FIIs lap up Standard Chartered IDR issue to leverage arbitrage benefits

After a 4% rally in the Standard Chartered stock on the LSE yesterday, FIIs rush to cash in on a possible arbitrage opportunity

The Standard Chartered IDR issue, which was floundering with a negligible response from investors, was rescued by foreign institutional investors (FIIs) on the very last day. But it is likely that the FII interest had more to do with the arbitrage opportunity created by the stock’s rally on the London Stock Exchange (LSE).

FIIs have finally bid for 22.94 crore shares in the Standard Chartered IDR issue, after a 4% rally on the LSE yesterday. The stock was up 4.41% at £16.80 yesterday on the LSE.

At the time of writing, the Standard Chartered stock was trading at £16.62 on the LSE. In Indian currency, keeping in mind the stock movement on the LSE, one IDR is equivalent to Rs113. Ten IDRs represent one share. Sources say that FIIs have bid for the IDRs at Rs104. If the IDRs are listed at a premium, then it would be a double bonanza for them.

The retail investor quota was subscribed 0.13 times while the employee share was subscribed 0.12 times. The QIB portion was subscribed 4.14 times. Overall, the issue has been subscribed 2.20 times.

“Yesterday the market went up substantially in London. The Standard Chartered share rallied to Rs1,142.40 (in rupee terms). People were looking for arbitrage. A lot of FIIs came in, which no one was expecting. Since it’s a follow-on offer, FIIs take a call on the last day,” said a top official from an investment banking firm.
Retail investors have been given a 5% discount in this issue. The issue opened on 25 May 2010 and closed today. The IDRs will be listed on 11 June 2010. The IDR issue opened with a lukewarm response from investors. The issue was subscribed 11% yesterday.

The IDRs have a lock-in period of one year before they can be freely convertible into shares.

Life insurance companies are not allowed to invest in the IDR by IRDA.




Hemant Beniwal

7 years ago

Logic of FII we can understand but why Indian Mutual Fund were Anchor Investors.... Who will bear the currency risk & company risk....
Questions should be raised to these MF...

"The bank on 24 May 2010 raised Rs 374.4 crore by allotting 3.6 crore IDRs to 6 anchor investors at Rs 104 each. The anchor investors include ICICI Prudential Asset Management Company, Franklin Templeton Investments, Sundaram BNP Paribas Mutual Fund, Birla Sunlife Mutual Fund, HDFC Mutual Fund and Reliance Capital Mutual Fund."

Gazing into the real-estate crystal ball through a book on bricks & mortar

Suhas Mantri, proprietor, Mantri Constructions, speaks to Moneylife on his book, ‘The Comeback’, based on the working of the real-estate industry, and also looks at where the industry is heading. The book is a story on the bankruptcy and survival of a real-estate company

Moneylife (ML): The book is a work of fiction, but according to industry sources, it is a mirror of your life. What are your views on it?
Suhas Mantri (SM): The first part of the book is fiction, events that are taking place in many family-run businesses. The second part—that is, the turnaround story of the company—is a real story. Overall, if we look at the book, it represents stories of many corporate houses. I receive calls from founders of various corporate houses who feel that the book talks about their story. 
ML: The book has a fictitious entity, ‘Mehta Housing Ltd’, which took the route of an initial public offering (IPO) to grow rapidly in the real-estate industry. Do you observe the same thing happening now as most developers are rushing towards IPOs—failing?
SM: It is not about rushing towards an IPO. The real-estate industry is a cyclical industry which undergoes a slowdown after a certain period of time. It becomes difficult for a company to give the best performance when it is listed. The management worries on the financial numbers rather than concentrate on other factors like quality, delivery and initiating new constructions. 

I believe there is always an expectation from a listed company to report better revenues compared to a previous quarter and this creates problems for it in the future. 

ML: The book talks about the bankruptcy and survival of a fictitious real-estate company. What according to you are the key measures that a real-estate company should take to ensure its long term survival?
The main reason for failure of realty companies is the lack of working capital for under-construction projects. Most real-estate companies emphasise on creating a land bank rather than concentrating on the progress of construction. According to me, (the concept of a) land bank is a myth. Huge amount of money gets blocked in buying land. If a developer has sufficient funds for a particular period (for example five years) only then should he think of creating a land bank. Otherwise, a company should concentrate on keeping ample working capital aside.
ML: To get funding for projects is an issue for most developers. Many of them are offering 'guaranteed returns' on their properties because it is difficult to raise funds either through the markets or financial institutions. What can developers do in such a scenario?
SM: Such a scenario only arises if the company focuses on creating land banks and neglecting its core business—construction. If the company concentrates on construction and on delivering the project on time, then I don’t think there will be any issue with the funding for projects. Instead, if the company holds on to the land and waits for the land value to appreciate, then it would create problems for the company when it wants to raise funds.

ML: The book explains, the ‘7 step pyramid’ followed by Mehta Housing to come out of the crisis; will you suggest those steps for all real-estate firms?
SM: The ‘7 Steps’ suggested are not only for the real-estate industry, they are applicable to all individuals.  It applies to all businessmen, professionals and each and every individual including housewives.  Some simple steps mentioned in the pyramid are: Assess your spending; take financial protection, if required, to invest your savings in different places where you are confident of returns and bring down all your non-performing assets.

ML: The realty industry has a number of family-run businesses. What will be your advice to the promoters of such companies?
SM: In a family-run business, each individual should be handed over some responsibility so that he/she can be accountable whenever required. 

ML: How do you see the real-estate industry doing in the next two years in Mumbai and Pune?
SM: For the next couple of decades, the real-estate industry will move in the upward direction. However, the real-estate industry is a cyclical one and undergoes a slowdown every three to four years. But the long-term prospects are really dynamic. 

ML: Prices of properties are shooting up, do you think prices will increase in Mumbai and Pune or will they stabilise?
SM: The prices in the real-estate industry depend on two factors—the cost of land and the cost of raw material.  For example, a few components of real estate like direct/indirect taxes, development charges and sanction charges (among others) contribute a major percentage to the increase in prices of properties. The charges for these components increase approximately by 10% to 15% annually.  Hence, real-estate prices will definitely go up in the future.


Thane-based builder wants to convert part of mall into corporate park

The Siddhi Group—that developed Lake City Mall in Thane—is asking shop owners to sign a no-objection certificate so that it can lease the space to corporates

Thane-based developer Siddhi Group Developers (earlier known as Shree Balaji Builders and Developers) is in the process of scrapping part of its ambitious mall project and wants to convert this space into a corporate park. The developer is asking all people who had bought space in that particular section of the mall to sign a no-objection certificate (NOC) allowing it to lease the space to corporates.

Balaji Builders opened booking for its Lake City Mall in 2004. The mall has a total area of 5.5 lakh square feet (sq ft). Many people with a dream to own a shop in a big mall invested huge amounts and even paid as much as 90% of the total amount at the time of booking. The mall was planned to be built in two parts, block A and block B. It was expected to be ready in two to three years. However, the project was delayed beyond that due to slow construction activities.

Big brands such as Big Bazaar and McDonalds were the first to receive possession and open their shops at the Lake City Mall. However, due to delay in completion of the rest of the mall, no other big brand was interested in opening shop there. In the meantime, the developer also changed its name to Siddhi Group from Shree Balaji Builders and Developers.

Now, after taking about six years to complete the project, the developer wants to convert the remaining part of the mall into a corporate park citing slowdown in the retail industry as a reason. The Siddhi Group has been asking people who had booked shops in block B to sign NOCs so that it can lease the space to corporates. It is promising to give a minimum of Rs50 per sq ft on carpet area as rental income to shop owners. This is unacceptable to shop owners who had invested money in the property. They feel that the builder may earn more than Rs100 per sq ft as rental income from corporates but will give only Rs50 to the shop owners.

At present, the area around the mall attracts an average rate of Rs70 per sq ft for commercial office space. In addition, there is no mention of any timeframe in the NOC, which may make it difficult for the shop owner to take back possession of his property. The developer has also kept mum on matters like who will sign the lease agreement and what would be the period.

One such person Ram Mohan (name changed) had bought two shops on the ground floor of block B by paying about 90% amount of the agreed price. He is eager to open his shop in the mall. However, the Siddhi Group wants to divide block B into two parts, with about 25% area converted into a business centre and remaining 75% as a retail section.

According to sources, the builder has already started booking of the business park space without informing the shop owners. It has also blocked the 25% area. Unfortunately, Mr Mohan's shop falls in this section. He is not happy with the promised returns from the builder. He says, firstly the rate of return on his investment comes to just 0.5% per month or 6% per annum that too after a 'lock-in' period of six years. This is when he would have earned more money as pure interest income from his investment, deposited in a bank.

However, with the Siddhi Group forcing shop owners to sign the NOC, is there any option left for Mr Mohan? We asked some legal experts. According to Vinod Sampat, advocate and founder, Vinod C Sampat and Co, "If the builder does not keep up to his commitments, the owners of the properties have various methods to get the place—like issuing a legal notice, approaching a consumer court, criminal court and also police authorities.”

The claim of a slowdown in the retail industry by the Siddhi Group is also doubtful, especially looking at the higher number of footfalls in Big Bazaar and McDonalds. Even the change in infrastructure and the competing market of Thane has caught the interest of other big players like the Raheja Group and the Runwal Group. Both of them have launched KORUM and R-Mall, respectively in the city.

Officials from the Siddhi Group were not immediately available for comments. Despite calling their office several times throughout the day, we were told that the concerned officials “were in a meeting.”




6 years ago

i have my shop in mall A on second florr, now on this very date i have heard that builder kapil sharma or jaywndra gala are selling B mals shops at rate of 15000per sqft, i have just heard i dont knw its true or no, but here in A mall he hasnt look anything all shops are been converted to offices,
builder took AC money also which he promised to be centrally and now AC has been removed, so what is that money taken for,
how will we get that repay of our investment, i tried to mail many media person to make shooting, and make it publically in tv about this cheater builder
what action can we take now, i have my shop running and no footfalls, he has just been interested in making money from the rent he gets from offices now,
3rd floor was for food court when we booked but now 3rd floor is been on rent to future genrali insurance cmpany, nice he is eating the rent
how can we book case againt the builder
no media person has called or even took step to check in and show to whole mumbai how this builder is working
u can call me 9820173739

Hitesh P

7 years ago

I have purchased several shops in the adjoining building and would like to appreciate the Builders effort for completing the work so far. It should be noted that the Builder had started the Project in 2004 and subsequently there was a Notification from MPCB to get the clearance of project from the Environmental committee... along with this project there are several other projects which were stuck unnecessarily for the environment clearance. I would appreciate the Fact that after getting the Environment clearance in 2007 ( yes the work was stopped for almost 2 and a half years and no one but the central government is to be blamed) the builder is almost on the verge of completing the project. during this period the builder has hardly troubled any one for regular payments as per the schedule initially mentioned. I have received payment reminders almost after the gap of 8 - 10 months and was never pushed to make payments. I would humbly request all the investors to make their investment successful you should cooperate and try to make this project a successful in interest of investment made by all of us



In Reply to Hitesh P 7 years ago

Dear Hiteshji,

You seem to be favoring the builder, which is good and should be appreciated, if this is correct.

This has to be proved by the possession date and feelings of all the investors !

Mrs Rakhi Gupta

7 years ago

I am also an owner of a shop on ground floor of B Block. Builder is not ready to give any commitment on pocession date - but is sending me threatning letters mentioning that the agreement (I have done stamp duty and regesteration) stands cancelled because I have not paid the rest of the 10% that is pending. I would request all Shop owners to come together and fight the builder. Pls contact me at 9971215060.



In Reply to Mrs Rakhi Gupta 6 years ago

hi mrs rakhi,
sorry for that day couldnt talk much and dint call back, after diwali i will visit at my shop and if we can meet at mall than fine
but i dont think now fighting with builder is possible cause all owners now have gave their shops on rents and some have sold, now whole shopping mall is been converted to offices, if we meet than we can see what happens
now i have heard that builder is taking 1500 rs per sq ft rate for transfer charges, is that leagl, i have heard this from other estate agents who are in the mall,


In Reply to Mrs Rakhi Gupta 7 years ago

Rakhiji, I am also the owner of a shop. Tried to contact you, but your mobile was switched off. Please reply by email.

Mrs Rakhi Gupta

In Reply to Sunil 6 years ago

I would request all shop owners to please come together - we have suffered huge losses due to B Block being under construction for over last 4 years. I am receiveing letters informing me my shop is cancelled - when I am asking for how the payment should be made there is no response


In Reply to Mrs Rakhi Gupta 6 years ago

check this site out

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