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Primary market scenario post April 2022

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5 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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IT Q2 results beat low expectations, but demand recovery pushed to FY28: Report

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4 days ago

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November 6, 2026

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India’s information technology (IT) services sector delivered Q2 FY27 results that were modestly ahead of subdued expectations, but the broader recovery in demand is increasingly being pushed into FY28 as companies contend with pricing pressure and AI-driven disruption, a report said on Friday.

The report from BNP Paribas India said investors responded positively to better-than-expected earnings after analysing quarterly results from 15 Indian IT services companies, including five large-cap and 10 mid-cap firms.

Shares of the covered companies rose by a median 5 per cent following the results after having declined about 23 per cent year-to-date in 2026.

The market rewarded better-than-feared revenue, margin expansion and strong deal momentum, while penalising margin pressure and weak deal wins. Demand remains steady but narrow, with the financial services vertical as the bright spot.

“While FY27 headline revenue growth guidance cuts seemed modest, the organic cut was sharper, implying that FY27 organic revenue is likely to trail FY26, with acquisitions filling in the gap partly,” the report said.

“AI-led work continues to grow even as clients demand pass-back of the productivity gains, shrinking the legacy books and pushing down pricing pressure. With seasonally weak H2FY27, companies now expect recovery in FY28, supported by large deal ramp-ups,” the report noted.

Collectively, 60 per cent of the firms beat on revenue and 53 per cent beat on EBIT margin expectations, while 27 per cent missed on revenue growth and 40 per cent missed EBIT margin expectations.

Deal Total Contract Value (TCV) inched up modestly annually in Q2FY27, underpinned by strong wins of three companies. Headcount increased slightly sequentially, while attrition and utilisations improved modestly.

Another recent report said that management commentary across nearly all major Indian IT companies during Q1 FY27 earnings season showed that clients demanded measurable outcomes, governance frameworks and stronger data foundations before committing to large-scale AI rollouts.

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India bolsters ties with diamond-producing countries

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5 days ago

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November 5, 2026

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India, as Chair of the Kimberley Process (KP) for 2026, has flagged key priorities concerning the global diamond industry, including responsible rough diamond sourcing as part of its outreach ahead of the KP Plenary to be held in Delhi from November 30 to December 4, according to a statement issued by the Commerce Ministry on Thursday.

The issue was discussed at a stakeholder consultation in Angola’s Luanda on Tuesday, chaired by Additional Secretary Yashvir Singh on India’s behalf, which brought together the Chairs and Vice-Chairs of KP Working Groups and Committees (KP Working Bodies), the KP Vice-Chair (of Ghana), and the former KP Chair (of the United Arab Emirates). Representatives of observers and partner organisations, including the World Diamond Council and the African Diamond Producers’ Association (ADPA), also participated in the discussion, the statement said.

India has observer status in the ADPA, providing an institutional platform for engagement with African diamond-producing countries. This offers opportunities for cooperation in securing rough diamond supply chains, technical knowledge exchange, value addition, market access and the promotion of ethical and sustainable practices.

The 13th Extraordinary Meeting of the ADPA Council of Ministers, held alongside the 20th anniversary celebrations, approved a Memorandum of Understanding (MoU) between the Gem & Jewellery Export Promotion Council (GJEPC), India, and the ADPA. The MoU seeks to strengthen cooperation between the Indian gem and jewellery industry and African diamond-producing countries, including through capacity building and skills development in diamond sorting, valuation and manufacturing, exchange of technical expertise, and the promotion of trade and investment linkages across the diamond value chain, the statement said.

Yashvir Singh said: “India’s chairship places emphasis on confidence, compliance and credibility. The consultation in Luanda provided an opportunity to engage directly with the leadership of the KP working bodies, the KP Vice-Chair and observers on issues that are important to the future of the Process and the diamond industry. Our endeavour is to build a shared understanding of the issues before the New Delhi Plenary and to advance practical outcomes through constructive dialogue and consensus-based decision-making.”

Discussions covered the sustainability of diamond-producing countries and communities, sustainable funding and continuity of the KP Secretariat, digitalisation of certification and statistical processes, and strengthening compliance with the Kimberley Process Certification Scheme.

Participants also exchanged views on the reform of the conflict diamond definition, responsible sourcing, artisanal and alluvial diamond production, consumer confidence and the importance of effective reporting and peer-review mechanisms.

The ADPA, established in 2006 in Luanda, seeks to enhance cooperation among African diamond-producing nations. It effectively comprises 15 member countries and 8 observers, including two non-African observers, namely Russia and India. Its member countries collectively account for over 60 per cent of global diamond production.

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Business

Adani Ports to acquire Europe’s Evos for 2.56 billion euros in major global expansion

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5 days ago

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November 5, 2026

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Adani Ports and Special Economic Zone Limited (APSEZ) on Thursday announced the acquisition of Netherlands-based Evos B.V., Europe’s second-largest independent liquid storage operator, in an all-cash transaction valued at an enterprise value of 2.56 billion euros.

Under the agreement, APSEZ will acquire a 100 per cent stake in Evos from Igneo Infrastructure Partners.

The deal values Evos at an equity value of 1.18 billion euros and implies an acquisition multiple of 11.7 times CY25 EV/EBITDA.

The transaction will be funded through debt and remains subject to regulatory approvals and works council consultation.

“APSEZ, India’s largest and one of the world’s fastest growing Integrated Transport Operator, agrees to acquire 100 per cent stake in Netherlands-headquartered Evos B.V. (Evos) from Igneo Infrastructure Partners. The proposed transaction is an all-cash deal at an enterprise value of 2.56 bn euros,” the official statement said.

For calendar year 2025, Evos reported revenue of 392 million euros and EBITDA of 219 million euros, translating into a robust EBITDA margin of 56 per cent.

Following the acquisition, the combined entity’s pro forma net debt-to-EBITDA ratio is expected to stand at 2.76 times and decline to around 2.5 times by FY27.

Commenting on the deal, Karan Adani, Managing Director of APSEZ, said the acquisition marks a significant milestone in the company’s journey toward handling one billion tonnes of cargo and building a truly global integrated transport platform.

“Evos marks an important milestone in APSEZ’s trajectory towards handling 1 billion tons of cargo and building a truly global, integrated transport platform. We are delighted to welcome Evos into our portfolio, giving us significant presence across key global liquid storage and energy hubs,” Karan Adani noted.

“We look forward to partnering with Europe, supporting its sustainable energy transition and creating enduring value while maintaining the financial prudence that underpins our growth,” he added.

Headquartered in the Netherlands, Evos operates 6.3 million cubic metres of storage capacity across eight strategically located port-based terminals in the Netherlands, Germany, Spain, Belgium and Malta.

The company has a presence in major energy and industrial hubs, including the Amsterdam-Rotterdam-Antwerp region, Hamburg and the Mediterranean.

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