Street signs: More companies could delist, RIL's rights issue, and more

More companies could delist

Delisting of companies could gain traction with some promoters eyeing to wrestle full control, taking advantage of the drop in share prices triggered by the Covid-19 pandemic. Closely after Anil Agarwal-led Vedanta announced its delisting plans, the Street was abuzz that London-headquartered Diageo may soon make a bid to take United Spirits private. Investment bankers refrained from naming specific companies, but more promoters are toying with the idea. “For cash-rich promoters, it is good time to delist. The stock prices as well as investor expectations are low. Also, the new framework for delisting makes it relatively easier,” said a banker, adding that under the earlier framework it was far more challenging to delist.

Jash Kriplani

 

Liquidity management via RIL rights

Brokers say Reliance Industries’ (RIL’s) shareholders can use the rights issue to create some liquidity. The strategy involves selling their existing RIL holdings in the secondary market and then buying an equal number of rights entitlement (RE). With RE, they subscribe to the rights issue, where payment has to be made in a staggered manner. “Those applying for the rights issue have to pay only 25 per cent of the rights issue price of Rs  1,257 now, 25 per cent after a year and the balance 50 per cent in November 2021. Investors can pocket Rs 1,433 (per share) now by selling in the secondary market. Subscription to the rights issue will cost only Rs 526 per share (Rs 212 for one RE and first tranche of Rs 314) initially. They can free up the remaining amount and use it for other purposes,” said a stock broker.

Samie Modak

 

Mobius bullish on mid-, small-caps

Veteran investor, Mark Mobius believes this is good time to look at mid- and small-cap stocks. “India has seen bear markets about eight times and generally speaking the recoveries have been pretty fast. The outlook for India is pretty good... There will be problems along the way, but it is a great opportunity now to be looking at equities, particularly  mid- and small-sized companies," Mobius said in a recent webinar. He is also hopeful that the current Covid-19 situation will goad the government to push for more reforms. This month, the Nifty Midcap 100 and Smallcap 100 are down about 6 per cent each, outperforming the benchmark Nifty, which is down 8.3 per cent.

Ashley Coutinho