Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<div>The Indian mutual fund industry has assets of almost INR 6.6 trillion across Multi cap, Large Cap, Large and Mid Cap, Mid Cap, Small Cap and Flexi Cap equity schemes. Equity schemes classified as large cap need to have at least 80% of their assets invested in large cap stocks, large and mid cap schemes need to have at least 35% of their assets in large cap stocks and at least 35% in mid cap stocks, mid cap funds need to hold at least 65% of their assets in mid cap stocks, and small cap funds need to hold at least 65% of their assets in small cap stocks. Flexi cap funds can invest across market caps.</div><div>
The Association of Mutual Funds in India (AMFI) publishes the list of the stocks in each market cap segment in January and July each year and mutual funds have one month to rebalance their portfolios to adhere to the new categorization.
At the next recategorization in July 2021, we see 7 stocks moving from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 13 stocks are expected to move from the small cap segment to the mid cap segment with the 16 stocks moving from the mid cap to the small cap segment. There are 3 recent listings that will enter the mid cap segment with over 18 joining the small cap segment.
Historically, the stocks migrating upward to a higher market cap segment have outperformed stocks that migrate to a lower market cap segment over the 1 month and 2 month period post the publishing of the AMFI list. This can be attributed to fund managers realigning their portfolios to meet the new categorization. This provides opportunities to pre-position for the move and unwind post the announcement of the reclassification.
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The Indian mutual fund industry has assets of almost INR 6.6 trillion across Multi cap, Large Cap, Large and Mid Cap, Mid Cap, Small Cap and Flexi Cap equity schemes. Equity schemes classified as large cap need to have at least 80% of their assets invested in large cap stocks, large and mid cap schemes need to have at least 35% of their assets in large cap stocks and at least 35% in mid cap stocks, mid cap funds need to hold at least 65% of their assets in mid cap stocks, and small cap funds need to hold at least 65% of their assets in small cap stocks. Flexi cap funds can invest across market caps.
The Association of Mutual Funds in India (AMFI) publishes the list of the stocks in each market cap segment in January and July each year and mutual funds have one month to rebalance their portfolios to adhere to the new categorization.
At the next recategorization in July 2021, we see 7 stocks moving from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 13 stocks are expected to move from the small cap segment to the mid cap segment with the 16 stocks moving from the mid cap to the small cap segment. There are 3 recent listings that will enter the mid cap segment with over 18 joining the small cap segment.
Historically, the stocks migrating upward to a higher market cap segment have outperformed stocks that migrate to a lower market cap segment over the 1 month and 2 month period post the publishing of the AMFI list. This can be attributed to fund managers realigning their portfolios to meet the new categorization. This provides opportunities to pre-position for the move and unwind post the announcement of the reclassification.


India: Stock Reclassification & Active Portfolio Management

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Macrotech Developers / Equity Capital Markets

Macrotech Developers (Lodha) aims to raise around US$345m in its India IPO. It is the largest real estate developer in India, by residential sales over FY14-20. In FY20, it had a share of 24% of total supply (by units), 32% of total absorption (by units) and 46% of total absorption (by value) in the Top Seven Indian Markets. Lodha is primarily a residential developer with most of its operations restricted to the Mumbai Metropolitan Region (MMR). It has projects across the value spectrum from the affordable segment to ultra-luxury high-end residential projects. As of Dec 2020, it had completed 91 projects with a developable area of 77.22m sqft. As of Dec 2020, it also had 36 ongoing and 18 planned projects in India with a developable area of 28.78m sqft and 45.08m sqft, respectively.This will be the company’s third listing attempt, after 2009/10 and 2018. The size of the deal is expected to be much smaller as well versus the US$800m that it was hoping to raise in 2018. We have looked at its previous listing attempt in our prior note, <a href="https://www.smartkarma.com/insights/lodha-developers-pre-ipo-second-time-lucky-but-not-really-that-much-affordable" target="_blank" rel="noopener">Lodha Developers Pre-IPO - Second Time Lucky but Not Really that Much Affordable</a> . We covered the details of the current attempt in <a href="https://www.smartkarma.com/insights/macrotech-lodha-developers-pre-ipo-new-name-but-up-to-some-of-the-same-old-tricks" target="_blank" rel="noopener">Macrotech (Lodha) developers Pre-IPO - New name but up to some of the same old tricks</a>.In this note, we will talk about the valuations.

Macrotech Developers (Lodha) aims to raise around US$345m in its India IPO. It is the largest real estate developer in India, by residential sales over FY14-20. In FY20, it had a share of 24% of total supply (by units), 32% of total absorption (by units) and 46% of total absorption (by value) in the Top Seven Indian Markets. Lodha is primarily a residential developer with most of its operations restricted to the Mumbai Metropolitan Region (MMR). It has projects across the value spectrum from the affordable segment to ultra-luxury high-end residential projects. As of Dec 2020, it had completed 91 projects with a developable area of 77.22m sqft. As of Dec 2020, it also had 36 ongoing and 18 planned projects in India with a developable area of 28.78m sqft and 45.08m sqft, respectively.This will be the company’s third listing attempt, after 2009/10 and 2018. The size of the deal is expected to be much smaller as well versus the US$800m that it was hoping to raise in 2018. We have looked at its previous listing attempt in our prior note, Lodha Developers Pre-IPO - Second Time Lucky but Not Really that Much Affordable . We covered the details of the current attempt in Macrotech (Lodha) developers Pre-IPO - New name but up to some of the same old tricks.In this note, we will talk about the valuations.

Macrotech (Lodha) Developers IPO - One Too Many Issues

Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

ASA Capital Management

ASA Capital Management is a boutique Research and Investment Advisory firm focusing on primary research in India. ASA provides bespoke research services to Institutional Clients with a focus on due diligence backed with primary research, Field Trips & Channel Checks.

Thematic (Sector/Industry)

With our Post Card Series, our aim is to bring on-ground realities &amp; perspectives from cities across India. Our meetings are specifically set up with Small and Medium Scale Enterprises to understand the structural changes happening in their Industry. In this visit to Bangalore, we focus on the real estate sector and developer financing issues. In this Insight, we bring you highlights of our interactions with local entrepreneurs, IT Professionals, real estate brokers and developers to understand the state of consumption in the city, the primary drivers impacting real estate demand, and the current funding scenario for real estate developers.

With our Post Card Series, our aim is to bring on-ground realities &amp; perspectives from cities across India. Our meetings are specifically set up with Small and Medium Scale Enterprises to understand the structural changes happening in their Industry. In this visit to Bangalore, we focus on the real estate sector and developer financing issues. In this Insight, we bring you highlights of our interactions with local entrepreneurs, IT Professionals, real estate brokers and developers to understand the state of consumption in the city, the primary drivers impacting real estate demand, and the current funding scenario for real estate developers.  

Post Card from Bengaluru (India) | No Panic in Real Estate & Developer Financing

India - Politics, Industrials, IT and Large Caps, EMAlpha

Pankaj Sharma

India - Politics, Industrials, IT and Large Caps

In this week, we spent three days to figure out if things are improving in the National Capital Region (NCR) of Delhi's Real Estate market. We traveled to areas like Yamuna Express Way, Noida, Greater Noida, Ghaziabad in Uttar Pradesh and Manesar, Sohna Road and Gurgaon in Haryana to understand the current state of market for residential housing. The news is not really that good with no significant movement on unsold inventory, heavy discounts offered by the developers, 'wait and watch'  mode the potential buyers are in and a lack of optimism among market participants. However, the more important issue is that there are fears of things getting worse. The increase in interest rates, tedious process of insolvency proceedings against defaulting developers, slow pick up in economic activity because of policy changes impacting buyer interest and big gap between demand and supply are seen as negatively impacting sentiment further.

In this week, we spent three days to figure out if things are improving in the National Capital Region (NCR) of Delhi's Real Estate market. We traveled to areas like Yamuna Express Way, Noida, Greater Noida, Ghaziabad in Uttar Pradesh and Manesar, Sohna Road and Gurgaon in Haryana to understand the current state of market for residential housing. The news is not really that good with no significant movement on unsold inventory, heavy discounts offered by the developers, 'wait and watch'  mode the potential buyers are in and a lack of optimism among market participants. However, the more important issue is that there are fears of things getting worse. The increase in interest rates, tedious process of insolvency proceedings against defaulting developers, slow pick up in economic activity because of policy changes impacting buyer interest and big gap between demand and supply are seen as negatively impacting sentiment further.

India On The Ground: No Sign of Recovery in the NCR Real Estate Market, Things Could Get Even Worse

Indian Accounting Research Analyst, Trudence Capital Advisors

Nitin Mangal

Indian Accounting Research Analyst

Accounting processes in Real Estate companies came into discussions when India was converging to International Financial Reporting Standards (IFRS) w.e.f. April 2016. As per Indian accounting standards, Real Estate companies follow the percentage of completion method (PoCM) for recognizing revenue from real estate projects. On the other hand, IFRS stringent guidelines made it impossible for the companies to book revenue on the PoCM basis and opt for the completed contract basis system.However…

Accounting processes in Real Estate companies came into discussions when India was converging to International Financial Reporting Standards (IFRS) w.e.f. April 2016. As per Indian accounting standards, Real Estate companies follow the percentage of completion method (PoCM) for recognizing revenue from real estate projects. On the other hand, IFRS stringent guidelines made it impossible for the companies to book revenue on the PoCM basis and opt for the completed contract basis system.However…

Ind AS 115: Trough Awaits In The Balance Sheet Of Real Estate Companies

India

Prestige Estates Projects Ltd. develops real estate.  The Company builds residential projects including apartments, villas, plotted developments and integrated townships; commercial projects including corporate office buildings and technology parks; hotels and resorts; and retail buildings.

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Prestige Estates Projects (PEPL IN)

India: Stock Reclassification & Active Portfolio Management

There are a lot of segment changes expected in July when AMFI recategorizes stocks and mutual funds start to rebalance their portfolios. We...

Brian Freitas

Macrotech (Lodha) Developers IPO - One Too Many Issues

Macrotech Developers (Lodha) aims to raise around US$345m in its India IPO. It is the largest real estate developer in India, by residential sales...

Sumeet Singh

Post Card from Bengaluru (India) | No Panic in Real Estate & Developer Financing

With our Post Card Series, our aim is to bring on-ground realities & perspectives from cities across India. Our meetings are specifically set...

Pranav Bhavsar

India On The Ground: No Sign of Recovery in the NCR Real Estate Market, Things Could Get Even Worse

In this week, we spent three days to figure out if things are improving in the National Capital Region (NCR) of Delhi's Real Estate market. We...

Pankaj Sharma

Ind AS 115: Trough Awaits In The Balance Sheet Of Real Estate Companies

Accounting processes in Real Estate companies came into discussions when India was converging to International Financial Reporting Standards (IFRS)...

Nitin Mangal

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52-week Range

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