Consolidate markets within primary market focus

By Arun KejriwaThe market was volatile in the past week and it tested investors and traders patience.Although the week ended with positive gains, there were still a few hiccups along the way.

BSESENSEX gained 1,090.21 points, or 1.89 percent to close at 58.786.67 points.NIFTY gained 314.60 point or 1.83 Percent to finish at 17,511.30.The benchmark indices, which gained in two sessions of five trading sessions but fell on the other two sessions, were almost flat during the rest.BSE100 and BSE200 saw broad market gains of 1.80 percent, 1.89% and 1.98% respectively.BSEMIDCAP lost 2.08 percent, while BSESMALLCAP saw a 2.95% increase.It was interesting, almost unique that BSESENSEX moved four digits (or 1,000 points) upwards or downwards on three consecutive days.NIFTY averaged 300 points.

These volatile swings were not seen in my 30+ years of market tracking.These volatile swings clearly show the nervousness and fickleness of market participants.Indian Rupee fell to 0.80 percent or 60 pesos to trade at Rs 75.76 against the US Dollar.Dow Jones experienced a strong move up and closed at 35.970.99 point with 1,390.91 points, or 4.02 percent.This smart, strong move has the potential of taking the Dow to new heights, surpassing the old record of 36,566.

In its bi-monthly MPC Policy meeting, RBI kept key rates the same and voted 5-1 for continuation of this rate.The announcement came in line with our expectations.

Market experts expect that rates will be kept at negative returns.If this happens, RBI could raise interest rates.

The outcome of the meeting of the committee will be decided at the end of the month.The primary markets keep releasing new issues that tap the market with their ever-expanding list of markets.

As we saw, two issues opened and closed for subscription.Four issues will be reaching the market with their issues over the next week.

Two of these issues have already opened, while two more will open.Two more issues are scheduled for the next week, where price bands have yet to be disclosed.

Three IPOs will be listed next week, while the last IPO was not.Rategain Travel Technologies Limited opened the issue for subscription on Tuesday, 7 December through Thursday 9 December.Subscriptions were received 17.40 times for the QIB section, HNI part 42.04 times, and Retail Section 8.06 times.The total number of applications was 6.63 million.Shriram Properties Limited published the second issue.

It opened for subscriptions on Wednesday, the 8th December, and ended on Friday, the 10th December.Price range was between Rs 113 and Rs 118.Overall, the issue was subscribed 4.81x.The QIB section subscribed 1.93x, HNI subscribed 5.04x, Retail subscribed 13.27x, and Employee subscribed 1.31x.All in, there were 4.56 million applications.Star Healths listing was sluggish, as was the reaction to its IPO.This issue, which had been priced at Rs900, was discovered at Rs 848.80 (BSE) and Rs 845 (NSE).At Rs 906.85 the share closed marginally positive, which was a gain in Rs 6.85 (or 0.76%).Poor subscription reduced the issue size from 856.54 lakh shares to 676.91 million shares.This clearly shows that the merchant bankers who were involved in pricing, demand and price calculations made an error.

They also miscalculated the amount of shares required to cover the issue.It was difficult to predict which direction the price would go because of the low traded volumes and poor delivery volumes.

To have any meaningful interest in the shares, it must be possible to increase volume.Three shares will be listed for trading in the week ahead.

These are Tega Industries Limited; Anand Rathi Wealth Limited; and Rategain Travel Technologies Limited.C.E.is the first issue that will be available for subscription over the next week.Info Systems Limited is tapping the market with its 1,00,639,00045 share offer at Rs 1000-1,033.

This issue was opened Thursday, December 9th and will close Monday, December 13th.C.E.Info Systems, also known by the popular digital mapping tool Map my India, is also called C.E.Indias largest provider of digital maps and geospatial products, Info Systems is Indias most trusted company.The comprehensive MaaS, SaaS, PaaS, and PaaS suites of services include MaaS (maps as an service), software as a server, as well as PaaS (platform-as a Service).

It has developed capabilities that allow it to cross-sell products and upsell customers in marquee sectors.Subscription fees, royalties, and annuities make up over 90% of FY21 revenues.

Per vehicle, transaction and/or per user fees are charged by the company per period.The company has recurring revenue visibility, which ensures excellent revenue visibility.

The EPS for the year ended March 2021 was Rs 11.30 while on a fully diluted basis it was Rs 10.99.For the first half year of FY22 the EPS is Rs 8.78 while on a diluted basis it is Rs 8.61.The PE for the issue at the top end of the band based on fully diluted EPS of Rs 10.99 for FY21 is 93.99 times.If one were to consider the same on the basis of first half FY22 fully diluted EPS on an annualised basis the same would reduce significantly to 59.88 times.The company is debt free and has investments which earn it other income as well.

Further the issue is entirely an offer for sale and the entire proceeds would go to selling shareholders.The issue merits attention and at the end of two days of subscription is subscribed 5.32 times with Retail portion subscribed 7.08 times.Over 15 lac applications have been received.The second issue is from Metro Brands Limited which is tapping the markets with its fresh issue of Rs 295 crore and an offer for sale of 2.14 crore shares in a price band of Rs 485-500.The issue opened on Friday the 10th of December and would close on Tuesday the 14th of December.

The company is into retailing of shoes, leather accessories and allied products.It operates close to 600 stores across four verticals and had revenues of Rs 800 crore for the year ended March 2021.Its profit after tax was Rs 64.62 crore and it reported and EPS of Rs 2.43 for the period.Based on this EPS, the PE for the issue is a never heard of 205.76 times at the top end of the band.In the six-month period ended September 2021, revenues have improved to Rs 456 crore and the profit after tax was Rs 43.07 crore.The EPS was Rs 1.62 and even at this EPS, on an annualized basis the PE is a staggering 154.32 times.The company is valued in excess of Rs 13,000 crore and would trade at 16.6 times the revenue.Beats me how such valuations can be ascribed for this company.

For the discerning investor, Bata India reported revenues of Rs 1,800 crore for the year ended March 2021 and currently has a market capitalisation of 26,000 crore.The third issue to tap the capital markets is Medplus Health Services Limited, issue opens on Monday the 13th of December and closes on Wednesday, the 15th of December.

The issue is for a fresh issue of 600 crore and an offer for sale of Rs 798 crore.The price band is Rs 780-796.

The company is into the business of pharmacy stores and currently operates in seven states with over 2,300 stores.The company has added 350 stores in the first half of the current year ending September 2021 and would be adding a similar number in the next six months as well.

Going forward the planned expansion of stores is to add close to 1,500 stores each year over the next two years.The company reported diluted EPS of Rs 5.75 for the year ended March 2021.The PE at this EPS would be 135.65-138.43 times.In the current six months ended September 2021, the EPS has improved to Rs 5.99.If one were to annualise this the PE would reduce to 66.44 times.The company has growth and good prospects going forward.The fourth and final issue is from Data Patterns Limited, which is tapping the capital markets with its fresh issue for Rs 240 crore and an offer for sale of 59.52 lakh shares in a price band of Rs 555-585.The issue opens on Tuesday the 14th of December and closes on Thursday the 16th of December.The company reported revenues of Rs 226.55 crore for the year ended March 2021, with a net profit of Rs 54.61 crore.The EPS was Rs 11.89.The PE on this Eps is 46.67-49.20 times.The company had recently done a pre-IPO placement of Rs 60 crore at Rs 577.The company is a vertically integrated defence and aerospace electronics solutions provider catering to the indigenously developed defence products industry.Its offerings cater to the entire spectrum of defence and aerospace platforms -- space, air land and sea.It would be a big beneficiary of the Atmanirbhar Bharat programme where the Indian companies are spearheading the indigenisation program of our armed forces.The company is interesting and would be well received by the market.

Coming to the markets in the week ahead, they would continue to remain volatile and make attempts to move sharply in either direction.The fact that FII continue to be sellers, though the quantum of sales seems to be reducing, would be a dampener for the markets.

The Omicron variant is yet another joker in the pack and seems to be causing unjustified panic more than anything else.Markets would trade in a broad range with the lows of 56,400 on BSESENSEX and 16,800 on NIFTY being key supports.

On the upside we could see another 2 per cent move but it would be accompanied by bouts of selling as well.The strategy would be to sell on sharp rallies and buy on dips and also look at the top performing midcap and Smallcap stocks as well.

In conclusion we could see some consolidation and by and large a broad sideways move in the week ahead with focus on the primary markets.(Arun Kejriwal is the founder of Kejriwal Research and Investment Services.

The views expressed are personal) arun/dpb