“If there’s one thing the history of evolution has taught us, it’s that life will not be contained. Life breaks free, it expands to new territories, and crashes through barriers painfully, maybe even dangerously… [in simple words] Life finds a way.” – Ian Malcolm, Jurassic Park

The Omicron – the latest WHO variant of concern, is déjà vu all over again in the ongoing evolutionary battle between humanity and the virus. After multiple COVID waves across countries, we can now safely conclude that COVID is more likely to co-exist with humanity than just pass away. Consequently, policymakers and financial markets must take into account this ‘co-existence’ as part of their decision framework.

Along with the virus, it is the nature of inflation that has undergone multiple mutations in the COVID-era. Over the last few months, there has been an endless debate on ‘transitory’ inflation. There are three parties to this conundrum – those who believe inflation is transitory, those who believe it’s ‘time to retire’ the word ‘transitory’ and those who are paying high prices while the debate rages on. In fact, everything that can be said about inflation has already been said, while little has been done to address it yet. And just when the world is beginning to expect the possibility of a measured policy response to manage inflation, as if on cue, arrives the Omicron.

But, as always, this time it’s different. Unlike in the first half of 2021, inflation has now started to hit the common man through high energy and consumer prices. The recent US CPI inflation of 6.2 percent is the highest in 30 years. Eurozone inflation too hit a record high in November. In India, inflation is visibly on the uptrend amid higher vegetable prices, revision in GST rates and most recently due to price hikes by FMCG and Telecom companies. This puts at risk RBI’s headline CPI tolerance level of 6 percent, despite the recent excise duty cuts on fuel.

Furthermore, any COVID-related slowdown may have additional adverse consequences for the already high inflation, complicating the policy response.

Prior to Omicron, India’s Interest Rates Swaps market were expecting a swift pace of normalisation by the RBI over the next few quarters. The government securities market was pricing the same, albeit to a lesser extent, possibly due to expectation of favourable demand dynamics from the Global Bond Index inclusion and continuing RBI support. Since then, financial markets have substantially watered down their expectations of central bank normalisation across the board, given the Omicron uncertainty.

In a few weeks, as we get better, data-driven understanding of the threat posed by the Omicron, financial markets may again realign to the new realities. The only market certainty during times of high uncertainty is high volatility amid reduced participation. Going forward, prudent policy making dictates that in order to minimise policy-related volatility in markets, the central banks should consistently under-deliver on tightening compared to market expectations. That way, the element of positive surprise is maintained even during policy normalisation, thereby keeping undue volatility in check.

In India, this should begin from the December policy. The MPC is likely to keep all interest rates unchanged and continue with its accommodative policy stance. We also expect the RBI to continue to extend the tenors and quantum of existing VRRR (variable rate reverse repo) operations, thereby continuing to nudge the overnight rates higher.

Rate action, if any, will be accompanied by sufficiently dovish commentary, building a case for modest future actions compared to markets’ expectations. Over time, we expect orderly evolution of Yield Curve – an acknowledged “public good”, to continue as this cycle of dovish policy normalization begins.

Albeit, a noticeably slower than expected pace of policy normalization coupled with the reduced Central Bank purchases amidst high government borrowing could threaten yet another consensus trade of Yield Curve flattening.

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The IPO, during its subscription period, seems to have got all the right ingredients for a bumper listing on December 13.

Subscription record

The initial public offering has broken records of achieving the highest subscription from qualified institutional buyers (QIB) category in the last decade. On December 03 which was the last day of subscription, the QIB portion was subscribed 215.5 times. Overall, the issue was oversubscribed by 219.0 times.

It may be noted that the previous highest subscription for QIB portion was achieved by HDFC Asset Management Company Ltd which got 192.3 times subscription from QIB investors for its IPO that was launched from 25th – 27th July, 2018.

This was followed by Indigo Paints at 189.6 times and , Tatva Chintan which got 185.2 times subscription for its QIB portion.

Strong response to QIB category indicates that investors are willing to put their good money in quality IPOs and as per the market experts, QIBs are evincing interest in new businesses where there are few or no companies that are listed.

To be sure, the Bids had come in for 209.36 crore equity shares against an offer size of 95.68 lakh in the QIB category.

The IPO has seen strong demand for all investors. The retail portion has been subscribed 29.4 times and the portion for non-institutional investors was subscribed 666.2 times.

The primary offer of the company was entirely an offer for sale (OFS) of 1.37 crore equity shares offloaded by the company’s existing shareholders and promoters. The price band fixed for the offer was fixed at Rs 443-453 per share.

On November 30, the company had already mopped up Rs 186 crore from 14 anchor investors, who were allotted 41.0 Lakh equity shares at the upper price band of Rs 453 per share.

Mill-Liner Market

Globally on the basis of revenues, the company is the second-largest producer of polymer-based mill liners as of June 30, 2021. To be sure, mill liners are part of recurring consumables in global mineral beneficiation, mining and bulk solids handling industry.

75% of the total demand for mill liners came from copper and gold mining during 2020 while 25% came from iron ore, cement and other aggregates.

In the year 2020, the global mill liner market was estimated at USD 1.73 billion with demand skewed majorly in favor of replacement for existing grinding machines compared to that for fixing in new grinding machine. The ratio is expected to be about 70-80% from replacement and 20-30% are in the new installed machines.

Strong Grey Market Premium

The offer is commanding a strong premium of Rs 410 per share in the grey market and the reason for such a high premium is fundamentally strong business.

Ujjawal Kumar, Research Analyst, Green Portfolio attributes the high grey market premium to the fact that, “the company makes specialized critical products with high barriers to replacement or substitution

and is insulated from mining capex cycles as its products cater to after-market spends, providing recurring revenues”.

The company’s long standing relationship with marquee global customers supported by global manufacturing & sales capabilities puts it in good stead compared to its competitors which has helped improve the margin profile and ROCE consistently over the last couple of years, he added.

Prashanth Tapse, VP Research, Mehta Equities concurred with Kumar, saying that, “We like the recurring revenues business model as Tega products cater to the after-market spend of a mining processing unit resulting in repeat orders of spares which is typically 3 times of the upfront capex spend over the lifecycle of a mill”.

On valuations aspect, at upper price band (Rs 453/-), the issue seems to be reasonably priced and well in line with listed peer and we believe there is still something is left on the table for new investors, Tapse added.

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The company has a strong rationale for investment because of debt free books, robust free cash flows and growth prospects. Hence it commands a strong premium in the grey market.

Manoj Dalmia Founder & Director, Proficient Equities Limited, attributes the high grey market premium to, “Strong NII and QIB portion coupled with positive market sentiment and attractive valuation compared to its peer”.He expects the stock to list in the region of Rs 853-863 per share resulting in the listing gains of nearly 90% - 100%.

“Investors can hold onto the issue and expect the price to increase further”, Dalmia advised.

The government has extended credit guarantee cover of Rs 67.91 crore to more than 200 farmer producer organisations (FPOs) in the last seven years, Parliament was informed on Friday.

In 2013-14 fiscal, the government through Small Farmers’ Agribusiness Consortium (SFAC) had created the 100 crore Credit Guarantee Fund to finance the project load of FPOs.

"Till date, 202 farmer producer companies (also called FPOs) have been extended credit guarantee cover amounting to Rs 67.91 crore," Agriculture Minister Narendra Singh Tomar said in a written reply to the Rajya Sabha.

The minister further said the Centre has created a credit guarantee cover with the National Bank for Agriculture and Rural Development (NABARD) as part of the central scheme that aims to establish and promote 10,000 FPOs across the country.

Also Read :- Govt buys 291 lakh tonnes of paddy for Rs 57,032 crore so far in 2021-22 kharif marketing year

A quantity of 290.98 lakh tonnes of paddy has been procured in KMS 2021-22 till November 30. "Till now about 18.17 lakh farmers have been benefitted with MSP value of Rs 57,032.03 crore," the statement said.

Kharif marketing season runs from October to September. In Uttar Pradesh, about 14.72 crore National Food Security Act (NFSA) beneficiaries are covered under the PM Garib Kalyan Anna Yojana (PM-GKAY).

Also Read:- World food prices climb in November, stay at 10-year peak: FAO

In Uttar Pradesh, about 14.72 crore National Food Security Act (NFSA) beneficiaries are covered under the PM Garib Kalyan Anna Yojana (PM-GKAY). Separately, the government said that under the PM-GKAY scheme, the food ministry had allocated a total of almost 139.14 lakh tonnes of foodgrains to Uttar Pradesh, incurring an estimated total subsidy of Rs 43,335 crores.

In the wake of economic disruptions caused by the outbreak of COVID-19, the government in March 2020 had announced the distribution of free-of-cost foodgrains to about 80 crore National Food Security Act (NFSA) beneficiaries at the scale of five kilogram per person per month under PM-GKAY.

World food prices rose for a fourth straight month in November to remain at 10-year highs, led by strong demand for wheat and dairy products, the UN food agency said on Thursday.

The Food and Agriculture Organization's (FAO) food price index, which tracks international prices of the most globally traded food commodities, averaged 134.4 points last month compared with a revised 132.8 for October.

The October figure was previously given as 133.2.

The November reading was the highest for the index since June 2011. On a year-on-year basis, the index was up 27.3 percent last month.

Agricultural commodity prices have risen steeply in the past year, driven by harvest setbacks and strong demand.

The FAO's cereal price index rose by 3.1 percent in November from the previous month and was 23.2 percent higher than its year-ago level, with wheat prices hitting their highest level since May 2011.

FAO said wheat prices were supported by concerns about unseasonable rains in Australia and uncertainty over potential changes to export measures in Russia.

The dairy price index posted the largest monthly rise, up 3.4 percent from the previous month. "Strong global import demand persisted for butter and milk powders as buyers sought to secure spot supplies in anticipating of tightening markets," FAO said.

Also Read: Indian companies raise $1.34 billion from foreign markets in October; down 34% from last year, says RBI

Global sugar prices rose 1.4 percent on the month and was up nearly 40 percent year-on-year. "The increase was primarily driven by higher ethanol prices," FAO said.

The meat price index posted its fourth consecutive monthly decline, shedding 0.9 percent on the month, while world vegetable oil prices fell 0.3 percent on October levels, but international palm oil prices remained firm, FAO said.

Rome-based FAO cut its projection of global cereal production in 2021 to 2.791 billion tonnes from 2.793 billion estimated a month ago, according to its cereal supply and demand outlook.

However, the expected world cereal output would still represent a record, FAO said.

The month-to-month downgrade is primarily the result of an anticipated marginally smaller global coarse grains outturn, reflecting reduced forecasts for barley and sorghum production," FAO said World cereal utilization in 2021/22 was forecast to rise by 1.7 percent above the 2020/21 level, hitting 2.810 billion tonnes. FAO's forecast for world cereal stocks by the close of seasons in 2022 stood at 822 million tonnes, up 2.9 million tonnes since November but still down 0.7 percent from opening levels.

Microsoft has announced the general availability of Teams Essentials, a stand-along offering that is aimed at small businesses. The company calls it the, "most competitively priced online meetings and collaboration solution in the market."

The Redmond technology giant has priced Teams Essentials at Rs 100 per person, per month, giving small teams access to essential tools for hosting meetings and collaboration.

A party on teams can host meetings with up to 300 people and enjoy 10GB of cloud space per person in an organisation. The meetings that can be hosted are unlimited but are capped at a maximum of 30 hours.

“We know how difficult the past 20 months have been for small businesses. They’ve had to demonstrate extreme flexibility to adapt, often with limited access to tools and technology,” said Jared Spataro, corporate vice president of Modern Work at Microsoft.

“Teams Essentials is built specifically to meet the unique needs of small businesses, enabling them to thrive in this new era of work,” Spataro added.

Organisations using Teams Essentials will also have access to all the capabilities of the free version of Teams including email invites, Outlook calendar integration, meeting tools like lobbies and virtual backgrounds, always-available text chats and support for group projects and tasks.

Also Read: Indian companies raise $1.34 billion from foreign markets in October; down 34% from last year, says RBI

 to Mio Dispatch, The corporate messaging market has seen a lot of interest since the lockdown's hit in 2020. Microsoft is locked in fierce competition with Salesforce's Slack, which had 12 million active daily users in March 2020.

Teams is quickly catching up, with a total of 250 million active monthly users. Teams is also used by 91 of the Fortune 100 companies.

Indian companies raised nearly $1.34 billion from foreign markets in October this year, down 34 percent from the year-ago period, Reserve Bank of India (RBI) data showed on December 1.

The domestic firms had raised over $2.03 billion from the overseas markets in October 2020.

In a break-up, the companies raised as much as $1.32 billion by way of external commercial borrowings (ECBs) from the automatic route.

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While, the rest of $14,749,994 was raised by a single firm — Fortum Solar Plus — by issuing rupee-denominated bonds (RDBs), popularly known as masala bonds.

The company is engaged in electricity, gas and steam air conditioning supply and the proceeds of the borrowings are to be used for refinancing of rupee loans, showed the RBI data on ECBs for October 2021.

Major borrowers in the ECB category include ONGC Videsh (OVL), which raised $600 million for refinancing of earlier ECB.

India’s manufacturing activity grew at the fastest pace in 10 months in November, buoyed by a strong pick-up in demand, but higher inflationary pressure left factories worried about their future prospects, a private survey showed on Wednesday.

An easing of COVID-19 restrictions drove demand and boosted sales, indicating the economy was on the path to normalization.

Compiled by IHS Markit, the Purchasing Managers’ Index rose to 57.6 in November from 55.9 in October. The reading was the highest since January and the fifth straight month above the 50-mark that separates growth from contraction.

"The Indian manufacturing industry continued to expand in November, with growth gathering pace and forward-looking indices generally pointing to further improvements in the months to come," said Pollyanna De Lima, economics associate director at IHS Markit.

"The fact that firms purchased additional inputs at a stronger rate amid efforts to restock, combined with recurring declines in inventories of finished goods and tentative signs of a pick-up in hiring activity, indicate that production volumes will likely expand further in the near-term."

New orders improved sharply – the strongest since February – mostly driven by domestic demand. That resulted in production rising for a fifth consecutive month and at the fastest pace in nine months.

Firms increased headcount to meet the elevated demand, ending a three-month sequence of reduction, although the pace of job creation was minimal.

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But the optimism was darkened to some extent by soaring input price inflation. Barring October, the input prices sub-index was at the highest in almost eight years owing to supply constraints and rising transportation costs.

"Should raw material scarcity and shipping issues continue to feed through to purchasing prices, substantial increases in output charges could be seen and demand resilience would be tested," De Lima said.

Output prices continued to rise moderately, indicating firms passed on some of their additional cost burden to clients.

The Reserve Bank of India is not expected to raise interest rates until at least the beginning of next financial year, according to a recent Reuters poll, but it might consider a rate hike earlier to curb inflation.India’s economy expanded by 8.4% in the July-September quarter from a year earlier, but economists said disruptions from the emerging Omicron coronavirus variant risked slowing the recovery, especially given the country’s low vaccination rates.