“Kya lagta hai Bazaar…?”
Most common and very frequent question ask to most of the Market professional with perceived answer of Good / Bad or some sector or Stock specific comment. Most of us believe money only be made by Buying or selling in Market. Let me throw some lights on what are other ways too to minting money. Yes, you get it right its based on Corporate action of particular company where you can invest your fund for short term Profit opportunities. We believe its most under-rated practice because of lack of awareness.
There are mainly 5 types of Corporate Actions where one can look forward to make calculation-based Profit opportunities
- Buy Back
- Right Issues
- OFS
- Corporate Restructuring
- IPOs
As the same like shares, here also there is risk but it is backed by some calculation. Now you will think what type of calculation is required? Well, each method has its own way of analysis and it will be little difficult to express here still we try to brief about each one of them.
Buy Back:
When company has surplus cash in Balance sheet they have to spend it for further growth or expansion but if they don’t have such a plan they have to give it back to original owners – Shareholders. So, in this situation company may declare buy back to buy their own shares. The rate of Buyback is on higher side than prevailing market price so existing share holder get benefited and it helps to boost confidence in Market. For example, Bajaj -Auto and TCS was very successful buyback for investors
Right Issue:
People applying in IPO but not in Right Issue thanks to its little complicated procedure and lack of awareness. Actually, process is simple but No body takes extra pain to find value in it. Right issue is fund raising exercise when company needs money. Company usually offers Right issue at discounted rate than prevailing market price. By this existing share holder rewarded and company gets fund to finance its future plans. Sometimes rights issue brings to accommodate new investors, its one kind of arrangement where Major share holders renounce its shares and wilful investor purchased their rights by this way they can increase their stake and come on board. For example, recently Indiabulls -Right issue gave good return to the investors.
OFS:
Mostly Govt is selling its stake through OFS to complete Disinvestment target. Further As per SEBI rule any listed company’s promotors can not hold more than 75% of Total equity so those company having more that 75% stake has to bring OFS to bring down their stake. OFS comes with discounted price to attract more investors. But remember its “fastest finger first” as the real game start after 3:15 pm. Mostly Big investors bid after 3:15 to understand market sentiment of the offer.
Corporate restructuring:
You must hear about unlocking of wealth by demerging business and also heard of synergies of business while merging two separate entity. Now it depends up on the swapping ratio of shares, Does something left on table for existing shareholders. Sometime both companies have been already listed or some new entity will list directly after demerging. For example, ITC- they having multiple business if they come out with restructuring proposal (Long time market buzz), There may be a few new listings of tobacco or Hospitality business. Tata Coffee will be merged to Tata Consumer both are already listed entity.
IPO:
Now a days most of new investor participate in IPO but due to over subscription they hardly get allotment. Some time Dimond available at the value of stone, one must track such IPOs. Mankind Pharma got very low subscription due to market sentiment later it was listed with good premium. Also, one should understand the allotment procedure for example When there is oversubscription allotment will be based on minimum application amount irrespective of application size.
One should follow exchanges website for such announcements and to track company’s activity. Again, let’s make it very clear that any such opportunity offers equal risk of getting wrong like stocks buying/Selling. But We have narrated certain process that helps to increase your win rate, you can join Finix Capital’s, one of the best Stock Market Courses in Ahmedabad, “Basic to Brilliance” session for further Insight.
