Heard on the Street: Mahindra Holidays’ IPO plan lifts peer’s stock

Mahindra Holidays��� upcoming initial public offer (IPO) has sparked investor interest in Sterling Holidays, which incidentally is India���s first holiday company. Sterling shares, which have moved up 50% in a month, ended 4.9% higher at Rs 62.75 in a weak market.

The company was virtually written off due to mounting losses and poor financial management with accumulated losses of Rs 142 crore. But some shrewd investors, of late, have taken interest in the company, which has resorts in 13 locations across India. Investors are expecting that Sterling���s valuations would also receive a boost with the listing of Mahindra Holidays. Market buzz has it that the company is planning to restructure operations. It has managed to raise Rs 50 crore through placements to investors in February and June this year at a price of Rs 35 per share.

MFs hand out goodies to banks to sell new schemes

Ever thought what it took for an asset management company to sell mutual funds to investors? Apart from the normal commission of 2.25% (now no longer applicable), distributors and top independent financial advisors ask for extra toppings to recommend schemes.

Fund houses, on their part, spare no expenses to keep distributors and wealth advisors in good spirits. According to distributors, one of the fund houses that launched an NFO is handing out 3-4% as commission to banks to sell its new scheme. The fund house has also promised a 2.75% commission rate for independent financial advisors, apart from giving them free family lunches (and dinners) in plush five-star hotels.

Not with respect to any specific scheme or fund house, sales personnel stationed in two-, and three-tier cities offer cash incentives from their own pockets to smaller middlemen to sell schemes launched by fund houses. This money (spent on giving cash incentives) is later recovered from the fund house by claiming more working allowances and reimbursements.