MC Pro Inside Edge: Vedanta deal disappoints bulls, turbulence ahead for Indigo, the banker’s cut, break in clouds for HDFC Bank?
Know what stocks veteran bulls are eyeing, what the bears are ganging up against, major deals and all the inner goings-on from Dalal Street.
Whodunnit
The much awaited block deal in Vedanta did happen, but not exactly in the way that the bulls in the stock were hoping for. The good news is that the company has managed to raise funds without diluting equity as it races against clock to repay bondholders. But the question is: who were the buyers for the shares that the promoter group sold? There has been chatter for a while that Rajiv Jain-owned GQG was interested in the stock. And when the block changed hands on Thursday, everyone assumed it had to be that fund. But many in the market feel GQG may not have been the buyer. For one, the idea would have been as much to show the market that a heavyweight fund was willing to back the stock, as much as it was to raise funds. So it would have made sense to put the transaction through the block deal window where the buyers’ details would have to be revealed. Putting such a large deal through the regular trading window and risking ‘leakage’ (as other traders too can bid for the shares) indicates not many well-known funds were excited for a piece of the action. Excluding LIC’s 9 percent stake, local funds hold just a little over 2 percent in Vedanta. Frequent run-ins with minority shareholders in the past is one reason why the company is not on the favourites list of local mutual funds. That did not matter so much pre-COVID when FIIs were the bigger force in the Indian market. But times have changed, and it is local mutual funds that need to be kept in good humour. The market’s disappointment was evident from the way the price tumbled immediately after the deal.
Some respite
Leading US-based fund house Cap-It-All is said to be through with the sale of its holdings in the bank. That comes as a relief to local mutual funds and HNIs who are holding large quantities of the stock, and have been hurting from the prolonged underperformance. Meanwhile some of Silent Investor’s acolytes have been grumbling at the opportunity cost of betting on a struggling stock in a bull market. Silent is still convinced that the stock will prove detractors wrong, but his followers are running out of patience, so one hears.
Turbulence ahead
Chatter is that the Gangwal family, erstwhile promoters of Interglobe Aviation, will be shortly offloading some more stake. Indigo bulls can take heart in the fact that there is appetite among institutional investors. But as long as fund managers have a ready seller in the Gangwals, they are unlikely to buy large chunks from the open market.
A win-win
It is raining profits for merchant bankers in SME initial public offerings (IPOs). As if collecting an extortionate fee from the issuer companies were not enough, many merchant bankers are now said to be asking for a cut from the investors who want an allotment in the anchor book. And given the massive demand from PMS funds, the bankers are in a position to make such a demand. Some prospective investors balk at the idea, but most pay up, partly out of greed and partly because the bankers have the promoters’ ears.
Bymoneycontrol
