MC Pro Inside Edge | Silent wait for HDFC Bank re-rating, BSE craves for NSE public issue, Polycab promoters pitch tent

MC Pro Inside Edge peeps into the inner goings-on of Dalal Street.

Big Re-rating Bet

Most fund managers would agree that HDFC Bank is ripe for a re-rating, but the stock price movement suggests that they are not putting their money where their mouth is. But that is not the case with the Silent Investor, someone whom the late Big Bull Rakesh Jhunjhunwala considered his mentor. Silent is learnt to have doubled down on his bet on HDFC Bank over the last few months. And that seems to have given many of Silent’s acolytes the confidence to load up on the stock, some of them through the futures route. Domestic heavyweights are all praise for HDFC Bank’s fundamentals, but foreign investors don’t appear to be sharing that optimism for now. As a result, it's turning out to be a long wait for Silent & Co.

Wealth and Finance

The PMS fund named after a wealth god, not a desi one, of course, is said to have picked up a sizeable chunk of IIFL Finance shares from the bulk deal last Friday. Giving the wealth god company in the purchase was the Bridge broking firm, which many in the market refer to as ‘fastest finger first’ because of the speed with which it and its two sister concerns, scoop on bulk deals. The IIFL Finance stock took a beating last week after RBI decided to bar banks from investing in tranched AIF products and is yet to recover from it.

Neighbour’s Pride?

Companies usually don’t savour the prospect of their arch rivals coming out with an initial public offering (IPO). But that’s not quite the case when stock

exchanges are concerned. Sebi rules bar a stock exchange from getting listed on its own platform. So, you can’t blame BSE if it's keenly watching out for NSE to go public. BSE may have rapidly gained market share in the F&O segment, but the growth in cash market share has been slower to come by. It needs something big to accelerate that, and the listing of NSE’s shares could be the solution. Given NSE’s size, it is bound to get a much higher valuation than BSE. What the NSE will achieve through the listing is market cap, but the gain for rival BSE would be market share, not to mention higher revenues through transaction charges.

New Bully Boys

A rash of IPOs has increased the bargaining power of merchant banks, especially in SME offerings. Knowing that they have an opportune but limited window of time to raise funds at exorbitant valuations, many companies are said to be paying obscene fees to merchant bankers. In some cases, the fee is said to be as high as nearly 40 percent of the issue size. And where anchor allotments are concerned, domestic fund houses that give more business to the broking arm of the banker are said to be getting preferential treatment. Even the managements have no say in which of the anchor investors should be allotted how much.

In the Spotlight

Shares of Gujarat-based exhibition and event management firm Praveg have been on a tear this year. It first drew attention a few months back when Sadhu Number One started accumulating the stock through bulk deals across its schemes. And now the company, popular for its luxury tents among other offerings, is finding other reputed backers as well. Investors in its latest preferential issue include Polycab promoters, who would have had a trying time last week because of the I-T searches at the company’s premises.