Daily Current Affairs : 12-12-2020

1.Initial Public Offerings (IPO)

Amid a bull run on the stock markets, the initial public offering (IPO) market, or primary market, is again in the spotlight.

What is an Initial Public Offerings (IPO)?

• An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance.

• The Companies can raise equity capital with the help of an IPO by issuing new shares to the public or the existing shareholders can sell their shares to the public without raising any fresh capital.

Why are companies lining up for IPOs?

• The biggest factor driving companies to the IPO market is the bull-run in the stock markets, which has taken the Sensex to an all-time high of 46,000.

• A strong market means a good company can get a good valuation for its shares.

• It has also enabled several ventures and private equity funds’ exit from companies that they funded through the IPO.

• The market regulator SEBI has fine-tuned the primary market norms, enabling the issuers to float an IPO and list shares in a short period, thus cutting costs.

• The success of IPOs has prompted many potential issuers to look at the primary market for fund raising and listing as investor sentiment is positive.

Advantages of IPOs

• The company gets access to investment from the entire investing public to raise capital.

• It facilitates easier acquisition deals.

• The increased transparency that comes with required quarterly reporting can usually help a company receive more favorable credit borrowing terms than as a private company.

• A public company can raise additional funds in the future through secondary offerings because it already has access to the public markets through the IPO.

Concerns associated with investment under IPOs

• An IPO is expensive, and the costs of maintaining a public company are ongoing and usually unrelated to the other costs of doing business.

• The company becomes required to disclose financial, accounting, tax, and other business information.

• There is a loss of control and stronger agency problems due to new shareholders who obtain voting rights and can effectively control company decisions via the board of directors.

• There is an increased risk of legal or regulatory issues, such as private securities class action lawsuits and shareholder actions.

Alternative of IPOs for Retail Investors

• The market experts feel investing in IPOs is no longer a worthwhile exercise for retail investors, who should instead look for fundamentally strong, established companies in high-growth sectors.

• The retail investors must also understand that nowadays investment bankers compete for the IPO mandate, and the promoter/company goes for whichever banker gives the highest valuation.

Pre-conditions before investing in IPO

• It is important to take a careful look at the company's finances prospective investors must also look at the quality and stability of the management, and the promoters and their credibility.

• The investors must study other listed companies in the sector and compare their growth, and also compare their PE ratio (market price to earnings per share).

• IPOs are one of the riskiest asset classes to invest in, and ideally retail investors should stay away.

• Unlike listed companies where there is higher disclosure and information available in public, very little is known about an unlisted about-to-IPO company, in comparison.

• The investors must also look at existing institutional investors such as private equity and venture capital investors in the company.

Importance of IPOs for stock markets

• A higher number of good-quality listed entities offer more options for investors in the secondary market, and provide stability and increase liquidity.

• If a large sum of investor money chases few quality stocks, they will all turn very expensive and push the stock much ahead of its fundamentals.

Source: Indian Express

2.Digital Voter ID card

Recently, the Election Commission (EC) is keen to make the Elector’s Photo Identity Card or EPIC available in electronic form.

Current form of Voters’ ID

• The EPIC is only available in hard copy, and has to be produced in the original by the voter on Election Day.

• EPIC only establishes the identity of those whose names are there in the Electoral Roll to ensure that their right to vote is smoothly exercised.

• EPICs are issued only to the electors enrolled in the general rolls.

Conditions for Digital Voter ID card

• An eligible voter will have to provide her mobile number or email address to the EC machinery at the time of applying for enrolment in the voters’ list.

• The new voter can download the Voter Card through OTP (One Time Password) authentication.

• The existing voters may have to re-verify their details with the EC (similar to the Bank KYC process) and provide their email or mobile phone number to get their cards in the electronic form.

Election Commission’s view on Digital Voter ID card

• An electronic card will help the EC save costs on printing and distributing hard copy of EPIC.

• The EC feels that voters too, will find it useful to have the PDF file of her voter card on her phone, which will do away with the necessity of first producing a voter’s slip on the day of voting.

• The digital voter card is not expected to look too different from its physical form.

• The soft copy may also have a QR code that will carry the voter’s enrolment details such as name and date of birth and address.

Source: The Indian Express

3.Northern Lights

Recently, the Space Weather Prediction Center at the US National Oceanic and Atmospheric Administration (NOAA) has said that the electromagnetic storm could be growing to major status, causing the Northern Lights to be visible in more number of areas than usual.

What are Northern Lights?

• Northern Lights, also known as aurora borealis, are usually witnessed far up in the Polar Regions or the high latitude regions of Europe.

  • Auroras occur when charged particles ejected from the Sun’s surface (solar wind) enter the Earth’s atmosphere.

• The fast-moving solar wind carries with it the Sun’s magnetic field, which disrupts the magnetosphere (the region of space around Earth in which the magnetic field of our planet is dominant.).

• When the Sun’s magnetic field approaches Earth, the protective magnetic field radiating from our planet’s poles deflects the former and thus shielding life on Earth.

• The charged particles interact with different gases in the atmosphere at the north and south poles causing a display of light in the sky.

Aurora in Northern and Southern Hemisphere

• In the northern part of our globe, the polar lights are called aurora borealis or Northern Lights, and are seen from the US (Alaska), Canada, Iceland, Greenland, Norway, Sweden and Finland.

• In the south, they are called aurora australis or southern lights, and are visible from high latitudes in Antarctica, Chile, Argentina, New Zealand and Australia.

What are solar flares or solar storms?

• Solar flares can typically affect space-dependent operations like Global Positioning Systems (GPS), radio and satellite communications, besides hampering flight operations, power grids and space exploration programmes.

• The solar flares are a sudden explosion of energy caused by tangling, crossing or reorganizing of magnetic field lines near sunspots.

  • The ejections travelling at a speed of 500km/second are common during solar peaks and create disturbances in Earth’s magnetosphere.

• During spacewalks, astronauts face a great health risk posed by exposure to solar radiation outside Earth’s protective atmosphere.

Source: Indian Express

4.Red-headed Bunting

Recently, the birdwatcher have sighted the ‘Red-headed Bunting’ at Gobichettipalayam.

About Red-headed Bunting

• It is a migratory bird from Europe which breeds in Afghanistan, Iran, Kazakhstan, Kyrgyzstan, Mongolia, Russia, Central Asian Russia, Tajikistan, Turkmenistan and Uzbekistan.

• It is a passerine bird in the bunting family Emberizidae.

• The bird breeds in open agricultural land and lays three to five eggs in a nest in a tree or bush and consumes seeds and insects.

• It is listed as ‘Least Concern’ under the IUCN Red List of Threatened Species.

Source: The Hindu

5.Human-made materials now outweigh Earth's entire biomass

Recently, the scientists have found out for the first time in history man-made materials now likely outweigh all life on Earth.

Key Highlights

• The weight of roads, buildings and other constructed or manufactured materials is doubling roughly every 20 years and it currently weighed 1.1 teratonnes (1.1 trillion tonnes).

• The weight of living biomass (trees, plants and animals) has halved since the agricultural revolution because mankind has ramped up its insatiable consumption of natural resources.

• The research showed that the mass of human-produced objects stood at just three percent of the weight of biomass at the start of the 20th century.

• Since the post-World War II global production boom, manufacturing has surged to the extent that humans now produce the equivalent of the weight of every person on Earth every week on average.

• At the current growth rate, man-made material is likely to weigh as much as three teratonnes by 2040.

• The primary reasons for decreasing biomass are deforestation and land use changes making way for intensive agriculture.

What is Biomass?

• Biomass is a renewable energy resource derived from the carbonaceous waste of various human and natural activities.

• It is derived from numerous sources, including the by-products from the timber industry, agricultural crops, raw material from the forest, major parts of household waste and wood.

Importance of Biomass

• Biomass does not add carbon dioxide to the atmosphere as it absorbs the same amount of carbon in growing as it releases when consumed as a fuel.

• Its advantage is that it can be used to generate electricity with the same equipment or power plants that are now burning fossil fuels.

• Biomass is an important source of energy and the most important fuel worldwide after coal, oil and natural gas.

Source: The Hindu

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