BSE Limited IPO- Positive & Negative factors related to investment

Summary of the business

The Bombay Stock Exchange (BSE) is the first and the oldest stock exchange in Asia, which was formed on 9th July, 1875. The BSE was the world’s largest exchange by number of listed companies, and India’s largest and the world’s 11th largest exchange by market capitalization, with US$ 1.52 trillion in total market capitalization of listed companies.

Trend of domestic market capitalisation to GDP across major economies

Grey market premium trend at 11.30 Dated 23 Jan 2017

Current GMP IS Rs.134/- to Rs.136/-

And Kostak Is Rs.800/- to Rs. 850/-

Objects of the issue

To achieve the benefits of listing the equity shares on NSE.

For the sale of equity shares by the selling shareholders.

Issue details

IPO opens- 23rd January 2017

IPO closes- 25th January 2017

Issue type- Book Built Issue IPO

Face Value- Rs 2 /- per equity share

Issue price band- Rs 805 to Rs 806 per equity share

Issue size- 15,427,197 Equity Shares of Rs 2 aggregating up to Rs 1,243.43 Cr. Offer for Sale of 15,427,197 Equity Shares of Rs 2 aggregating up to Rs [.] Cr

Market lot- Minimum of 18 shares

Minimum investment- Rs 13600 on lower price band

Leading managers- Edelweiss Capital, Axis Capital, Jefferies, Nomula Intl, Motilal Oswal, SBI Capital markets and SMC Capital.

Listing- Only NSE (it cannot list on its own BSE stock exchange as of now)

Currently, Multi Commodity Exchange of India Ltd (MCX) is the only listed bourse in the country. MCX has market capitalisation of Rs. 5100 crores based on current CMP of its shares.

Strength

Strong brand recognition with a track record of innovation

It has built its own brand by historically anticipating and responding to investor’s needs through the introduction of new products and services. Examples of its past product innovations include BSE StAR and BSE SME. It introduced BSE StAR, its online platform for the placement of orders and redemptions of units in mutual funds, in December 2009, providing investors with a single platform to invest and redeem in a wide selection of mutual fund schemes. As at June 30, 2016, BSE StAR offers a platform to invest and redeem in 39 asset management companies (“AMCs”) with 6,112 different mutual fund schemes.

Diversified and integrated business model and active relationship with market participants

It operates a diversified and integrated business model including trading, clearing and settlement of products listed and traded on the BSE, as well as the provision of data products, IT services and solutions, index products and training. By providing such integrated services, we support market participants and members throughout the entire life-cycle of a trade.

State-of-the-art infrastructure and technology

It has the electronic systems for entry, trading, clearing and settlement and depository services and we continually seek to improve our core IT capabilities, the reliability and consistency of which help us to maintain our competitive position.

Financial strength and diversified sources of revenue

In order to provide a stable stream of revenue to support our fiscal policy, we have sought to diversify our revenue streams. We derive revenue from a variety of sources including revenue from trading activities on the exchange, such as trading fees and trading tariffs, revenue from post-trade services, such as clearing, settlement, depository, custody and nominee service fees, and initial and recurring listing fees from equity, debt and derivative products, and subscription fees from data products.

Top 10 Shareholders

 As on September 6, 2016, the Exchange had 9,855 Shareholders.

Top 10 Share holder

 

Impact of Demonetization on Real Estate & its effective resolution plan

Summary of the Industry

Positive Factors

Its consolidated revenue grew at 3% CAGR in last 5 years. And its un-consolidated revenue grew at 6% CAGR in last 5 years.

Good profits of 24.2% in the last couple of years (consolidated). However, one should note that there is decline in margins in the last 2 years compared 2012 to 2014 (which was in the range of 26% to 30%).

Strong brand as BSE.

CARE Resarch Report

Negative or Risk Factors

  • There is outstanding litigation against the Company, BSE Group Companies and BSE Directors which if determined adversely, could affect BSE’s business and results of operations.
  • Broad market trends and other factors beyond BSE’s  control could significantly reduce demand for BSE’s services and harm BSE’s business, financial condition and results of operations.
  • There can be no assurance that BSE will be successful in implementing BSE’s current and future strategic plans.
  • BSE’s proposed international exchange in GIFT City is subject to numerous contingencies and uncertainties.
  • Trading on BSE equity derivatives segment is less than that on the NSE and there is no guarantee that BSE can successfully compete in the equity derivatives segment against the NSE.
  • Damage to BSE’s reputation could materially adversely affect BSE’s business.
  • Any current and future strategic investment, alliance, joint venture or other business combination may materially adversely affect BSE’s financial condition and results of operations.
  • BSE’s existing products may lose market appeal and BSE may be unable to expand into new product lines or attract new types of investors.
  • BSE’s electronic trading platform, networks and those of BSE’s third-party service providers may be vulnerable to security risks and cyber-attacks.
  • Certain of BSE’s critical trading infrastructure and software agreements are licensed from third parties.
  • Insufficient systems capacity and systems failures could materially adversely affect BSE’s business and reliance on third party service providers.
  • Changes in regulations concerning BSE’s ownership in CDSL may have a material adverse effect.
  • Changes in interest rates may materially adversely affect BSE’s profitability.

Investment strategies/Recommendation

  • Strengthen BSE’s position to become the exchange of choice in India and expand BSE’s cross-border reach by entering into strategic alliances.
  • Increase BSE’s variety and market share of derivative products.
  • Diversify BSE’s product and service offerings and maintain new product innovation and development.
  • Maintain and improve best-in-class platform infrastructure.
  • Establish an international exchange at GIFT City.
  • Capture growth in the under penetrated Indian financial markets.

Market capitalisation

There is no listed peer in India who is in similar business for comparison, hence we cannot say whether this issue price is over priced or under priced.

Company revenues grew at 3% CAGR in the last 3 years. It generated profit of 24% in the financial year 2016. BSE is a good brand. It would be only listed company in India in Stock Exchange business after listing. While revenue growth is not that great, considering higher margins and investor sentiments, this IPO can create.

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.

Determine EMI on Home Loans by Your Credit Score

Good news for home loan buyers. The interest on home loans is going to be linked to your credit rating or the discipline you maintain in repaying your existing loans.

If you have a higher credit score than previous, then you will have to pay less EMI and vice versa.

Bank of Baroda

Report from Bank of Baroda

A big announcement is made by Bank of Baroda (BoB) to lower the interest rates from Monday onwards. It is the first bank to associate the home loans to credit score of borrowers.

Credit Information Bureau of India (CIBIL) will be giving all the information to the bank regarding the rates. If the score is above 760 points, then the rate charged will be 8.35%.

Other banks are going to take critical initiative after the decision made by BoB.

If the credit score of the customer is between 725-759 points, then they will be charged the interest rates of 8.85%. And if the score is below 724 points then, 9.35% rate will be charged.

In case of first time borrowers, those who have no credit history will be charged 8.85%. Other officials from the bank who didn’t want to be named reveals that it wanted to reward the customers the better rating by offering them a better. The recent rates charged by the bank are regardless of the tenure and the amount.

Three finance lessons for your child

BoB is charging the lowest rates among all the other banks in home loans. Other banks are charging the rates like 8.65% and 8.70% in competition with the Bank of Baroda. The indication of Cibil Score is towards the financial discipline maintained by the borrowers in terms of timely repayment of their dues.

Bank of Baroda’s one-year marginal cost lending rate (MCLR), which is the floor rate at which they lend to the best customers, is fixed at 8.35%. The bank has not kept any spread or mark-up on its MCLR for best rated home loan borrowers. In case of SBI, which has a one-year MCLR of 8%, has kept a 65 basis point mark-up for home loans.

Invest in 10 Maharatna’s and Navratna’s

Investment Objective

The objective is to confer returns that, before expenses, closely correspond to the total returns of the securities as represented by the Nifty CPSE Index, by investing in the securities which are constituents of the Nifty CPSE Index in the same proportion as in the Index.

However performance of the scheme may differ from that of underlying Index due to tracking error. Their can be no assurance or guarantee that the investment objective of the scheme would be achieved.

For Anchor investors,offer open & closes on 17th JAN 2017.

For Non Anchor investors, offer opens on 18th JAN & closes on 20th JAN 2017.

Benchmark Index : Nifty CPSE Index

About the Index

It has been constructed to facilitate the Government of India’s initiative to disinvest some of its stake in selected Central Public Sector Enterprises (CPSEs) through the ETF route. The index contains 10 CPSEs with base date of 1st January, 2009.

As on 30th December, 2016, the one year CAGR^ return of Nifty CPSE TRI is 17.45% against 4.39% given by Nifty 50 TRI.

Selection Criteria’s for the Nifty CPSE Index

The 10 CPSEs selected meet below mentioned parameters:

  • Included in the list of CPSEs published by the Department of Public Enterprise.
  • Listed at National Stock Exchange of India Ltd. (NSE)
  • Having more than 55% government holding (stake via Govt. Of India or President of India) under promoter category.
  • Companies having average free float market capitalization of more than Rs 1,000 Crore for six month period ending June 2013 are selected.
  • Have paid dividend of not less than 4% including bonus for the 7 years immediately preceding or for at least 7 out of the 8 or 9 years immediately preceding, are considered as eligible companies as on cut-off date i.e. 28th June 2013.

NAVRATNA STOCK

 

Industry allocation

Face Value

Rs 10/- per Unit

Type of scheme

An open-ended index scheme, listed on the Exchange in the form of an Exchange Traded Fund (ETF) tracking the Nifty CPSE Index.

Liquidity Facility

All investors including Authorized Participants and large Investors can Subscribe (buy) / Redeem (sell) units on a continuous basis on the Exchange where the units are listed.

Load structure

Entry Load- Nil

Exit Load- Nil

Category of Investors (only during the FFO period)

  • Retail Individual Investors
  • Qualified Institutional Buyers or QIB
  • Non-Institutional Investors
  • Anchor Investors

Minimum Application Amount

During the Further Fund Offer (FFO) Period

For Non Anchor Investors

Retail Individual Investors can invest in the FFO of the scheme with a minimum amount of Rs 5000/- and in multiplies of Re 1/- thereafter.

For Anchor Investor

Investors can invest in the FFO of the scheme with a minimum investment amount of Rs 10 crores and in the multiples of Re 1/- thereafter.  

Discount offered by GOI of the scheme

A 5% discount on the ‘FFO Reference Market Price’ of the underlying Nifty CPSE Index shares shall be offered to FFO of the Scheme by GOI.

  1. RISK FACTORS

Standard Risk Factors

  • Investment in the Mutual Fund’s Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal. Further, there is no assurance or guarantee that the objectives of the scheme will be achieved.
  • Past performance of the Sponsors/AMC/Mutual Fund does not guarantee the future performance of the scheme.
  • The present scheme is not a guaranteed or assured return scheme.

Risk relating to Investing in Indian Markets

Investment in India may be affected by political, social, and economic developments affecting India, which may include changes in exchange rates and controls, interest rates, government policies, diplomatic conditions, hostile relations with neighbouring countries, and many more.

Risk relating to receiving underlying CPSE Securities from the GOI

In the event the scheme does not receive the underlying CPSE Securities from the GOI pursuant to the FFO, for any reason whatsoever, including on account of GOI terminating the agreement with the AMC (for sale of the underlying CPSE Securities to the scheme) for breach of any terms under such agreement, the scheme will not allot FFO Units to the investors and would refund the subscription amount to the investor in accordance with the previous under this supplement.

Market risk

The NAV of the scheme will react to the securities market movements. The investor may lose money over short or long periods due to the fluctuation in the scheme’s NAV in response to factors such as economic, political, social instability or diplomatic developments, changes in interest rates and perceived trends in stock prices, market movements and over longer periods during market downturns. The scheme may not be able to immediately sell securities.

Market Trading Risks

  • Absence of prior active market
  • Trading in units may be Halted
  • Lack of market liquidity
  • Units of the scheme may trade at prices other than NAV
  • Regulatory risk
  • Reinvestment risk
  • Risk of substantial redemptions

Volatility Risk

The equity markets and Derivative markets are volatile and the value of securities, Derivative contracts and other instruments correlated with the equity markets may fluctuate dramatically from day to day. This volatility may cause the value of investment in the scheme to decrease.

Redemption Risk

Investors may note that even though the scheme is open-ended scheme, the scheme would ordinarily repurchase units in creation unit size.

Risk Associated with Investing in Debt Securities

  • Interest rate risk

Changes in interest rates will affect the scheme’s NAV. Debt markets, especially in developing markets like India, can be Volatile leading to the possibility of price moving up or down in fixed income securities and thereby to possible movements in the NAV.

  • Pre-payment Risk

A borrower may prepay a receivable prior to its due date. This may result in a change in the yield and tenor for the scheme.

  • Zero coupon and deferred interest bonds

The scheme may invest in zero coupon bonds and deferred interest bonds, which are debt obligations issued at a discount to their face value. Such investments experience greater volatility in the market value due to changes in interest rates than debt obligations.

  • Liquidity or Marketability Risk

This refers to the ease at which a security can be sold at or near its true value. The primary measure of liquidity risk is the spread between the bid price and the offer price quoted by a dealer. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of the investments made by the scheme.

  • Credit Risk

Credit risk means that the issuer of a security may default on interest payments or even paying back the principal amount on maturity.

  • Risk of Investing in Unrated Debt Securities

It is more likely to react to developments affecting market and credit risk than are more highly rated securities, which react primarily to movements in the general level of interest rates.

SCHEME’S PERFORMANCE

  • Absolute Returns

Scheme performance

Figure 1: Returns for FY 2014-15 are from i.e. 03-Apr-2014 to 31-Mar-2015

  • Compounded Annualised returns (%) as on December 30, 2016

Compounded Annualised returns

Impact of Demonetization on Real Estate & its effective resolution plan

The real estate suffers a lot these days. 2016 ends up bad for them. But hope doesn’t have any end. Many expectation are there in the year 2017 for the real estate industry.

Real estate saw an immense change this year, especially on the policy front. Few of the massive game changing policies such as GST and RERA have cleared the obstacles on their way and and moved towards the execution in full speed.

The demonetization has created a substantial confusion among all. But by implementing Benami Transactions Act, it assures to bring clarity in the real estate sector.

Real estate investment trust (REIT) has assured to open up the real estate market to smaller investor in the upcoming years and now there will be much focus on the affordability in housing sector. India’s Tier-I cities moved up to the 36th rank in JLL’s biannual Global Real Estate Transparency Index in 2016 due to improvements in structural reforms and liberalization of the foreign direct investment (FDI) policy.

Policy Chassis

  • Demonetization

After the announcement of demonetization on 9th November, the old currency notes of 500 and 1000 were withdrawn from the banks as a legal tender. After this act, the real estate transaction has been slow down, especially in the land and capital raising business.

  • Real Estate (Regulation & Development) Bill

The parliament passed Real Estate Regulatory Agency (RERA) in the month of March, 2016. All the states of India including union territories had a last date for the implementation of the act i.e. 1 year from the date the bill passed. This will bring clarity to the real estate sector than never before.

  • REITs

Real estate investment trusts (REITs) will help small investors to invest in Grade-A commercial real estate across India. In budget 2016-17 dividend distribution tax (DDT) has been excluded on special purpose vehicles (SPVs). Rules for REITs were relaxed, and the investment cap in under-construction projects was raised from 10% to 20%.

  • Benami Transactions Act

This new law is applicable to curb black money. It has a provision that persons indulging in benami transactions may face upto 7 years of imprisonment and fine but, the amended has only 3 years of imprisonment or fine or both. Also the law states that, providing the false information is punishable by imprisonment upto 5 years and fine.

The amendment gives the right to the government to usurp the properties or assets held in the name of another person to avoid the tax responsibility and conceal the unaccounted wealth. The act covers the properties such as tangible, intangible, movable or immovable and also comprehend any right or interest in those properties.

  • Goods and Services Tax

The GST is the single-largest taxation reform in modern India, and assures to blot out geographical barriers for businesses by lighten the differences in indirect taxes relevant within the various states in India. The deadline for the implementation of the act is 1st April, 2017.

Commercial Real Estate

As per the demand made by the public, the space requirements for office in sectors such as FMCG, manufacturing, logistics, etc.. had improved a lot in 2016 and it should be same as in next coming years. Commercial real estate sector is heading their business towards the highest level o growth these days and doing a great job.  Depreciation of the INR versus the USD and Euro is likely to play a major role in this.

The office space needs of technology and outsourcing firms (especially in software development) slowed down in 2016. The step taken for the growth of top technology firms was in single digits due to global uncertainty and technological interruption.

A WAY OF SUCCESS FULL FINANCIAL PLANNING

The coming year 2017 is will continue to increase the acceptance of new technologies across the business. Hence, the ratio between growth of a business and its real estate requirements are going to be changed, as technology is becoming a disturbing element across the sectors. The technology is becoming more process-driven rather than people-driven.

As India is improving on the ‘ease of doing business’ rankings and policies are made more investor-friendly, so higher FDI is suppose to rule into India very soon. The Modi government’s focus on wooing foreign investment is helping. Demand has been steady so far – and if GDP growth is maintained as it is, then demand will definitely rise up.

Residential Real Estate

A pan-India trend that came out in the year 2016 was that a higher number of units were sold every quarter (1Q16-3Q16) than new project launches in the same period. A very few of the new launches helped to reduce the inventory project. The result of demonetization changes in the fourth quarter readings being intensely different from the first three quarters once they get in.

Since, the old currency notes of 500 and 1000 are not in use now, that is why, home buyers or investors using unaccounted wealth to carry out transactions in cash would be in difficult situation, and developers accepting cash components are facing a higher liquidity crunch than those accepting all payments through cheque or bank transfer.

In cities, especially in Hyderabad, Pune and Bengaluru, Capital Values (CVs) saw an affable appreciation in 2016 and this will definitely be continued in the coming years as the residential markets are being mature and become more end-user-driven than ever before. Sales are going to remain constant throughout the year. It is suppose to rise up from 2H2017 after the settlement of demonetization, which has made many buyers hold on to their purchase decisions as they are waiting for the slowdown of the capital values in residential sector.

Impact of Demonetization on Real Estate

Retail Real Estate

Supply was approximately 2 times less than the absorption in the year 2016. 14 poor malls closed down in the past few quarters or getting spruce up into office buildings and shopping centers in the cities like Delhi and Mumbai, the retail space across key Indian cities stood at 75.8 million sft as of 3Q16.

2017 is likely to see the highest mall space becoming operational, second to 2011. High levels of activity are expected 2017 onwards, after a prolonged slowdown from 2014 that lasted through 2016. This slowdown was the result of very few malls getting completed in these three years, and also due to poorly-performing malls shutting down. All three segments of retail – apparel, F&B (food and beverage) and entertainment & cinema perform well in 2016. High streets and malls saw more and more people eating out, which helped the F&B category. Delhi and Mumbai led this growth. Entertainment and cinema also saw a good performance this year.

Various brands like LeEco have filed applications with the Foreign Investment Promotion Board to set up their company-owned stores across India. Brands are also looking at expanding their production activity in the country. This is one of the various requirements of the government, as per our prime ministers ‘Make in India’ prospect.