BSE Sensex and NSE Nifty are likely to open positive tracking SGX Nifty and global markets. (Photo: PTI)

BSE Sensex and NSE Nifty are likely to open in positive terrain on Friday tracking SGX Nifty and firm global markets.

At 7.28 am, SGX Nifty was up 92.5 points, or 1.11 per cent, at 8,339.

Asian shares extended a global stocks rally on Friday after the European Central Bank signaled its readiness to inject more stimulus, helping the US dollar scale a fresh two-month peak against the euro.

Japan’s Nikkei stock index was up 2.3 per cent, poised to gain more than 3 per cent for the week.

After the ECB held policy steady at its meeting on Thursday as widely expected, central bank chief Mario Draghi told a news conference that ECB policymakers were “open to the full menu of monetary policy” to stoke the euro zone economy as needed.

The affect was visible on Wall Street with S&P 500 index hitting a two-month high on stronger-than-expected corporate results from companies including McDonald’s and cues from the European Central Bank about extending its stimulus program.

Back home, BSE Sensex on Wednesday fell 19.17 points to 27,287.66 and NSE Nifty dropped 9.95 points or 0.12 per cent to close the day at 8,251.70. On Thursday, markets were closed on account of Vijayadeshami.

Wipro’s stocks will be in focus as the company on Wednesday after market hours announced its second quarter results. India’s third largest IT services exporter reported a net profit of Rs 2,235.40 crore, registering a 2.2% sequential increase in net profit for the second quarter boosted by higher productivity and better pricing powers.

Stocks of JSW Steel Ltd will be in focus as the company on Wednesday said its net profits for the July-September period slid 84.3% to Rs 116.95 year compared to Rs 748.76 crore a year earlier, indicating a continuing price pressure due to cheap imports from countries such as China, Korea, and Japan.

Companies such as Asian Paints, Infratel, Symphony are expected to announce their quarterly earnings on Friday.

In March, Coffee Day raised Rs 100 crore in a pre-IPO funding from Nandan Nilekani and Rare Enterprises (owned by Rakesh Jhunjhunwala and Ramesh Damani), among others. (Reuters)

Set to debut in stock market, leading coffee chain operator Coffee Day Enterprises has fixed its public offer price at Rs 328 per share, taking the total proceeds to Rs 1,150 crore from its over-subscribed IPO.

The IPO closed on October 16 after three days of bidding in a price band of Rs 316-328 a piece for the shares on offer. The IPO got over-subscribed 1.81-times with demand worth Rs 2,000 crore.

Although the portion reserved for retail investors could not be fully subscribed with 90 per cent bids, the company has now fixed the final offer price at the upper end of the price band.

The shares reserved for qualified institutional buyers (QIBs) was subscribed nearly 4.4 times. The most tepid response was in non-institutional investors category, which saw only 53 per cent subscription.

In its final prospectus ahead of the listing, the company has now said the public issue of 3.5 crore shares has been made at a price of Rs 328 per equity share, aggregating Rs 1,150 crore.

This is the largest IPO in the Indian market in about three years since Bharti Infratel’s over Rs 4,000 crore public offer in December 2012.

The issue comprises a net issue to the public of 3.46 crore shares and a reservation of 4.6 lakh shares aggregating Rs 15 crore for subscription by eligible employees.

The public issue would constitute 17.012 per cent of the company’s post-issue equity share capital.

Coffee Day Enterprises Ltd is the parent company of Coffee Day Group and operates coffee business through a subsidiary, Coffee Day Global Ltd (earlier known as Amalgamated Bean Coffee Trading Company Limited) and its subsidiaries. Its coffee retail chain operates under Cafe Coffee Day brand.

The company said that the issue price of Rs 328 has been determined in consultation with the investment bankers “on the basis of market demand from investors for equity Shares through the book building process and, is justified in view of the (various)… qualitative and quantitative parameters”.

Coffee Day, which competes with global giant Starbucks in the fast-growing Indian consumer market, also disclosed that the average cost of acquisition of equity shares by the company promoter is Rs 36.35 per share.

The public offer was being seen as heralding revival in big-ticket IPOs, but relatively tepid response from retail investors has raised concerns ahead of another big offer slated next week of low-cost carrier IndiGo’s parent InterGlobe Aviation.

Kotak Investment Banking, Citigroup, Morgan Stanley, Axis Capital, Edelweiss and Yes Bank handled the IPO of Coffee Day Enterprises, whose shareholders include private equity giants KKR and New Silk Route.

V G Siddhartha, the main promoter as well as Chairman and MD, holds 54.78 per cent stake in Coffee Day.

The overall shareholding of promoters was 92.74 per cent.

In March, Coffee Day raised Rs 100 crore in a pre-IPO funding from Nandan Nilekani and Rare Enterprises (owned by Rakesh Jhunjhunwala and Ramesh Damani), among others.

Foreign mutual fund houses continue to exit the Indian asset management space and Goldman Sachs Asset Management (GSAM) is the latest player to sell its domestic asset management business to Reliance Capital Asset Management (RCAM). The acquisition price is Rs 243 crore and the deal is valued at 3.4% of GSAM’s average assets under management.

According to a release issued by RCAM, the boards of both companies have already approved the transaction and the acquisition is expected to be completed in this fiscal, subject to necessary regulatory approvals. “The transaction will add over half a percent in our market share. We will ensure that we maintain seamless continuity for all GSAM India fund investors across all schemes. Going forward, we would be willing to consider more such acquisitions that add to our strength and complement our portfolio”, said Sundeep Sikka, chief executive of Reliance Capital Asset Management.

With this buyout, Goldman Sachs Asset Management will be third foreign player to exit  mutual fund operations in the current calendar year. Earlier, Pramerica Asset Management bought assets of Deutsche Asset Management Company (AMC), and just a few days ago — in the first week of October — Belgian-based KBC Asset Management sold its 49% stake in mutual fund business to its partner Union Bank of India.

The primary focus of GSAM is to manage exchange traded funds (ETFs) and the company currently manages 12 mutual fund schemes, including 10 ETF schemes, and is the largest ETF provider in the country.

GSAM India is currently the exclusive fund manager for central public sector enterprises (CPSE) ETF and manages assets worth R2,172 crore for the scheme. According to the data from the Association of Mutual funds in India, average assets under management of GSAM for the July-September quarter stood at Rs 7,132.05 crore. In March 2011, Goldman Sachs Asset Management had acquired assets of Benchmark Mutual fund for more than Rs 130 crore.

Market participants said this deal would add value to the business of RCAM. “I think they have paid such high valuations only because of track record of schemes of Goldman Sachs. With this move, Reliance gets to manage current CPSE ETFs and further benefit from participating in the follow-on offer of CPSE ETF,” said the CEO of a top fund house. Typically, in the Indian mutual fund industry, equity assets are valued in the range of 4-6%, while debt assets are valued in the range of 1-2%.

According to Amfi, average AUMs of Reliance Mutual Fund stood at Rs 1.52 lakh crore for the July-September quarter. “We feel this business is best positioned to achieve long-term success under the direction of an asset manager with an established onshore franchise. We are deeply encouraged by the growing investor demand and government support for the burgeoning Indian ETF industry”, said Sanjiv Shah, co-chief executive officer of GSAM India.

CEO-SPEAK
* We will ensure that we maintain seamless continuity for all GSAM India fund investors across all schemes
* Going forward, we would be willing to consider more such acquisitions that add to our strength
* The transaction will add over half a percent in our market share and complement our portfolio

Retain ‘equal-weight’ on SKS Microfinance with target price of R480 per share. SKS’ Q2FY16 profit after tax (PAT) of Rs 779 million (up 37% y-o-y) was 18% ahead of our estimate and Bloomberg consensus. PBT growth was 78% y-o-y. The effective tax rate was 23% (minimum alternate tax) from near zero levels last year – SKS did not account for MAT credit benefit in the P&L. Higher revenues, reflecting higher than expected AUM growth, drove the beat. Operating efficiency improved. SKS raised its FY16 PAT guidance ~23%, from Rs 2.35 billion (provided with FY15 results) to R2.9 billion (up 55% y-o-y). Asset quality was stable.

Funding costs for SKS have been falling. With spreads being capped at 10% for MFIs, lending rates have been declining. In late September, SKS cut interest rates 125 bps to 20.75%, effective October 1 (cumulative cut of 380 bps since October 2014). According to the results press release, its marginal cost of funds is 11.2%.

The cost-to-AUM ratio improved q-o-q to 7.6% from 8.5% (10.0% in Q2FY15). The cost-to-income ratio improved to 47% from 52% (58% in Q1FY15). SKS has completed its Smart TAB project, enabling its loan officers to carry out all their activities on tablets. This compares to our estimate and Bloomberg consensus for FY16 of Rs 2.5 billion. We will revisit our estimates after further discussions with management.