The timeline for completing a major air accident investigation cannot be predicted,” the Ministry’s statement said.

It also said that all probable causes and contributing factors leading to the accident are being investigated, indicating that the probe remains comprehensive and no conclusions have been reached so far.

The ministry further informed the Rajya Sabha that the inspection of the complete Thrust Control Module at the original equipment manufacturer’s (OEM) facility is underway as part of the ongoing investigation.

The Ministry of Civil Aviation had earlier, in a reply, also stated in Parliament that the Aircraft Accident Investigation Bureau (AAIB) is “transparently” conducting its investigation into the Air India Boeing crash on June 12 last year and “all probable causes leading to the accident are being investigated.”

A preliminary investigation report was published by AAIB on July 12, 2025, and the same is available on their website www.aaib.gov.in. The investigation is in progress, and the final report will be published after completion of the investigation, the ministry stated in a written reply to a question in the Rajya Sabha.

“As per the ICAO Annex 13 requirements, the interim statement has been published by AAIB on June 12, 2026. The final investigation report will be published after completion of the investigation,” the ministry added.

As many as 260 people were killed when the AI-171 Boeing Dreamliner flight from Ahmedabad to London-Gatwick on June 12 crashed within 35 seconds of taking off. While 241 people on board the Dreamliner lost their lives, 19 people were killed on the ground. One passenger on the plane had a miraculous escape.

The preliminary report released by the AAIB on July 12 stated that both engines of the ill-fated Air India Boeing 787 Dreamliner lost thrust after the two fuel cut-off switches moved from the ‘RUN’ to the ‘CUTOFF’ position. However, the cockpit voice recorder has revealed that one of the pilots told the other that he did not turn off the fuel control switches. The fuel switches were then returned back to the RUN position just before the plane crashed.

Union Civil Aviation Minister Ram Mohan Naidu earlier said that the Aircraft Accident Investigation Bureau’s report on the Air India crash was based on preliminary findings, and urged against reaching any conclusions until the final report is released.

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Maharashtra first to qualify for second RKVY instalment after timely fund utilisation

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3 hours ago

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July 27, 2026

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New Delhi, July 27: Maharashtra has become the first state to qualify for the second instalment of the government’s Rashtriya Krishi Vikas Yojana funding after utilising about Rs 260 crore of the Rs 335 crore first instalment, exceeding the 75 per cent utilisation benchmark, an official statement said on Monday.

Union Minister for Agriculture and Farmers’ Welfare Shivraj Singh Chouhan chaired the virtual review meeting to assess the utilisation of funds released under the scheme and to consider the issuance of the second instalment to Maharashtra, the statement said, adding that the process for release is being taken up.

The minister acknowledged satisfactory progress under the Mission for Integrated Development of Horticulture and urged the state to accelerate expenditure on digital agriculture, agriculture extension, the National Horticulture Mission, seeds, oilseeds and agroforestry components.

He also suggested that pending liabilities under the Seeds component be booked expeditiously to improve fund utilisation.

Chouhan said Maharashtra’s overall utilisation exceeding the required threshold reflected effective implementation of agricultural development programmes.

The minister emphasised that timely expenditure should always be accompanied by continuous monitoring to ensure that public funds are utilised strictly for the objectives for which they have been sanctioned.

He also appreciated Maharashtra’s performance in generating Farmer IDs and recalled the state’s prompt financial assistance to farmers affected by floods, wherein compensation amounting to around Rs 14,000 crore was transferred directly to farmers’ bank accounts within five days.

During the meeting, a separate discussion was also held on the implementation of the Pradhan Mantri Fasal Bima Yojana (PMFBY). The minister stressed the need for accurate disclosure of information by farmers while applying for crop insurance.

He clarified that both Kisan Credit Card (KCC) and non-KCC farmers are eligible to avail crop insurance benefits, but concealment of KCC status by applying through another account should be avoided.

The proposed declaration on the portal is intended solely to ensure transparency and correctness of information, and not to restrict benefits to any eligible farmer.

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Zen Technologies shares tumble over 10 pc after weak Q1 earnings

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9 hours ago

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July 27, 2026

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Mumbai, July 27: Shares of Zen Technologies Ltd. fell more than 10 per cent in early trade on Monday after the technology company reported a weak set of earnings for the first quarter of FY27, hurt by lower revenue and a sharp contraction in operating margins.

At around 10:50 am, the stock had plunged as much as 10.39 per cent to an intraday low of Rs 1,585.55 on the BSE. It later pared some losses to trade at Rs 1,688.95, down 4.55 per cent.

The disappointing quarterly performance has shifted investor attention to the company’s order book and management’s outlook for the rest of the financial year.

Revenue from operations declined 10.5 per cent year-on-year to Rs 142 crore in the April-June quarter, compared with Rs 158 crore in the same period last year.

The company’s operating performance also weakened, with EBITDA falling 38.8 per cent to Rs 38.7 crore from Rs 63.3 crore a year earlier.

Its EBITDA margin narrowed sharply to 27.3 per cent from 40 per cent in the corresponding quarter last fiscal, indicating increased pressure on profitability despite a relatively modest decline in revenue.

Net profit dropped 27.8 per cent to Rs 34.5 crore from Rs 47.8 crore in the year-ago period. The company said the quarterly performance was also affected by a one-time loss of Rs 3.4 crore.

Meanwhile, the board approved a two-year extension for the utilisation of proceeds raised through its qualified institutional placement (QIP). Zen Technologies had raised the funds in August 2024 and has been regularly updating stock exchanges on their utilisation through monitoring and deviation reports.

On Monday, the stock touched an intraday low of Rs 1,585.55. Over the past 52 weeks, it has traded between a low of Rs 1,224 and a high of Rs 2,023.40 on the BSE.

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