ISSUE 1 | OCT '2O

FINeprint
A weekly update on high impact areas in Finance

In This Issue Key Updates this week

Mazagon Dock Shipbuilders Defense PSU shipbuilding co. IPO subscribed 157.41 times
becomes highest It makes it highest subscribed PSU IPO leaving behind IRCTC
It is third government shipbuilder to go for public issue
subscribed PSU IPO
15.17% stake on sale as a part of Govt disinvestment plan
Investment Banking Snippets Plethora of opportunities lead to a valuation of INR~3000 Cr.

Dow Rallies on hope for Dow Jones avg. closed by 1.5% or 410 points higher
stimulus package The demand for risk sensitive currencies increased
Safe heavily Currencies like USD fell down by 0.3%
Deciphering Markets Euro received a push, trading between 1.162 & 1.168

Curious Case of Portability Radiate Holdco raises $2.7bn loan with such clause
Clause Clause helps private equity firms to sell their cos.
Similar loans by ECi Software, Avaya, New Look
PE-VC Talks Two more deals in pipeline with Portability Language

Performance Snapshot Absolute return of 3.05% vs Nifty return of -1.98%

High allocation to IT (18%+) & pharma (15%+) stocks
Invested Rs. 1,20,000 in L&T Liquid Fund
JAF Reveals Exited three stocks - TCS, SBI and Tata Consume

What is Islamic Finance? Do send us your views on it by Friday not exceeding 100
words. 3 interesting views would be featured in next week's
FinQ of the week FINeprint

Please mail us your views, articles & feedback at below email id:
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Issue 1 | Oct'20 Page 1

FINeprint by FinClub Investment Banking Snippets

Mazagon Dock Shipbuilders becomes

highest subscribed PSU IPO
Company Info:
Mazagon Dock is a defence public sector undertaking under Ministry of Defence. It started as a
small dry dock in Mazagaon village in Mumbai to service the ships of the British East India
Company in 1774. The dock was then developed into a ship repair yard and later a ship-building
yard and acquired by government in 1960.
Mazagon Dock constructs and repairs warships and submarines for use by the Indian Navy and
commercial clients. It is India’s only shipyard to have built destroyers and conventional
submarines for the Indian Navy. The company operates two verticals: one builds and repairs naval
ships, and the second builds and repairs diesel electric submarines, among others.

Sector Brief:
Indian shipbuilding sector was dominated by public sector up to 1999-00. During that decade, it
opened to private sector. However, major private players are in weak position due to decreased
global trade and liquidity crunch. The sector is capital intensive and has high working capital
requirements. The private players had to go through corporate debt restructuring (CDR) at some
stage. The private players majorly fulfil the commercial orders while the PSUs, along with
commercial orders, are engaged with the defence orders which take longer time to fulfil.

Deal Summary:
The IPO is a part of government’s disinvestment program. It is selling 15.17% stake with a price
band of Rs. 135-145 per share. A valuation of Rs. 2,924.5 crs. is sought with government aiming to
raise Rs. 444 crs. at upper band. It has been subscribed 157.41 times making it the highest
subscribed PSU IPO leaving behind IRCTC (subscribed 109.75 times). It is the third government
shipbuilder to go public after Cochin Shipyard and Garden Reach Shipyard. Yes Securities (India)
Ltd, Axis Capital Ltd, Edelweiss Financial Services Ltd, JM Financial Ltd and DAM Capital Advisors
Ltd (earlier known as IDFC Securities Ltd) are the merchant bankers managing the IPO.

Insight:
The company has reported profits consistently for last 4 financial years. Its current order book
stands at Rs. 54,074 crs. which is entirely from the Ministry of Defence. The orders usually take 6-7
years to fulfil. It receives advances against the project and has a good cash position enabling it to
fulfil its working capital requirements from cash itself without debt. The company also expects the
government’s ‘Atmanirbhar Bharat’ plan to positively impact private and public shipyards as
domestic manufacturing picks up. The company is priced at the lower bands as compared to the
peers who are trading at higher value, making it an attractive stock and has hence got such high
subscription. The risks associated with the company are about the future uncertainty of the
defence orders, the cost overruns due to delay in procurement and the environmental damages.

Further Readings:
https://www.bloombergquint.com/ipos/mazagon-dock-shipbuilders-ipo-all-you-need-to-know
https://www.bloombergquint.com/research-reports/anand-rathi-mazagon-dock-shipbuilders-
ipo-robust-revenue-visibility-valuation-at-discount-to-peers

Sources:
Mazagon Dock Shipbuilders Limited RHP & VCCircle

Issue 1 | Oct'20 Page 2

FINeprint by FinClub Deciphering Markets

Dow Rallies on hope for stimulus package

Market Change:
On Monday, 28th Sept. 2020, the Dow Jones Industrial Average closed by 1.5% or 410 points
higher in expectation of the stimulus package. After 4 weeks of continuing losses, this is the first
positive raise received to this average. The stimulus package is costing about $2.4 trillion is the
second package expected to aid unemployment, airlines, and small business loan fundings
impacted due to COVID. The Nasdaq Composite (COMP) finished 1.9% higher. The broader S&P
500 augmented by 1.6%. The US stock purchase climbed up by 1% after a steady decline for 4
weeks. The CBOE Volatility Index (VIX CBOE MKT VOLATILITY IDX) has come down from the
extreme level of panic but still seeks the attention to address the problems.

Impact on Currencies:
The Australian Dollar experienced a bounce-back halting a decline. But it maintained a narrow
trading band between 0.730 and 0.750. After a two month high, USD & JPY fell down by 0.3% on
the day. The Euro experienced an upward drift, but it is still struggling between 1.1620 and 1.1680.

Insight:
The safe heavenly currencies which are preferred during the downturns have gone down and
underperformed. Moreover, risk-sensitive currencies like Australian dollars have gone up. Despite
the failed negotiations with Congress on approval of this package in recent times, the investors
are optimistic about the approval of this package. Whether this optimism can sustain the rally and
take the market to new highs, or if this is too far fetched remains to be seen. However, a stimulus
will add some pressure on the Fed, which will have certain ramifications later on.

Economists View:
Economists are a bit more pessimistic about this when compared to the investors. Some of the
Economists like Cleveland Federal Reserve Bank President Loretta Mester warned about the
fragility of the situation & about the hindrances in the way to promote and revive the economy.
They also opined that this raise could be because of the compulsion of the investors to buy some
stocks at the end of the month after a disappointing month rather than being less invested than
they actually were. So this may not drive away from the worries that pushed the stocks down in the
recent past.

Further Readings:
https://www.fxstreet.com/analysis/aud-downturn-stalls-amid-improved-demand-for-risk-
202009282348
https://edition.cnn.com/2020/09/28/investing/dow-stock-market-today/index.html
https://www.marketwatch.com/story/dow-industrials-aim-to-get-off-the-week-to-a-solid-start-
futures-jump-350-points-11601292955

Issue 1 | Oct'20 Page 3

FINeprint by FinClub PE-VC Talks

Curious Case of Portability Clause

What Happened?:
In one recent example, broadband company Radiate Holdco — which is owned by the private
equity group TPG — raised $2.7bn in the loan market last week in a refinancing deal that increased
leverage, funded payment to TPG and slid portability language into the loan documents. After
many decades, the Private Equity groups have started inserting a new clause in their loan
agreements by the name of Portability Language in loan documents.

What is Portability Clause in Loans:

A loan with portability clause would continue to be a part of balance sheet of a firm even if the
company is sold to a new owner. The clause makes managing the finances of the company easier
for the new investor, as the existing debt of the company has to be repaid as per the original terms
and rates without any renegotiation for the same. Other companies to have raised money this
month with portability clauses in the loan documents include cloud computing company ECi
Software, communications company Avaya and British fashion retailer New Look’s bond issue.
Two more such deals are in pipeline, as per a report by Financial Times.

Impact on companies:
The provision was present in the market, but it was pretty rare to be in loan agreements.
Previously, the standard practice for the lenders was to renegotiate the rate of interest and other
terms of the loan, when the company was taken over by a new investor, claiming the change in the
risk after such restructuring. The buyers of such a company have to arrange the new loans post
the acquisition. However, the Portability Language changes the status quo.
In this type of agreements, the debt gets transferred to the new owners. Therefore, the portability
makes debt-heavy companies more attractive, as their finances are already in place, and it also
makes them attractive because it decreases the time for the transaction, and as a result, it also
reduces the cost of the transaction.

Insight:
This development makes it easier for private equity to sell their debt-heavy companies but
removes an important potential check on leverage in the financial system from the analysts,
bankers and debt investors of the company. There are fewer loans on offer during the pandemic
and lots of companies to avail them. The banks, and other institutional debt investors are pushed
to give the limited resources to the debt laden companies as they are currently providing higher
returns than the risk-free investments (some of which are even having negative returns). In
addition to this, banks are also missing out on loan restructuring commissions and possibility of
relending at a higher rate of interest.

Further Readings:
https://www.ft.com/content/a1f44fe1-c784-46bc-9e55-e30921a4a8e5
https://in.reuters.com/article/new-look-ma-brait/portability-clause-to-facilitate-new-look-debt-
transfer-idUKL5N0Y61WW20150515
https://www.lexology.com/library/detail.aspx?g=ee91cde7-fbc7-4cbc-b76a-f2bec6cbd18a

Issue 1 | Oct'20 Page 4

FINeprint by FinClub JAF Reveals

Performance Snapshot
Return: 3.05%

Portfolio Value: ₹ 5,66,758

Top Three Gainers:

1. IndiaMart InterMesh Ltd. - 34.75%

2. Lauras Labs Ltd. - 12.89%

3. Coforge Ltd. - 10.30%

Top Three Losers:

1. MOST NASDAQ 100 ETF - 2.82%

2. Escorts Ltd. – 0.75%

3. Garware Technical Fibres Ltd. – 0.63%

Market Review

Shares of Chemcon Ltd. (specialty chemicals manufacturer) and

CAMS (mutual fund transfer agency) started trading on the bourses
this week after their IPO. Chemcon, which was subscried 129 times,
made listing gains of 115%. CAMS (subscribed 47 times) made listing
gains of 23%.

Sensex & Nifty post biggest weekly gains in last three months; up over
3% each with Bank Nifty also gaining 6% this week. This was after the
Supreme Court deferred the case on extension of loan moratorium
and waiver of interest. Central Govt. has formed a committee to
decide on a plan related to the issues.

Government announced the Unlock 5.0 guidelines on 30 September

and gave permission for cinema halls to open, albeit at 50% capacity.
This resulted in shares prices of Inox Leisure Ltd. and PVR Ltd.
gaining over 6% and 7% respectively on Thursday.

Issue 1 | Oct'20 Page 5