Real estate companies in India are in the midst of a major rethink. Firstly, they are desperately trying to reduce the debt in their books to make their models more flexible. Secondly, these companies are also looking at ways and means to leverage the power of real estate investment trusts (REITs) to monetize their existing asset portfolios and become asset-light. Thirdly, real estate companies are also looking to restructure their business models and product structure to be in tune with the changing market demands. Lastly, real estate companies are also looking at means of getting large institutional investors to participate in projects either by taking a company-level stake or by involving themselves on a project basis. It is on these lines that the Indiabulls Real Estate Company Ltd. (IBREL) has sought to restructure itself. Here is how it will be restructured and what the larger implications could be. Continue reading
The government has already permitted REITS and InvITs to function in India in a big way. While the permission was granted nearly 3 years back, these products had failed to take off due to ambiguity over tax related issues. With these tax issues addressed in the Union Budget, it is time for REITS and InvITs to take off in India in a big way. But first, how exactly do these products work. Continue reading
As the Nifty and the Sensex scale new highs, the key question is whether it time to book profits and move out. There may be no clear answers as these decisions are largely driven by individual trading strategies and individual goals. However, there are 9 things that traders and investors need to remember before taking a decision to book profits just because the Nifty and the Sensex are at a new high… Continue reading
Ever since the commodity market regulation came under SEBI, there have been expectations of large scale reforms. Over the last few years, the commodity market has been subject to a lot of restraints like government controls, imposition of CTT, dwindling volumes etc. The NSEL default had only served to make things tougher for the commodity markets. Mr. Tyagi had already indicated broad reforms of the commodities business and the meet surely did not disappoint… Continue reading
The recent SEBI meet that concluded this week was special for the reason that it was the first meet chaired by the new SEBI chairman, Mr. Ajay Tyagi. The Board meet also had a very heavy agenda and to the credit of SEBI they have gone ahead and pushed for reforms on most of the areas. There were a lot of pending issues on the IPO front and the SEBI Board meet has taken a decisive step on two fronts…
Monitoring of IPO fund usage…
The previous financial year 2016-17 saw nearly $2.2 billion raised through the IPO route. The coming year is likely to be much bigger with $5 billion likely to be raised through the IPO route. Recent IPO listings have not only been at a premium but have also sustained post-listing gains. That has substantially reinforced the faith of investors in the IPO markets. The SEBI Board meet has approved the reduction of IPO funds monitoring threshold from Rs.500 crore to Rs.100 crore. Currently, only IPOs that raise above Rs.500 crore are required to appoint an agency to monitor the usage of funds raised through the IPO. That limit now stands reduced to Rs.100 crore. There have been constant allegations of promoters diverting funds for purposes other than stated in the prospectus. The monitoring agency will report all such deviations to the shareholders as well as to SEBI. That will surely be a major check on fly-by-night promoters in the IPO market!
Expanding the QIB definition…
One of the key investor participants in the IPO market is the qualified institutional buyer (QIB). Normally, banks, insurance companies, mutual funds and foreign institutional investors are included under the definition of QIB. In its latest board meet, SEBI has expanded the definition of QIB to include systemically important NBFCS also under that header. Thus, NBFCs with a net worth of Rs.500 crore and more will be permitted to invest via the QIB route. Since QIB allotments are on a discretionary basis, this will incentivize NBFCs to apply for a larger share of IPO allotment. From the fund raiser’s point of view, this opens up a new sales channel for raising equity funds from, apart from the regular financial institutions that are anyways being tapped. This will also make NBFCs more serious players in the IPO market.
How will these help IPO markets?
These announcements are surely a step in the right direction. The IPO monitoring of issues above Rs.100 crore will ensure better usage of funds raised through IPOs. Investor interest will be better protected. The inclusion of large NBFCs under the definition of QIB will expand the QIB universe. In the process the IPO market will become broader and more transparent. SEBI has made a start; a lot will depend on how these measures are implemented! ©