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“You are listening to the Expresso Business Update. Here is the latest news from the world of Indian and International business brought to you by The Indian Express and The Financial Express.
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The Securities and Exchange Board of India may tighten norms for investment by mutual funds in initial public offerings. The guidelines may pertain to the post-allotment allocation of shares to various schemes and the due diligence process to be followed for IPO investments, said two people familiar with the matter. Currently, mutual funds bid for shares at the fund house level, and not at the individual scheme level. There are no standard guidelines on how the allocation has to be made. So, post allotment, a fund house can use its discretion to assign shares to different schemes. The regulator may dictate all funds to do a scheme-wise allotment. So, when the bids are placed, there will have to be a clear demarcation on which scheme is applying for how many shares. Say, a large-cap scheme is applying for 2 million shares and a flexi-cap scheme from the same fund house is applying for 1 million shares. This will have to be mentioned upfront.
Meanwhile, the Centre is likely to earn about Rs 30,000-35,000 crore from the windfall gains taxes on oil companies this fiscal due to the falling global crude oil prices and the reduction in the levies since they were imposed on July 1, 2022. While the finance ministry had not given an official estimate of the revenue to be raised from the taxes, it was expected initially that it would raise at least about Rs 60,000 crore this fiscal. A person familiar with the development said that given the recent trends in crude oil prices and the series of revisions in the windfall gains taxes, it is estimated that the revenue from it would be in the range of Rs 30,000 crore. He added that another round of revision in the taxes is expected by early next week. The lower collection is, however, not expected to impact the government’s fiscal math as tax collections have been buoyant and higher than estimated till now.
Moving on. A clutch of new age technology companies has lost nearly Rs 2.5 trillion in market capitalisation since listing on the exchanges. Shareholders have been disappointed by either poor performance or unwieldy acquisitions. In some instances, the sale of stakes by investors post the expiry of the lock-in period, has dragged the stock down. Although Paytm reported smaller losses of Rs 571 crore sequentially in the September quarter and a revenue growth of 14% to Rs 1,914, the arrival of new competition has also prompted analysts to become more cautious. For example, analysts at Macquarie believe that Jio Financial Services “can pose a significant growth and market-share risk” for players such as Paytm and Bajaj Finance. Paytm has launched a buyback of shares at Rs 810 apiece, about 60% lower than its IPO price, but that has not enthused shareholders.
In the economy sector, The Reserve Bank of India has stepped in to address concerns of banks in clearing payments to India’s major pulses suppliers, such as Myanmar, Mozambique and Tanzania, which have been flagged as risky destinations by the Financial Action Task Force. In a communication to the Indian Banks’ Association, the banking regulator has clarified that the FATF move doesn’t prevent domestic financial entities from undertaking legitimate trade and business transactions with these jurisdictions, especially when it involves supplies of essential commodities like pulses, sources close to the development told FE.
In other news, the Indian electric vehicle industry could be bracing up for yet supply chain disruption as China experiences its worst wave of Covid-19 infections, causing disruption in battery cell-producing factories and other critical components which power EVs. Battery pack makers in India, who depend on suppliers from China, believe that by the time the authorities are able to bring the pandemic under control, the country will shut down for the Chinese New Year in the second half of January. None of the Indian EV producers have clarity on supplies beyond January because cell orders for deliveries expected in February are yet to be awarded. The deliveries to be received in January, the orders for which were placed weeks ago, are either in transit or are lying at warehouses within China, say Indian importers.
Lastly, Premium and luxury products in the jewellery, electronics and fashion segments have led to a rebound of footfall in malls. During the April-September period this fiscal, trading values recovered to about 115% of pre-Covid levels, backed by increase in spend per footfall in these sectors. Mall footfall was around 85% of pre-Covid levels. According to rating agency Icra, the trading density is expected to remain firm till March 2023 given the impact of the festive season. Additionally, rental income has bounced back driven by a higher revenue share owing to an increase in retail trading density due to premiumisation.
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