United Stock Exchange of India

The United Stock Exchange of India (USE) is an Indian stock exchange. It is the fourth pan India exchange to be launched for trading financial instruments in India over the last 140 years.

USE has received final approval from the market regulator SEBI to start currency futures trading. USE represents the commitment of ALL 21 Indian public sector banks, private banks and corporate houses to build an institution of standing.

USE also has Bombay Stock Exchange as a strategic partner.

Public Sector Banks that are stakeholders of USE include Allahabad Bank, Corporation Bank, Punjab National Bank, Andhra Bank, Dena Bank, State Bank of India, Bank of Baroda, IDBI Bank, Syndicate Bank, Bank of India, Indian Bank, UCO Bank, Bank of Maharashtra, Indian Overseas Bank, Union Bank of India, Canara Bank, Oriental Bank of Commerce, United Bank of India, Central Bank of India, Punjab and Sind Bank, Vijaya Bank. Private Sector Banks like Axis Bank, Federal Bank, J & K Bank, HDFC Bank. Corporate Institutions such as Jaypee Capital, MMTC and India Potash are also associated with United Stock Exchange.

USE launched its operations on 20 Sept 2010.

USE began operations in the future contracts in each of the following currency pairs:

• United States Dollar-Indian Rupee (USD-INR)
• Euro-Indian Rupee (EUR-INR)
• Pound Sterling-Indian Rupee (GBP-INR)
• Japanese Yen-Indian Rupee (JPY-INR)

There would be 12 contracts i.e. one for each of the next 12 months in each of the above currency pair

Outright contracts as well as calendar spread contracts are available in each pair for trading.

Source: http://en.wikipedia.org/wiki/United_Stock_Exchange_of_India

IPO story in India in 2010

Indian firms have raised more than $15 billion so far this year from share sales, third in Asia after China's $103 billion worth of issuances and Hong Kong's $18 billion, according to Thomson Reuters data. Bankers said total equity offerings in India could reach $25 billion to $30 billion in 2010, making it the best year since 2007 when $31 billion was raised from 202 issues, and compared to $20 billion last year.


Sept 21 - 25 : Busiest week for IPO market in 15 years - a choice of 11 IPOs

This week is slated to be the busiest in the last 15-years for the primary market, with eight companies seeking to raise around Rs 3,000 crore through public offers, in addition to three already underway.


The companies, which are hitting the primary market this week include, Orient Green Power (Rs 900 crore), VA Tech Wabag (Rs 500 crore), Electrosteel (Rs 285 crore), Tecpro Systems (Rs 268 crore), Ashoka Buildcon (Rs 225 crore) and Gallant Ispat (Rs 40.50 crore).While Ramky Infrastructure and Cantabil Retail will hit the capital market with issue sizes of Rs 530 crore and Rs 105 crore respectively.

Indian Companies doing IPOs in US - MakeMyTrip


MakeMyTrip, the parent firm of India's largest online travel company, MakeMyTrip India, is selling the first U.S. initial public offering (IPO) by an Indian company in four years at a 26 percent premium to the biggest online travel agencies

MakeMyTrip will be the first IPO by an India-based company in the U.S. Morgan Stanley is the sole book running manager to the offering and Oppenheimer & Co Inc and Pacific Crest Securities LLC will act as co-managers.

MakeMyTrip is offering 5 million shares at $12 to $14 each. The India-based company at 5.41 times next year's sales, higher than the average of 4.28 for U.S.-traded stocks from Expedia to China's ELong.

MakeMyTrip booked about 48 percent of the $1 billion in online travel reservations made in India last year. Yatra.com and Cleartrip.com accounted for a combined 42 percent of sales.

Companies with recently concluded IPOs

Recently, public issues of a number of entities including SKS Microfinance, Prakash Steelage Ltd and Gujarat Pipavav Port Ltd got good response from investors and were oversubscribed. Listing of these firms was also impressive. The follow-on public offer of the state-run Engineers India Ltd also received big investor response.

Continued below are details about some famous IPOs that have happened in the recent past.

SKS Microfinance

When SKS Microfinance launched India’s first initial public offering (IPO) on July 28, 2010, the total share issue received bids for 13.55 times the overall shares on offer, with the institutional share offer oversubscribed by 20.3 times. The share bids were at the high end of the INR 850 to 985 (USD 18.42 to 20.04) price range. SKS Microfinance allocated 3.02 million shares at INR 985 (USD 20.04) per share to 36 anchor investors, including: ICICI Prudential, an Indian life insurance company; BNP Paribas, a French global banking group; Nomura, a Japanese global investment bank; Reliance Capital, an Indian non-banking financial company; and three U.S.-based financial institutions, JP Morgan, Morgan Stanley and Goldman Sachs.

SKS Microfinance is an Indian microlender that delivers microfinance products through a group lending model to impoverished women in India and had total assets of USD 596 million at March 31, 2009. SKS Microfinance was founded by Vikram Akula and is backed by venture capital fund investors Quantum Hedge Fund, Sequoia Capital and Sandstone Capital.

Engineers India Limited

Incorporated in 1965, EIL is an engineering consultancy company providing design, engineering, procurement, construction and integrated project management services, principally focused on the oil and gas and petrochemicals industries in India and internationally. Over the Years, it has developed expertise to cater the needs of petrochemicals, fertilizers, metals, & Power sectors, however currently more than 90% of business comes from hydrocarbon sector.



Objects of the Issue : To dilute GOI holding as a part of disinvestment Plan, proceeds will go to GOI.
The government holds 90.4 per cent stake in EIL, which provides design and engineering services for petroleum, power and fertiliser companies. Post FPO, government holding in EIL will fall to 80.4 per cent.

The government set Rs 270-290 as the price band for the follow-on public offer (FPO) of state-run Engineers India Ltd (EIL). The Rs 977-crore FPO had received an overwhelming demand from all market participants, including retail investors, making it one of the best divestment offers by the government so far this fiscal. In the portion reserved for institutional buyers, the FPO was subscribed 23.43 times. The government, which holds a little over 90 per cent in EIL, is selling 10 per cent stake through the FPO.


The issue price of  Rs 290 was determined by the government for public sector EPC and consultancy firm Engineers India Ltd (EIL). This is the upper end of the price band. “Issue price has been fixed at Rs 290 a share. A discount of 5 per cent will be given to retail bidders and to employees,” officials sources said.
The public issue, which was oversubscribed 13 times, will fetch Rs 950 crore to the government. The offer was open between 27 July  to 30 July. The government is offering a discount of five per cent to retail investors– an allotment price Rs 275.50 a share.

Cairn Vedanta deal

***** rough draft meant for testing *****

Vedanta attached a summary of the deal where Cairn Energy is selling a 40-51 percent stake in its Indian arm to Vedanta Resources Group for up to $8.48 billion.

he Oil Ministry has shown signs of discomfort at a non-oil firm taking control of a company whose main property is the Barmer district oilfields in Rajasthan

Cairn India's contract with the government for three oil and gas producing properties including the one in Rajasthan, do not provide for prior government approval in case of a change of control happens at the corporate level.

The only contracts that provide for government permission in case corporate ownership of Cairn India changes are seven exploration blocks the company had won under New Exploration Licensing Policy.

"Hypothetically speaking, if the oil ministry was to act tough, Vedanta can tell the ministry to keep the exploration blocks and walk away with the Rajasthan oilfield, the Ravva oil and gas field (in eastern offshore) and the Cambay block," he said.

"The $9.6 billion that Vedanta is paying is for these three fields and not for the exploration areas."

Oil and Natural Gas Corporation (ONGC) declared that without its approval UK's Cairn Energy Plc can not sell its stake in Cairn India to London based Vedanta Resources.

The state owned company's (ONGC) claim is based on the pre-emptive rights in oilfields like Rajasthan, where it is an equity partner with Cairn India.

The pre-emptive right is to maintain current shareholder's fractional ownership of a company by buying a proportional number of shares of any future issue of common stock.

ONGC, which owns 30 percent in the 6.5 billion barrels Rajasthan block, believes that with the stake, it has the pre-emptive right of first refusal to buy Cairn India in case the company's ownership changed.

ONGC owns 30% in Cairn India’s prolific Rajasthan oilfields, which is at the centre of the $ 9.6-billion takeover deal by London-based Vedanta group.

The petroleum ministry says the deal needs the ‘prior written consent’ of the government according to the requirements of the production sharing contract (PSC).

ONGC’s right of first refusal in the case of sale of an asset cannot in any way help in blocking the deal as ownership-change in a company cannot be equated to the sale of assets. The government can shoot down the deal only if the PSC allows it to, they said.

Anil Agarwal owned Vedanta Resources on Aug 16 had offered to take over 60 percent in Cairn India for $9.6 billion.

Though the offer sparked objections from sections of the government that are seemingly reluctant to part with a profitable oil producing asset to Vedanta.

Why is the carry trade so dangerous ?

 Few people can resist the lure of free money. Hence the recent fad for ‘stoozing’; borrowing large sums on credit cards with a 0% interest rate and investing the proceeds in a savings account.

Without having to advance a penny of their own money, the borrower can pocket a few hundred pounds a year in interest. When the credit card’s zero-rate period comes to an end, the borrower pays back the loan or, even better, rolls the debt over on to a new card. At one point a couple of years ago this trick was so popular that personal finance pages filled up with tips on how to do it.

Stoozing has gone out of favour somewhat since most credit cards began charging a balance transfer fee, making the returns less attractive (although you can still net 2%-3% a year from it). 

The big difference is that carry trades are a lot more dangerous than stoozing. Firstly, rather than being invested in a safe savings account, the money increasingly flows into riskier place, such as emerging market assets. Secondly, carry trades are often cross-currency carry trades, which carry extra risks.

In a currency carry trade, the speculator borrows money in a low-interest rate currency and buys higher-yielding assets in a different currency. Today, the low-rate currency is generally the Japanese yen; the higher-yielding assets are often US dollar bonds, but sometimes more esoteric assets such as Icelandic housing bonds or even emerging market equities or commodities.

The carry trade is appealing because of the type of returns it can earn, particularly if the proceeds are invested in bonds. These returns may not be huge, but they’re steady and consistent, and so they appeal to money managers who want a steady income stream – for example, hedge fund managers with pension fund investors.

But the counterpoint to these small, steady returns is the possibility of a very large, very sudden loss. The biggest risk is generally that the exchange rate moves against you – the higher-interest rate currency rapidly devalues, reducing the value of your assets relative to your borrowing. That's why these trades are often described as “picking up nickels in front of a steamroller”

So what might cause the carry trade to unwind? Dresdner Kleinwort strategist Albert Edwards identifies one route. Plenty of carry trade money has flowed into risky cyclical assets. As we head into the economic slowdown, these assets are likely to fall in value. As a result, speculators in them will cut their losses, bail out and repay their yen debts.

This flow of money back into yen could boost the yen’s exchange rate, regardless of the BoJ’s desire to keep the yen cheap to help its exporters. A rising yen would put other carry traders’ positions under water, causing them to sell off and head back into yen, and so on in a vicious circle.