STEEL Authority of India (SAIL) is understood to have deferred its five-year bond issue because the company is not comfortable with the rate at which bids are coming in. The lowest bid so far has been 8 basis points higher than the steelmaker’s expectations, according to bond arrangers.

Ajay Manglunia, executive vice-president at Edelweiss Securities, confirms that SAIL deferred its five-year bond issue two days back since the lowest yield offered to the company stood at 8.18% while SAIL was looking to issue bonds at a better pricing.

“The company had made a counter-offer at 8.10%. Even at 8.18%, SAIL received bid for a small quantum against the R500 crore it was planning to raise. This is why it deferred the bond issue,” said Manglunia.

Corporate bond yields in October are at comparatively softer levels from what were seen in September. Bloomberg data show that on September 22, Rural Electrification Corporation (REC) issued five-year bonds at 8.36%. A few days later, in a surprise move on September 29, the RBI cut the repo rate by 50 bps that pushed yields on corporate bonds down.

It became evident when REC was able to issue 10-year bonds at a yield as low as 8.11% on October 7.

The yield on a five-year public sector unit paper currently stands close to 8.15%. However, SAIL was offered a bid of 8.18% because of the present conditions in the steel sector, market participants said.

“SAIL is always seen demanding a better price for its bond issue compared to prevalent market rates. The yield on a five-year PSU paper stands at 8.15% as of now. For SAIL, the yield offered was 8.18% with the premium of a few basis points taking into account the sluggishness prevailing in the steel sector,” Manglunia added.

Amid a crash in global commodity prices, metal producers, especially domestic steel makers, are facing a very difficult business environment. At a time when global benchmarks are trading at multi-year lows, slowdown in domestic demand and onslaught of imports have led to every second large-to-medium size steel producer reporting losses in the first quarter of this fiscal.

The stress on the sector is evident with the number of rating downgrades that have taken place in FY16 so far. Of the 11 metals producers that saw rating downgrades, seven are steel producers of which four are now graded “D”. Among the bigger players, Vedanta, Hindalco and Jindal Steel and Power have also seen a demotion in their credit ratings.

Analysts expect many companies from the sector to report negative cash flow for FY16 even as an imposition of a safeguard duty is likely to bring some respite in terms of higher domestic prices.

The future does not look great either. On Wednesday, Bloomberg quoted the deputy head of the China Iron and Steel Association, Zhu Jimin, saying that production cuts are slower than the contraction in demand and, therefore, oversupply is worsening.

We retain ‘sell’ rating on TVS Motor and earnings estimates but marginally increase our SOTP-based target price to R248 (earlier R245 per share), implying 14x October 2017 earnings for the core standalone business. The stock currently trades at 17.7x FY17e net earnings. Significant benefits from BMW tie-up (not factored in our estimates).

TVS Motor’s Q2FY16 results were ahead of our expectations, driven by stronger-than-expected Ebitda margin for the quarter. Revenues (including other operating income) increased 7% y-o-y, 10% q-o-q and were 3% ahead of our estimates (due to higher-than-expected realisation per vehicle). Raw material costs as a percentage of sales declined by 71 bps q-o-q and were 48 bps lower than our expectations. As a result, gross profit and gross margin were 5% and 48 bps higher than our expectations.

Two-wheeler demand remains subdued mainly in rural areas due to the weaker than expected monsoon. This has particularly impacted the demand for mopeds and motorcycles. Any expectation of demand improvement going forward is dependent on how the north-east monsoon pans out. The company continues to witness healthy demand for its scooters (primarily Jupiter) including during the recent Dussehra festival. It continues to target market share expansion of 15% in domestic two-wheelers (its market share in H1FY16 was 13.1%) on the back of new launches in motorcycles and sustained strong demand for its scooter Jupiter.

On the other hand, domestic institutional investors (DIIs) were net sellers in October – the first time since January 2015. (PTI)

After two months of intense selling, foreign portfolio investors (FPIs) have turned net buyers this month, anticipating stability in global equities and better-than-expected macro-economic data from China.

Overseas investors are net buyers of $866.6 million so far this month – the highest monthly inflows in three months. In July 2015, FPIs had bought Indian equities worth $882.36 million, Bloomberg data showed.

According to Andrew Holland, CEO, Ambit Investment Advisors, foreign investors resumed investing in the Indian markets in October after positive data started coming from China. “The selloff by foreign investors during the last few months was over the concerns about China. During October, foreign investors resumed buying Indian equities as global markets stablised. However, the future inflows would depend on domestic factors like the outcome of Bihar elections,” Holland said.

The revival in fund inflows was evident through out the emerging market (EM) universe, not just India, with FPIs featuring as net buyers or partial sellers this month. Among EMs, Taiwan witnessed the highest inflows of $2.27 billion, followed by Brazil $1.17 billion.

“The scenario looks positive for all emerging markets in the near term, especially if a favorable outcome emerges from the meeting of US Federal Reserve meeting,” Holland added.

“Some FOMC participants have said they want to begin raising short-term interest rates. However, the majority of the FOMC does not seem convinced that action is needed at this moment, given the mixed nature of recent economic data, and the ongoing fragility of financial markets…an interest rate hike at this time would be disruptive,” said a team of Nomura economists, led by Lewis Alexander, MD and chief US economist.

On the other hand, domestic institutional investors (DIIs) were net sellers in October – the first time since January 2015. Local funds comprising banks, insurers and MFs, cumulatively sold equities worth R1,171.29 crore so far this month following continuous monthly purchases in the last eight months. In all, DII continue to be net buyers of R50,726.42 crore – the highest since 2008.

IndiGo’s parent InterGlobe Aviation’s Rs 3,018 crore initial public offer was over-subscribed by 1.06 times on day 2. (Reuters)

IndiGo’s parent InterGlobe Aviation’s Rs 3,018 crore initial public offer on Wednesday was over-subscribed by 1.06 times on day 2.

The IPO got bids for 3,20,48,760 shares against the total issue size of 3,01,22,088 shares, data available with the NSE till 1300 hrs showed.

The quota reserved for qualified institutional buyers (QIBs) was over-subscribed 3.59 times, sources said.

The portion reserved for retail investors saw 9 per cent subscription and non-institutional investors category was subscribed 2 per cent.

InterGlobe Aviation has already raised Rs 832 crore from anchor investors by allotting shares at the upper price band of Rs 765 apiece.

InterGlobe hit the capital markets to raise Rs 3,018 crore through the initial public offering, the biggest in nearly three years. The price band for the offer has been fixed at Rs 700-765 per share.

The offer comprises fresh issue of shares worth Rs 1,272.2 crore and the revised Offer for Sale (OFS) size that would be about Rs 1,746 crore. Together, the share sale can rake in up to Rs 3,018.2 crore.

The IPO would close on Thursday.

Barclays Bank PLC, Kotak Mahindra Capital Company Limited and UBS Securities India are managing the issue.

IndiGo has a fleet of 98 aircraft and about 75 of them are on operating lease – a business model which has helped it lower costs.