Latest IPO trends In Indian Capital Markets-September 2017

Can also be read at our blog,Brinks of economic thoughts.


Latest IPO trends In Indian Capital Markets-September 2017





Month of September was very much vibrant with many IPOs hitting the Indian stock markets. The month saw IPO issue of Dixon Technology,Bharat Road Network limited, Limited IPO, Capacit Infraprojects.ICICI Lombard and SBI life IPO among the major players. Along with these Pratap Snacks also went public.


Infrastructure entity like Capacit Infraproject was one among the most sought after with subscription demand as high as 82 times .Indian investors in IPO markets show a trend to earn profits on quick basis. It has been seen that majority of subscription is done with an intent to gain the listing profits. We cannot conclude, but it is observed that investment in majority of cases is not done keeping in mind a very long term of 5-7 years in mind.

Various studies in past global IPO markets have indicated that IPOs are underpriced .This phenomenon helps the initial subscribers to gain heavily on the listing days, or during the 3-4 days of commencement of trading in the markets.

The month was also affected by the events transpiring in the North East Asia. Consistent verbal threats amongst North Korean regime and USA, multiplied with events of Europe, Chinese economy and USA economy led to a considerable decline in the markets.


Dixon technology and Capacit Infraprojects were one among the issues which were heavily oversubscribed; nearly 120 times and 82 times respectively. While on the day of listing both issues gave premium listings too. Dixon technology being as high as 54 % to Rs 2,725,high from the price band offered of Rs1766 INR per share while during  initial subscription.

Same was with Capacit infraprojects.It also listed at premium as high as 399 INR high by nearly 60 % from initially offered price of 250/- INR per share for  a market lot of 15,000 INR.

There were doubts about the Bharat Road network IPO due to registering losses. It somehow managed to get subscription of 1.8 times and even got some little enlisting gains. But since then it is been a decline in the share price.

Another interesting IPO was the matrimonial .com IPO.It was very heavily priced in the range of 985 Rs.It was oversubscribed 4.41 times .It started from slipping as low as 950 and today it is trading at 810 INR per share.



2 IPOs were the ICICI Lombard and SBI life IPOs which were to be looked after keeping in mind very long term perspective .These could have been the biggest success.SBI life IPO was the biggest IPO{8500 CRORE} post since Coal India Limited launched in 2010.SBI life had been given subscribe rating by majority of Investment advisors.SBI life had been paying dividends consistently since 2012.These 2 IPOs although gave some initial listing gains. Higher valuations looked a concern and it was expected that these 2 IPOs may not be able to give strong listing gains. But since insurance market has been mostly untapped in Indian markets, it was advised to subscribe the IPO keeping in mind medium to long term gains.


Indian investors are driven by the motive of listing gains. We did not see a very heavy demand for both issues.SBI life IPO was oversubscribed 3.6 times while ICICI Lombard has oversubscription of 3 times. Or even one can say that given the demands in last few months seen as high as 80-90 percent in cases of CDSL and Kochin Shipyard. These oversubscription figures then may look small. But still they sailed through with strong demand.

IPO market looked very vibrant for the month of September. In this month of October with Godrej Agrovet and MAS financial services going public. More activities are expected in the IPO market front.



Harsh Vardhan Pathak




Budget 2016 –ITC’s Expectations for its Cigarette segment.

Budget 2016 –ITC’s Expectations for its Cigarette segment.

{This was a report made by me under my internship trainer N Ravindranathan in 2016 Feb.It was about taxation impact on ITC and its share price movements}

ITC Limited is an Indian conglomerate with five diversified business, FMCG,  Hotels,Paperboard,Agri business and Information Technoligy.ITC   is globally the most successful cigarette company with an EBIT margin close to 67 %. In last 10 years studying in the context of ITC we witnessed that tax burden on Cigarettes has continued to increase. Government has been aggressively increasing the excise duties maintaining its stance on emphasis on public health .During the last 4 years it’s excise rate hike has been registering a CAGR rate of > 15 %.In coming budget it is expected that previous years trend might continue.ITC would be expecting a single growth rate or no growth rate, as it would allow it to raise its price by 12-15 %, thus enabling it to earn growth rates of 15 % in earnings .While forecast of hike in excise duties close to 15 % will be troublesome. Cigarettes continue to see the most punitive policy.

Other than this there are concerns about anti tobacco measures taken by different states like,Punjab,UP,where ban has been imposed on selling loose cigarettes, VAT hike, Pictorial warnings to cover 85 % of packing has to be implemented from April 2016.Now at all India level cigarettes pack will have to also mention tar and nicotine content.

Despite this, ITC has managed to raise its net sales as compared to increase in taxes. One reason for this is the real income increase of consumer has been more as compared to the hikes in tax rates. So the affordability level of consumers has not gone down. ITC has also benefitted from the multi layered tax structure for different lengths of cigarettes ITC’s.

Cigarettes are sold in India in 6 different tiered structures. It was 7 till 2014.ITC’s growth revenues from micros cigarettes 64 mm have increased from around 5 % in Fiscal 2013 to nearly 20 % in Fiscal 2016.While revenue generation from 64mm-69mm has gone down to nearly 60 % in Fiscal 2016 as compared to nearly 75 % in Fiscal 2013.ITC benefitted since when the excise duty hike was very heavy on 64-69 mm section. It curtailed the length and brought in tax tier of cigarettes less than 64 mm in length . Micros volume has seen rapid growth during the past three years. For ITC an important aspect will be to watch out for any probable tax hike for micros this year 64mm . Presence of 6 tiered regimes for taxation of cigarettes also enables ITC to hold on with its market base and profits. Although 64mm has seen much sharper tax hikes.



Price per 1000 rs and impact of tax hike can be shown in tabular form in last 5 years.



As of steady hike in customs duties for cigarettes, the burden was shifted to consumers. So a consistent increase has been seen in the price per unit of cigarette.There has been significant impact registered on the cigarettes volumes which has been contracting 7-9 %.It has been noted that the Fiscal 2016 volume will be likely around Fiscal 2006 of nearly 75 billion sticks.

Trends in ITC’s portfolio mix

64 mm  segment has been growing rapidly and has ITC to maintain its consumer base



The gap between 64 mm and 69 mm has been reduced to 32 % from existing 110 % in FY 14 ,and if there is another rise in 64 mm ,its relevance will be under threat.

Trends in taxes on 64 mm vs 69 mm

Impact on stock prices during budget

Due to a excise hikes done during the budgets a stock prices of ITC showed volatility at times immediately before the day of budget. This can be shown that during the year 2015 immediately after the budgetary announcements of 25 % hike in cigarettes of length less than 65mm and 15 % for cigarettes in length exceeding 65 mm. The stock prices which were trading at 393 a day before the budgetary announcements immediately fell to 363 next day of the budget.

ITC has typically underperformed during the days before the budget .ITC stock has given negative to flat returns nearly 9 times over the past 13 years before the run up to the budget. It had been noticed that positive results were generated in 10 out of 13 times post budget. ITC’s stock performance has been better after the budget announcements have been done and uncertainties related to tax hike is over. Other major reason has been that strong pricing growth did offset weak volumes and lead to higher profit margins. So the stock continued to attain the faith of shareholders.

Other than this we saw that over the last 10 years 6 times the stock price fell before the budget in anticipation of probable excise hike. Barring 2013 and 2015 all years witnessed a growth in stock prices immediately after the budget declaration.

ITC EBIT margins are at an all time high and company is the most profitable cigarette company in the world.

10 year average stock price performance(in percentage)


Rise of illicit cigarette industry.

Factors such as rise of illicit markets have been getting worrying for the cigarette industry. India has emerged as one of largest markets for illegal markets in the world. It is estimated that illegal trade of tax evaded and smuggled cigarettes is 1/5 of overall cigarettes volume. Share of legal cigarettes in the overall basket of tobacco consumption has declined from 21 % at one’s existing level to 12 % today. In India, nearly 68-70 % of tobacco consumption escapes taxes as unorganised sector does not face regulatory oversight. It is estimated that revenue losses due to this may be as high as US $ 1 bn(6780 crores).However this is to be noted that despite sharp decline ,ITC’s excise duty payments to government have not declined over several years and same has been the case for the entire industry. But the declines in volume have been significant and a high price of cigarettes has been registered.

Selling price of illicit cigarette is even lesser than the tax


Study does show that government has not been losing on revenues as of its aggressive tax hikes and tax collection from cigarettes will still be on higher side. Trends in ITC’s excise duty payments.


Study indicates that there is overall need to increase excise on all tobacco products as government is losing on revenues .If the unorganised sector of tobacco production can be brought under taxation, it will be beneficial .ITC has been shifting its focus and has diversified its sales as total composition of cigarettes in revenue generation has declined from the levels of 70 % a decade ago to 62 % now. Cigarette earning growth has been at historic low.ITC will be watching out the budgetary announcements as tracking whether any hike around 15 % is done or no hike is done.

Trends before budget on movement of stock prices

Year Before 6 month Before 3 mon Before 2 mon Before 1 mon Day before
2005 -19.55% -0.31% 1.85% 8.19% -0.54%
2006 888.37% -19.19% -19.77% -9.88% -3.49%
2007 5.26% 4.68% 3.51% 0.58% -3.51%
2008 -17.33% -7.92% 1.49% -0.50% -0.50%
2009 -24.89% -20.25% -22.78% 1.27% 1.27%
2010 2.91% 12.51% 10.16% 7.26% 6.35%
2011 -4.62% -0.24% 1.30% -0.50% -7.69%


2012 -4.62% -0.24% 1.30% -0.50% -7.69%
2013 -9.04% 1.09% -1.83% 2.02% 0.07%
2014 -7.38% -1.79% -0.53% 2.21% -0.92%
2015 -1.67% 0.50% 2.35% -0.33% 8.76%

Trends after budget in movement of stock prices.

Year Day after I month later 2 month later 3 month later 6 month later
2005 3.32% 1.62% 12.13% 23.57% 31.38%
2006 0.58% 11.63% 16.86% 3.49% 31.38%
2007 0.58% -16.37% -6.43% -2.92% -2.34%
2008 0.00% 1.98% 4.46% 9.90% -9.41%
2009 2.11% -0.42% -1.27% 9.28%  
2010 3.77% 13.84% 15.13% 15.87% -29.43%
2011 2.37% 5.74% 13.52% 11.80% 19.50%


2012 1.78% 11.52% 5.16% 14.74% 19.52%
2013 -1.63% 4.97% 10.13% 15.33% 1.15%
2014 1.88% 12.69% 6.68% 7.05% 7.14%
2015 -5.08% -9.35% -6.59% -11.04% -12.30%


Yellow portion shows the trends of stock in run up to budget while green portion shows hike in price post budget. After tax uncertainties have eased out.

Impact on net sales in cigarette segment .over the Fiscal years.

CIGARETTES SALES(IN CRORES)/YEAR 2008 2009 2010 2011 2012


GROSS SALES 14326 15754 18111 19827 22232
NET SALES 6634 7556 9321 10673 12954
EXCISE DUTIES,TAX 7692 8198 8790 9154 9278
% EXCISE DUTIES,TAX 53.69% 52.04% 48.53% 46.17% 41.73%
NET SALES GROWTH% 113.90% 123.36% 114.50% 121.37%



109.97% 114.96% 109.47% 112.13%


29076 30452
15546 16804
EXCISE DUTIES 12017 13530 13648
% EXCISE DUTIES 46.24% 46.53% 44.82%
NET SALES GROWTH % 107.84% 111.29% 108.09%
GROSS SALES GROWTH % 116.89% 111.89% 104.73%





Harsh Vardhan Pathak

Msc Economics

Doon University


Kochin Shipyard IPO .-Its first day of trading


Much awaited Cochin Shipyard IPO hit the stock market floor on 11th of August. It was open for general public for subscription from 1st -3rd August.It has been one among the most sought after Public Offers in last few months, being receiving subscription applications as high as 76 times. Cochin Shipyard, shares closed 20% higher at Rs522 on BSE, which was the upper end of the price band of Rs424-432 per share.

Cochin Shipyard Limited (CSL) is the largest shipbuilding and maintenance facility in India. It is part of a line of maritime-related facilities in the port-city of Kochi, in the state of Kerala, India. Cochin Shipyard ltd{CSL} is a PSU enjoying”Miniratna” status and the largest public sector in India in terms of dock capacity.
Services provided by the shipyard are building platform supply vessels and double-hulled oil tankers. It builds the first range of indigenous aircraft carriers for the Indian Navy.

Cochin Shipyard was incorporated in 1972 as a Government of India company, The yard has facilities to build vessels up to 1.1 million tons and repair vessels up to 1.25 million tons, the largest such facilities in India. In August 2012, the Government of India announced plans of divestment to raise capital of Rs. 15 billion (15,000 million Rupees) for further expansion through an Initial Public Offering (IPO).

In addition to shipbuilding and ship repair, it also offers marine engineering training. As of May 31, 2017, the company has two docks – dock number one, primarily used for ship repair (“Ship Repair Dock”) and dock number two, primarily used for shipbuilding (“Shipbuilding Dock”). CSL’s Ship Repair Dock is one of the largest in India and enables it to accommodate vessels with a maximum capacity of 125,000 DWT and Shipbuilding Dock can accommodate vessels with a maximum capacity of 110,000 DWT.

The IPO, a fresh issue of 22.65 million shares, was expected to fetch the company Rs978 crore at the upper end of the price band. The Union government also sold 10% of its stake.

The funds from the fresh issue of shares are to be used to fund two major projects and also to improve the shipbuilder’s existing facilities.

On performance front, the company continued to post posted turnover/net profits of Rs.1660.45 cr. / Rs. 69.28 cr. (FY15), Rs. 2096.88 cr. / Rs. 291.75 cr. (FY16) and Rs. 2208.50 cr. / Rs. 312.18 cr. (FY17).

The company has order on hands worth Rs. 2936 crore as on 31.03.17. CSL has association with world leaders like Wartsila, GTT, Rolls Royce Marine. It has completed constructions of 20 FPVs for the Indian Costal Guard ahead of schedules. More that 72% revenue is coming from defence sector. Its foreign clients include NPCC, Clipper, Sigba.


One market lot of 30 shares were put to offer at price range of 424-432 Rs.           Whereas a discount of 21 Rs was made for the employees and the retail investors.

Nearly all the broking firms had given a subscribe rating to new issue. And it saw a very heavy demand. It was heavily oversubscribed, nearly 76 times. We have seen recently such demand for few issues like S Chand IPO, which is currently trading very low{468 Rs/share} compared to the enlisted price{680Rs/share} and the Central Depository Services Limited, which is still above its listed price.CDSL started trading on floor with premium price at 260 Rs and even crossed 425 Rs mark, but gradually its price fell .On Friday it closed at around 305 Rs/share.

Due to little downwards movement witnessed in global markets and in Indian markets too, Kochin shipyard did not make a high as expected as 550-600 Rs/share on day 1.

It will be observed that how the share trades from tomorrow .It has all the potential easily to cross 600 Rs/share mark.


Harsh Vardhan Pathak.


{Sources-Online reviews about the issue /the introduction of the company}


S CHAND IPO –A short review

Taken from our blog,”Brink of economic thoughts”

S CHAND IPO –A short review


One of the most significant and pioneers of book publications in India, S.Chand will now be getting enlisted into the NSE/BSE exchanges.S Chand has held a highly prominent space in the Indian publishing industry. The book building issue, initiated with a price band of Rs 660-670, aims to raise Rs 717-728 crore.Amidst the reasons which have been mentioned for going public have been


  1. Repayment of loans availed by the Company and one of their Subsidiaries, EPHL, which were utilized towards funding the acquisition of Chhaya;
    2. Repayment/prepayment in full or in part, of certain loans availed of by the Company and their Subsidiaries, VPHPL and NSHPL; and
    3. General corporate purpose.

S Chand  started operating since 1970 and develops content in education K12,{1-12TH grade education, a term derived from USA}.


Company has been involved into publishing books for children, schools, colleges, and universities, export, and import of various school curriculum books and other literary work; also selling digital content and interactive learning systems to schools and running pre-schools.

The company has continued to  provide digital data management services and digital content books to schools and colleges; solutions for higher education in colleges, universities, and technical institutes editing and proof reading, and cover designing services of books, journals, tabloids, magazines, bulletins, brochures, and periodicals in the form of hard copy, compact disks, and e-forms.

S Chand And Company Ltd offers in around 53 consumer brands across knowledge products and all of the services include S.chand, Vikas, Madhubun, Saraswati, Destination Success and Ignitor.

Amidst the strategy to further diversify the company’s profile and operating area with broadening of the existing customer base the company has been also exporting its printed and digital content to Asia, the Middle East, Africa, and internationally.

S Chand has benefitted majorly as of the booming education sector of India. The company has had very strong presence in the ISCE/CBSE school curriculum.


The initial public offering of textbook publisher did see solid investor demand as it was oversubscribed 59.28 times on the last day of offer. It was one of higher rate of oversubscription. The IPO received bids for 45, 56, 00,794 shares against the total issue size of 76, 85,284 shares,

JM financial securities,Axis Capital and Credit Suisse securities were the lead promoters of the issue.

Interesting will be to see the response received when the issue goes for trading on NSE/BSE floors from the market players. Such a huge subscription clearly shows that the issue has been considered promising and has been widely welcomed .


Harsh Vardhan Pathak



{S Chand has been one of leading school book curriculum provider in India. It has enlisted for being public and 26th-28th April had been the date when the IPO was to  be subscribed. This short review looks into the 3 days of it getting enlisted, a little study of peer and evaluations and subscription data. The review has been prepared by study of various online reports/news websites/capital markets reviews generating websites and review generated within last few days about the IPO.}

Debt markets in East Asian economies in 2016

Taken from our blog,”Brinks of economic thought”

Debt markets in East Asian economies in 2016


A short note study of Diversion in bond yields amidst global uncertainty.


Bond yields grew in advanced economies while they did not grow significantly in the developing economies. This had been evident from US Federal Reserve’s moves that it will continue its monetary policy normalisation. With the stable inflation rate under control coupled with encouraging employment figures for past continuous 40 + weeks, Fed increased its policy rates.

Despite the one way trend witnessed in the entire regional East Asian markets, one of the economies stood as an notable exception, China, where the 2 year and 10 year yield rose.


There are many uncertainties related to global factors which could impact the regions bonds markets.

  • The possible steps of policy rate hikes which will be taken by US Federal Reserve.
  • Deep rooted upcoming uncertainties being getting visible in the Euro region.
  • Depreciation of the Chinese Yuan, which may impact the growth prospect in the region.

The entire bond market of the East Asian region stood at around 10,000 USD, for which China accounted for nearly 70 % of them.

Out of these figures the government bonds dominated the major portion while accounting for nearly 65 %, while the private bonds stood for nearly 35 % on the total bond markets.

Asian markets had been consistently getting affected by the events that happened in 2016 in the world. One among the major was the UK exit from European Union. Then Italian referendum on the constitutional reforms was also a major event. Even this year general and presidential elections in Netherlands, France and Germany will decide the flow of capital from and within the emerging economies.

Any kind of uncertainty in the euro zone will increase the demand for safe heaven assets like heavy metals and highly rated sovereign bonds.

One of the most debated currencies in global economics, Chinese RMB Yuan, has also significantly depreciated in last 12 months. We have also seen the Chinese foreign exchange reserves have depleted, although they still are the largest in the world. China had invested heavily into the US treasury bonds, although gaining low returns, but enabling it to manipulate the currency and thus having high export surplus. This also enabled China to have the largest foreign exchange reserves.

Any kind of depletion in the RMB poses serious threat and risk to the potential stability of the markets in the region. It also poses challenge to the economic stability of the PRC in the region.

There is a significant risk that any further depreciation of RMB will result into the widening of US bilateral trade deficit with China, which could lead to change in the trade policy of US. Throughout 2016 People’s bank of China intervened heavily into the time when Yuan depreciated consistently by utilising its foreign exchange reserves.

The next and significant debt market in the region was of South Korea with outstanding bonds which stood at around 1700 USD.For Thailand the entire market stood at 303 USD.

When we make a study of market like Malaysia, we have to also keep in mind the role which Sukuk {Islamic bond} has played in the entire debts markets. It is one of the largest emerging Islamic debt markets in the East Asian region.

Share of the foreign holdings declined in East Asian markets in 2016 due to various factors. One being the uncertainty revolving around the US rate hikes and another being the strengthening of US dollar.

There were many interesting observations to be witnessed for the year. For example; The AAA-rated corporate yield versus government yield spread fell in the PRC and the Republic of Korea, but rose in Malaysia.


Policy and regulatory developments in East Asian Markets.


In December, the People’s Bank of China lowered the threshold—from CNY200, 000 to CNY50, 000—at which banks must notify the central bank of any domestic deposit, withdrawal, or transfer.

In February, the People’s Republic of China’s State Administration of Foreign Exchange announced that it would allow foreign institutions investing in the People’s Republic of China’s interbank bond market to purchase currency forwards, currency swaps, cross-currency swaps, and currency options.

In January, the Hong Kong Monetary Authority raised the countercyclical capital buffer requirement for banks from 1.25% to 1.875% as part of its implementation of Basel III.

In November, the Ministry of Finance announced that it would continue its frontloading policy for the issuance of government bonds in 2017.

Bank Indonesia, Bank Negara Malaysia (BNM), and the Bank of Thailand (BOT) signed two memoranda of understanding in December to promote the settlement of cross-border trade and direct investment in their respective local currencies.

In November, the Financial Services Commission announced measures to further develop the Republic of Korea’s derivatives markets, including the simplification of the listing procedures and diversification of derivatives that can be issued in the exchange-traded derivatives market and increased flexibility in the requirements for investors.

In November, BNM moved to discourage trading of Malaysian ringgit in the no deliverable forward (NDF) market. The central bank sees it as speculative activity that can potentially destabilize the Malaysian ringgit.

The Government of the Philippines plans to borrow PHP631.3 billion in 2017 to support its expenditures and loan payments.

Thailand’s Securities and Exchange Commission introduced a measure, effective 16 January, limiting intermediary holdings to one third for every new issuance of unrated debt securities falling below investment grade.



Harsh Vardhan Pathak

Green bonds markets in 2016

Taken from blog,”Brink of economic thoughts”

Green bonds markets in 2016


This Short note describes the emergence of a market for green bonds and examines how the market has worked in 2016,also a little focus has been made on the things which are to be looked for in 2017


Entities in today’s financial markets raise capital in 2 ways –Stocks and Bonds. Stocks are a kind of ownership while bond is a way of debt financing .It is interesting to make a comparison between both methods of financing as both markets have unique characteristics confined to them. Although when we make a comparison between the sizes of both markets we find that debt market is very large as compared to equity market.

A bond is a form of debt security. A debt security is a legal contract for money owed that can be bought and sold between parties.

Green bond is a debt security that is issued to raise capital specifically to support climate related or environmental projects. This methodology of debt financing is something which is a decade older and a newly conceptualised terminology since 2009 United Nations Climate Change conference held at Copenhegan.The 2009 Summit resulted into a mutual consensus reached among the participating members about how a mechanism has to be evolved to enhance investment in the coming decades to address concerns about the issues of climate change.

In principle it was also concluded that nations especially the developing ones will need a significant assistance to meet the challenges .Copenhagen accord concluded broad commitments about the scale of financial assistance that developed nations will provide to the developing nations. It was indeed essential as it was going to be difficult for the developing nations on their own to finance the technology needed for dealing with the climatic issues.

The Copenhagen Accord envisaged annual financing for developing countries (from both official and private sources) rising to around $100 billion per year by 2020, in support of strong policy actions by  countries to mitigate and adapt to climate change.


China was able to issue 255 billion Yuan (US$36.9bn) worth of green bonds in 2016, thus dominating the global market in climate-friendly infrastructure investment. This follows an increasing awareness of environmental issues in China which has been followed through to policy and financial decision-making.

The entire figures of 2016 green bond markets are also an encouraging sign of growth when compared from the previous year’s figures.2016 was also the largest year by far in terms of total growth witnessed, whether in the category of bonds issued, or issuer types, or the ratings or even the use of proceeds .Market has also been highly innovative by showing new types of bonds issued: Green covered bonds (which has a dual recourse structure), the first green residential mortgage-backed security (RMBS) from Obvion and the first Green Schuldschein (Nordex).


As cities are  looking forward  to play a role in country NDCs, Green bonds have attained a significant place amidst an increasingly viable form of finance with issuance from cities and municipalities growing from just USD4bn in 2014 (10%) to USD10.5bn (13%) in 2016. Whereas  US municipalities continue to dominate the sub-sovereign space, green municipal and city bonds have come from all around the world, including Mexico{Latin American states, Sweden and Australia. Nordic municipality debt aggregators were important players, enabling small municipalities’ access to low-cost capital through the bond market despite their small size.


For the year2016, green bonds use of proceeds was more equally split between the 7 sectors, showing the process of maturing of the markets. The largest category remained Energy (a total of USD31bn investment in 2016), although its share got declined from 52% in 2015 to 38% in 2016. Conversely, investment in Water grew from 9% to 14%. Both Transport and Buildings & Industry increased their share by 2%.



This can be considered as a welcome indication that the green transition is taking place all across the sectors.

Poland issued its debut green sovereign bond of EUR750m in December 2016 .France has already issued an impressive EUR7bn green sovereign bond in January 2017 .There are also plans for green sovereign bonds from Morocco and Nigeria. As governments seek to implement Nationally Determined Contributions (NDCs), sovereign green bonds are a logical financing option.

We have seen new players coming to the market from Poland, Costa Rica (Banco Nacional de Costa Rica), Philippines (AP Renewable), Morocco (MASEN, BMCE Bank), Colombia (Bancolombia), Latvia (Latvenergo), Brazil (Suzano), Mexico (Mexico City Airport Trust, Mexico City, Nacional Financiera), India (Axis Bank, Greenko, Hero Future Energy, NTPC, PNB Housing Finance, Renew Power) and of course, China.

In our neighbour China has shown remarkable increase since 2015 when clean energy company Goldwind released the country’s first green bond in July 2015.

China Central Depository and Clearing Company {CCDC}, which is a state, owned financial institution has come up with figures which do show a top level of sustainable financial push.

China as an economy grew very fast over last few decades. Its growth story enabled it to also amass one of the largest foreign exchange reserves on the planet .But the growth narrative also had one another side to witness. After Decade wise back to back rapid coal –fuelled development, China is facing issues such as food insecurity.


Setting up of international parameters has been under constant development since inception of the term “green bond “since 2007.But in a way it has assured the investors that the money which is being invested in the projects is going for an environmentally beneficial purpose and assures positive return also.


As one of the significant contributors to the UN climate deal, Beijing has committed itself to reduce carbon intensity (greenhouse gas emissions for each unit of GDP growth) 60-65% by 2030 from 2005 levels.

The People’s Bank of China, the central bank of China has estimated that between 2 and 4 trillion Yuan ($320-640bn) of investment is needed annually to clean up the economy.

Chief economist of People Bank Of China,Ma Jun said: “This report shows that the green bond market has had a strong start in China, now the world’s largest green bond market. Green bonds already make up 2% of Chinese bonds; whereas globally the figure is less than 0.2%.But the potential is tenfold, because 20% of investments in China need to be green to meet our national objectives. So we expect the green bond market to continue to have very strong growth.”

Many prominent economists have expressed their belief that development of green bond markets could help in mobilisation of private funds into green projects, thus helping in dealing with climate challenges and environmental issues.

Last year in July 2016, New Development Bank had successfully reported about the issuance of bank’s first green financial bond with a total size of worth RMB 3 billion. The bank had thus become the first international financial institution which issued a green financial bond in Chinese onshore bond market.

Overall climate issues made the concern in 2016 and the situation remains very grim. But on the front of green bonds and climate affairs, it can be summarised that green bond market remain very progressive and fluent in 2016.

The year 2017 may witness many more issuers from lower rating band coming to the markets as government are trying to mobilise more liquidity and support in the market and we are witnessing over subscription in the markets.




Harsh Vardhan Pathak

References; Various online sources. Climate change issues related websites. Bloomberg.

A short note on the Recommendations of Malhotra committee on insurance sector,,,

This has been taken from our blog,Brinks of economic Thoughts.

A short note on the Recommendations of malhotra committee on insurance sector,,,




In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.


Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.


In its report submitted in 1994, the committee recommended, among other things, that:


Private players be included in the insurance sector.

Foreign companies be allowed to enter the insurance sector, preferably through joint ventures with Indian partners.

The Insurance Regulatory and Development Authority (IRDA) be constituted as an autonomous body to regulate and develop the insurance sector.


The key objectives of the IRDA would include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums while ensuring the financial security of the insurance market.


Brokers representing the customer be brought in as another marketing and distribution channel, a practice prevalent in most developed markets

Raise the level of professional standards in risk management and underwriting and speed up settlement of claims.


Following the recommendations, the IRDA was constituted as an autonomous body in 1999 and incorporated as a statutory body in April 2000. With the coming into force of the IRDA Act, 1999, the insurance industry was opened up to the private sector

Under the IRDA Act, an Indian insurance company will be allowed to conduct insurance business provided it satisfies the following conditions:


It must be formed and registered under the Companies Act, 1956; The aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, should not exceed 26% paid up equity capital of the Indian insurance company;


 Its sole purpose must be to carry on the life insurance business or general insurance business or reinsurance business.2 To operate the insurance business in India, the Indian insurance company has to obtain a certificate of registration from IRDA.


It has also been provided in the IRDA Act that on or after the commencement of the IRDA Act, no insurer will be allowed to carry on the life and general insurance business in India, unless it has a paid up equity capital of Rs. 1 billion. For carrying on the reinsurance business, the minimum paid up equity capital has been prescribed as Rs. 2 billion. The Reserve Bank of India(RBI) has also issued guidelines for banks entry into the insurance business.

Harsh vardhan pathak

Msc economics integrated


while studying insurance sector i came across with malhotra committee recommendations to invite foreign players in indian insurance sector..,,i prepared this note from online news material,,,it was more of copy pasted,,,but i read each line in my continuous journey to explore field of contemporary finance]



This has been taken from our blog,”Brinks of economic thoughts”



This was written by me during the time when LIBOR crisis had shaken the financial markets.




This is the rate at which banks in London  lend money to each other for short-term in a particular currency. A new LIBOR rate is calculated every morning by financial data firm Thomson Reuters based on interest rates provided by members of British Banker ’s  Association [BBA].


This rate officially came into existence in 1984. LIBOR  rates are calculated  and published daily at 11;30 a;m [GMT] by Thomson Reuters.

Every day a group of  leading banks submit rates for 10 currencies  and 15 lengths of loan[borrowing periods] ranging from overnight to one year .It is a global bench mark interest rate used to set a range of financial deals. It is also a measure of trust in financial  system   and faith banks have in each other’s financial health. LIBOR is used to set arrange of financial transactions  worth an estimated $ 800 trillion which is equal to 12 times of global GDP. Many financial institutions , mortgage  lenders  and credit –card agencies set their own rates relative to it.


As early as 2005 there was evidence that Barclay’s had tried to manipulate dollar LIBOR at request of it’s derivative traders and other banks. It was clearly in 2008,Wall Street Journal published a report that questioned integrity of LIBOR.


It was in 20009 BBA had circulated guidelines for all contributor banks on setting   LIBOR rates in same manner. Barclay’s made no change to it’ s system to take account of BBA guidelines .Important rules as such of having distinction between derivatives team and submitters were violated.


It was finally in JUNE 2012, Barclay’s admitted to misconduct. The UK’S FSA imposed a euro 59.5 mn penalty.FSA[Financial service authority],US Department of Justice of Commodity futures trading Commission [CFTC]imposed fines worth euro 102 mn and euro 128 mn respectively ,thus way forcing Barclay’s to pay a total of around  euro 290 mn.



When financial crisis peaked in late 2007,many banks stopped  lending to each other over concerns about their financial health with some banks submitting much higher  rates than others.  Barclay ’ s  was the bank which was submitting higher rates. This prompted rumours that Barclay’s was in trouble. This followed a series of internal debate and controversial conversation with bank of England official, Barclay’s began to submit much lower rates. A bank has to pay a higher interest rate to borrow funds if other lending banks have less confidence in it.

Mechanism  with which LIBOR was fixed.


Bank submit rates


            A                                 B                                     C                                  D


            1%                               2%                                    3%                            4%



Lower bottom is discarded-



            1%                                 2%                                   3%                            4%



Avg. is calculated of remainder-   2.5 % This is LIBOR.



In same way rates if submitted by 16 banks were considered ,lower and upper 4 rates ,means overall 8 rates were discarded and average of rest 8 were calculated on which transactions took place.


As a consequence  of  it, those paying interest on loans would have benefitted from lower LIBOR rates, savers and investors would have lost out.

Barclay’s had to pay $ 453 million to settle U.S and British authorities’ allegations that British bank had tried to manipulate London interbank offered rate.


Barclay’s was not be the only bank put through wringer over question of rate manipulation .Barclay’s  also likely to faced civil cases, as customers on wrong side of LI BOR  movements bring claims.  at least   12 banks were involved in LIBOR investigations  around the world. Fines on Barclay’s may heralded similar penalties on others.


Investigations of more than a dozen bank by authorities on 3 continents  started   to   unearth evidence  that some banks improperly  sought to alter LIBOR.


Now it is a another case of globally working trade .Analysts said industry  may have to shell out billions of dollars to settle the cases and other  bank chiefs could find themselves in troubles.

Roughly a  dozen  banks acknowledged being under criminal or civil investigation in various countries in the matter.

MORE THAN $  800tn in securities were linked to the Libor ,including $ 350 tn in swaps & 10 tn $ in loans ,including home and auto loans. These transactions take place globally.


Britain’s financial services industry is a national asset. It has thrived for many reasons that include London’s   favourable  time –zone, that allows it to trade with Asia and  America .It was a fact of great prestige that Britain did effectively set interest rates for rest of world .As of now Britain’s ability to play by and police the rules is under scrutiny.BBA[British Banker’s Association] is considering a LIBOR revamp. Instead of  estimated  rates actual rates are considered to be used.



Harsh Vardhan Pathak

Mutual Funds In India

This has been used from our blog ,Brinks of economic thoughts.

Mutual funds in india,



A mutual fund is a financial intermediary that pools the savings of investors for collective investment in a diversified portfolio of securities. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 defines a mutual fund as a ‘a fund established in the form of a trust to raise money through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instruments’. The definition has been further extended by allowing mutual funds to diversify their activities in the following areas: 


· Portfolio management services

· Management of offshore funds

· Providing advice to offshore funds

· Management of pension or provident funds

· Management of venture capital funds

· Management of money market funds

· Management of real estate funds


A mutual fund serves as a link between the investor and the securities market by mobilising savings from the investors and investing them in the securities market to generate returns.


Benefits of Mutual Funds


An investor can invest directly in individual securities or indirectly through a financial intermediary. Globally, mutual

funds have established themselves as the means of investment for the retail investor.


1.       Professional management:

2.       Portfolio diversification:

3.       Reduction in transaction costs:

4.       Liquidity:

5.       Convenience:

6.       Flexibility:

7.       Tax benefits

8.       Transparency

9.       Stability to the stock market

10.   Equity research



Growth of Mutual Funds in India


The Indian mutual fund industry has evolved over distinct stages. The growth of the mutual fund industry in India can be divided into four phases: Phase I (1964-87), Phase II (1987-92),Phase III (1992-97), and Phase IV (beyond 1997).


Phase I: The mutual fund concept was introduced in India with the setting up of UTI in 1963.


Phase II: The second phase witnessed the entry of mutual fund companies sponsored by nationalised banks and insurance companies. In 1987, SBI Mutual Fund and Canbank Mutual Fund were set up as trusts under the Indian Trust Act, 1882. In 1988, UTI floated another offshore fund, namely, The India Growth Fund which was listed on the New York Stock Exchange (NYSB).


Phase III: The year 1993 marked a turning point in the history of mutual funds in India. Tile Securities and Exchange Board of India (SEBI) issued the Mutual Fund Regulations in January 1993. SEBI notified regulations bringing all mutual funds except UTI under a common regulatory framework. Private domestic and foreign players were allowed entry in the mutual fund industry. Kothari group of companies, in joint venture with Pioneer, a US fund company, set up the first private mutual fund the Kothari Pioneer Mutual Fund, in 1993.


Phase IV: During this phase, the flow of funds into the kitty of mutual funds sharply increased. This significant growth was aided by a more positive sentiment in the capital market, significant tax benefits, and improvement in the quality of investor service.


Types of Mutual Fund Schemes


The objectives of mutual funds are to provide continuous liquidity and higher yields with high degree of safety to

investors. Based on these objectives, different types of mutual fund schemes have evolved.


Functional Portfolio Geographical Other

Open-Ended Event           Income Funds   Domestic       Sectoral Specific

Close-Ended Scheme       Growth Funds   Off-shore       Tax Saving

Interval Scheme               Balanced Funds ELSS

                                             Money Market Special

                                             Mutual Funds

                                                                                                     Gilt Funds                                               

                                                                                                     Index Funds


                                                                                                     PIE Ratio Fund

1.      Open-ended schemes: In case of open-ended schemes, the mutual fund continuously offers to sell and repurchase its units at net asset value (NAV) or NAV-related prices. Such funds announce sale and repurchase prices from time-to-time. UTI’s US-64 scheme is an example of such a fund. The key feature of open-ended funds is liquidity.


2.      Close-ended schemes: Close-ended schemes have a fixed corpus and a stipulated maturity period ranging between 2 to 5 years. Investors can invest in the scheme when it is launched. The scheme remains open for a period not exceeding 45 days. Investors in close-ended schemes can buy units only from the market, once initial subscriptions are over and thereafter the units are listed on the stock exchanges where they dm be bought and sold.



3.      Interval scheme: Interval scheme combines the features of open-ended and close-ended schemes. They are open for sale or redemption during predetermined intervals at Nonrelated prices.


Portfolio Classification

1.       Income funds:

2.      Growth funds:

3.      Balanced funds:

4.      Money market mutual funds:

5.      Gilt funds:

6.      Load funds:

7.      Index funds:

8.      PIE ratio fund:

9.      Exchange traded funds:


Mutual Fund Investors

Mutual funds in India are open to investment by

a. Residents including

· Resident Indian Individuals, including high net worth

individuals and the retail or small investors. Indian


· Indian Trusts/Charitable Institutions

· Banks

· Non-Banking Finance Companies

· Insurance Companies

· Provident Funds

b. Non-Residents, including

· Non-Resident Indians

· Other Corporate Bodies (OCBs)

c. Foreign entities, namely, Foreign Institutional Investors

(FIIs) registered with SEBI. Foreign citizens/ entities are

however not allowed to invest in mutual funds in India


harsh vardhan pathak