From Paytm And NSE To Old Monk Maker, Retail Frenzy Drives Stock Prices In OTC Market
The maker of India’s staple rum, the nation’s largest retailer, one of the most-loved cricket clubs, the country’s largest bourse, a few financial services firms and more.
Unlisted shares of these companies have seen demand surge as an unrivalled stock frenzy during the pandemic rubbed off on the over-the-counter market, according to two dealers BloombergQuint spoke with—they didn’t want to be identified out of business concerns. The spike is driven by a record number of new retail investors who piled into equities while working from home during the lockdown.
Not averse to taking risks, they have been hunting for stocks from Old Monk rum maker Mohan Meakin Ltd. and National Stock Exchange Ltd. to Reliance Retail Ltd. Shares of nearly a dozen such companies—mostly linked to employee stock options—trade in the demat format in the over-the-counter market at mutually agreed prices.
Usually, the interest came from the wealthy or portfolio managers. The number of trades, however, has gone up and is concentrated in a few companies, said financial planner Harshvarshan Roongta. That’s a cause for worry as novice investors are putting money into this volatile category, he said.
One reason Roongta cited is that retail investors get squeezed out in the initial public offerings. And they’re buying and holding such stocks, hoping to make gains in an IPO.
Based on BloombergQuint’s conversations with market dealers, here are some of the stocks available in the OTC market and how their prices have moved.
A subsidiary of Reliance Industries Ltd., Reliance Retail Ltd. sells everything from grocery, household goods to mobile phones through its stores and online platform. The company tried to buy back shares from employees but analysts flagged that the price it offered was lower than they expected.
The company then raised Rs 47,265 crore by selling more than a 10% stake in Reliance Retail Ventures Ltd., the retail holding company, to a clutch of investors.
The price of its shares in the OTC market have surged nearly fivefold from Rs 380 it offered its employees to Rs 1,700 apiece. That would give a market value of about Rs 8.48 lakh crore.
One97 Communications Ltd., the parent of Paytm, offers tech-backed financial services both online and offline. It has an 11.5% share in the digital payments market by volume as of May, according to NPCI data, making it the third-largest player after PhonePe, GooglePay. The company plans a Rs 22,000-crore initial public offering.
Shares were One97 Communications have more than doubled since the IPO announcement, jumping from Rs 10,000 to Rs 24,000 apiece. That would give it a value of Rs 1.45 lakh crore.
India’s largest bourse, the National Stock Exchange of India Ltd., is grappling with the fallout of the co-location case that led to a penalty by the market regulator for preferential access to some brokers. That also stalled its plan for an initial public offering.
The NSE has challenged the SEBI order in the Securities Appellate Tribunal. According to the last financial statement, NSE held more than Rs 6,085 crore in an escrow account. The exchange got access to the amount after the SAT in May ordered allowing NSE to use the funds.
The price of NSE shares in the OTC market jumped from Rs 850 to Rs 2,000 apiece in the last year. At this level, the exchange is valued at an estimated Rs 99,000 crore.
Hero FinCorp Ltd., part of the Hero Group, offers credit to buy vehicles, loan against property and for commercial purposes. It has close to 2,000 retail financing touchpoints across Hero MotoCorp Ltd.’s dealer network.
The share price rose from Rs 800 to Rs 1,000 apiece last year. Its current value in the over-the-counter market is estimated at Rs 12,731 crore.
HDB Financial Services
HDB Financial Services Ltd., the non-bank lending arm of HDFC Bank Ltd., offers personal, gold, auto, business, durable, and commercial vehicle loan, as well as loans against property. The company has 1,500 branches in 24 states and three union territories.
HDB Financial Services is likely to list ahead of HDFC Securities Ltd., another subsidiary of the group, according to reports.
Aditya Puri, former chief executive officer at HDFC Bank, was expected to stay on the board of the non-bank lender after he retired from the parent. But his exit and as profit declined two-thirds in the last financial year, the stock price has fallen from about Rs 1,300 to Rs 915 apiece in the last six months. The company’s estimated value is Rs 72,210 crore.
Another subsidiary of the HDFC Bank, HDFC Securities Ltd. offers institutional and retail broking services.
Its price in the OTC market rose from Rs 8,000 apiece to Rs 10,300 apiece in the last year, giving it a value of about Rs 16,000 crore.
Tamilnad Mercantile Bank
Based Thoothukudi, Tamil Nadu, the lender has a pan-India network of 509 branches.
Shares of the private lender have risen after it disclosed IPO plans. The stock price has more than doubled from Rs 250 to Rs 600 apiece, valuing it at about Rs 8,551 crore.
Chennai Super Kings
Chennai Super Kings Cricket Ltd. is the parent of the CSK T20 team that participates in the Indian Premier League. Apart from the money earned from matches, it also sells merchandise including T-shirts, mugs and wall posters, footwear, wristbands, and other accessories.
The price of its unlisted shares fell to a low Rs 24-25 apiece when the IPL was suspended last year. But it has since recovered to Rs 68 apiece, giving the company a valuation of Rs 2,095 crore.
Mohan Meakin Ltd. delisted from exchanges buts its shares are available to high-net-worth investors and are traded with the OTC market.
Besides Old Monk rum, it makes Solan No. 1 whiskey and Golden Eagle beer, among other alcoholic beverages. The company has also diversified into fruit juices, breakfast foods, mineral water, and glass.
The stock has moved from Rs 600 to Rs 1,050 apiece since the beginning of the year, giving it an estimated value of Rs 900 crore.
Sterlite Power Transmission
A new addition to the OTC market, Sterlite Power Transmission Ltd. is part of billionaire Anil Agarwal’s Vedanta Group. The company offers power transmission and distribution services, besides making conductors and cables.
Its price up from Rs 260 to Rs 420 apiece in the last three months, valuing it at an estimated Rs 2,570 crore.
A manufacturer of helmets and accessories to two-wheeler riders, Studds Accessories Ltd. is present in more than 50 countries across Europe, Asia, Latin America, and the Middle East. The company has filed its draft prospectus with the market regulator for an IPO.
Its shares have jumped from Rs 500 to Rs 1,500 apiece in the OTC market in the last year, giving it a market value of Rs 2,951 crore.