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ETMarkets Morning Podcast: SPACs are coming to India; what’s in it for you?

Good Morning.

>> Rising interest rates for IPO funding may spoil the party
>> Debt fund investors stare at big loss after new Sebi rule
>> special purpose acquisition companies
are coming to India, regulators draw up the format
>> Equity funds dump blue chips amid redemption pressure

Hi there. Welcome to ETMarkets Morning, the show about money, business and markets. I am Sandeep Singh.

Let’s start with a quick glance on the state of the markets.

Dalal Street looked headed for rangebound trade on Friday as Nifty futures traded flat on Singapore Exchange at 7 am (IST) even as other Asian markets looked bouyant. A stronger risk appetite swept US equity markets to an all-time high in overnight trade on the passage of Washington’s $1.9 trillion stimulus package. Dow rose half a per cent, the S&P500 gained 1% and the Nasdaq 2.52%. In currencies, the dollar wallowed near a one-week low, but the Bitcoin climbed within reach of another all-time high. The risk-on mood benefited oil, and WTI crude traded around $66 a barrel mark.

That said, here’s what else is making news.

SPACS or special purpose acquisition companies
are coming to India soon. Two government regulators — Sebi and its counterpart for Gujarat’s GIFT City, IFSCA — are on track to facilitate the launch of Special Purpose Acquisition Companies in India. SPACs are formed with a definite purpose of acquiring one or more companies but, at the time of formation, the entities do not disclose the name(s) of the target. Of late, SPAC-like structures have gained popularity in the developed markets. They are also called ‘blank cheque companies’ since investors, other than those setting these up, usually do not know for which acquisition target or the assets they are putting in money till those are bid for by the SPAC.

A host of IPOs are set to leave you spoilt for choice in the primary market. But if you need to borrow to bid for these issues, there is bad news. Investors’ cost of borrowing to punt on IPOs is set to shoot up, as the rush of issues is likely to push up demand for funding. Five IPOs including Anupam Rasayan, Laxmi Organic, Craftsman Automation, Kalyan Jewellers and Suryoday Small Finance Bank, will open for subscription in the next one week to raise about Rs 4,500 crore. According to brokers, the increase in funding costs has shrunken grey market premiums for the upcoming issues. Brokers say the interest rate to borrow to invest in these IPOs could go up at least by 200 basis points from the current 7-8% levels.

Debt fund investors are in for a shock, as schemes holding perpetual bonds are staring at losses with a new valuation norm for the instrument likely to trigger a sharp selloff on Friday. Money managers said accelerated redemptions in debt schemes could trigger a crisis as mutual funds will be forced to dump such securities, causing yields to spike and making it costlier for banks to borrow funds from the market. They also say experienced investors could jump into the fray to lap up beaten-down bonds amid the chaos. Sebi on Wednesday asked mutual funds to value perpetual bonds as 100-year instruments from April.

Mutual funds continued to trim holdings in various blue-chip stocks in February as continued redemption pressures prompted fund managers to offload liquid stocks. According to Edelweiss Alternative Research, mutual funds offloaded shares worth Rs 2,800 crore of Bharti Airtel, worth Rs 1,700 crore of HDFC Bank, Rs 1,500 crore worth of RIL and Rs 1,400 crore worth of HDFC shares. On the other hand, they purchased shares of NTPC and IndusInd Bank to the tune of Rs 700 crore each; and in Larsen & Toubro, they were buyers worth Rs 650 crore during the month.

LASTLY…

The taxman is going after benami deals. As various government departments begin sharing data with each other, the income-tax department has started going after benami properties, or real estate assets bought under pseudo or fake names. In what seems to be a trigger following a data-analytics-based investigation, the tax department has started issuing notices to owners of many such “benami” properties, ET reported this morning.

NOW Before I go, here is a look at some of the stocks buzzing this morning…

Private equity major KKR is bidding for majority control in Vini Cosmetics, valuing the maker of Fogg deodorants at ₹8,500 crore.

At least two existing overseas investors in PNB Housing Finance — the Carlyle Group and General Atlantic (GA) Singapore — are believed to have hired consultants to carry out due diligence on the mortgage lender, which is looking to tap these investors for equity expansion.

M&M is understood to have received clearance from the RBI to reduce its ownership in Korean automaker SsangYong Motor, putting the sale process on fast track.

Consumer electrical goods maker Havells India on Thursday said it would cover cost of COVID-19 vaccination for all its direct and indirect employees in India.

SBI will conduct e-auctions of 12 bad accounts this month to recover dues of over Rs 506 crore under sale to asset reconstruction company mechanism.

Do also check out over two dozen stock recommendations for today’s trade from top analysts on ETMarkets.com.

That’s it for now. Stay put with us for all the market news through the day. Happy investing!



Source: ETMarkets Morning Podcast: SPACs are coming to India; what’s in it for you?

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