Only 24% Indians are financially literate : S & P

About 76% of Indian adults do not adequately understand key financial concepts, including risk diversification, inflation and compound interest. This is lower than the worldwide average of financial literacy, but roughly in line with other BRICS and South Asian nations, according to the Standard & Poor’s Ratings services global financial literacy survey.

1) Only 14% of Indian adults correctly answered the question on risk diversification. Conversely, 56% answered the inflation – question correctly.

2) About 39% of the adults who had borrowed formal loans are financially literate, while about 27% of formal loan borrowing adults were not.

3) 26% of the adults in the richest 60% of households are financially literate, while 20% of the poorest 40% of households are financially literate.

s and psurvey

4) The income gap is evident when the survey is broken down by concept – Poor adults are 21 percentage points less likely than richer adults to correctly answer the compound interest topic correctly. With regard to interest, the gap is 11 percentage points.

5) 38 percent of adults with tertiary education are financially literate; compared to 30 percent of adults with secondary education, and 18 percent of adults with primary education.

Interestingly, the survey also found a gender divide – 73% Indian men are not financially literate while 80% Indian women are not financially literate. India beats the 5 point worldwide gender gap. Among other countries, 57% of the adults in the US are financially literate; while in the UK 67% of the adults are financially literate.

In Asia, Singapore is home to the highest percentage of financially literate adults (59 percent), followed by Hong Kong and Japan (both at 43 percent). And less than a third of adults in China (28 percent) are financially literate

History suggests the six months following a rate hike are better for Indian markets

Since 1983, the US Fed has raised rates six times, the last one being in 2004. For Indian markets, however, the last three – in 1994, 1999 and 2004 – are more relevant since foreign money data has been maintained by Sebi only from 1993 onwards.

The first hike, which could have impacted Indian, markets since 1993 was announced on February 4, 1994. BSE Sensex had rallied by 69% from 2,336 to 3,947 six months prior to the hike. In the next six months, the pace slowed to 8.3% touching levels of 4,276. But importantly FII inflows were positive in the six months following the rate hike.

The second rate hike started just before the dotcom bubble burst as the US government felt its economy was heating up. The Fed started increasing rates from June 30, 1999. Indian markets were warming up to the global rally with some help from participants like Ketan Parekh. From levels of 3060 Sensex touched 4144, a gain of 35% as the US Fed decided to hike rates. Indian markets continued to move higher, taking the rate hike in its stride and touched 5375, a gain of nearly 30% in the next six months.


FII flows were positive for all the six months prior to the hike and saw selling in three months after the hike. The month of July 1999, the very next month after the hike was a positive month for FII flows, but small levels of selling was witnessed in the following three months. The last two months saw good buying interest resulting in a strong positive figure for the six months following the rate hike.

The most recent hike was on June 30, 2004. Indian markets had fallen, thanks to a change in government after the popular Vajpayee government lost the mandate. Markets were trading 18 per cent lower from 5,915 levels at the start of the year to 4,874.

FII flows were negative in the month of May 2004, when election results were announced. Inflows trickled in for the next two months but zoomed higher in the final four months of the year. This resulted in market posting a sharp 28 per cent gain in the six month period following the hike.

As we head in for a likely scenario of a rate hike in mid-December 2015 Sensex is down by nearly 11% in the last six months. FIIs have been net sellers in four of the last six months with the total being a negative figure.

This scenario has not been witnessed in any of the earlier rate hikes as new players like ETFs and Hedge Funds are wary of the uncertain future. History however suggests the following six months of a rate hike are better.

How India Will be Impacted if US Hikes Rate for First Time

If the Fed hikes rates, some foreign investors are expected to book profit in their holdings in Indian shares and bonds; they will likely repatriate funds back to the US, where buying high interest rate bearing bonds will become an attractive bet.

The next two weeks will see a lot of high-volatility trading across financial markets. The ECB (European Central Bank) has come through with an easy money policy, which has, however, disappointed markets, which were hoping for even easier terms. The US Federal Reserve is expected to raise its policy rate for the first time in many years.

This divergent set of actions will impact forex rates. In turn that will alter trading patterns between countries, as the relative value of goods and services change. It might change the assessments of global GDP growth through the next financial year. The markets are already discounting such expectations.

The interest rate parity equation will also change in favour of a stronger dollar if the Fed does hike. The dollar (or any currency) plus interest yield in that currency should equal the euro (or any other currency) plus interest yield for a comparable instrument in the same time period. The interest yield rises on the dollar and it falls on the euro due to central bank actions. So, the dollar should get stronger to compensate.


In the last two weeks of December and early January as well, we often see reduced trading volumes. People go on holiday and this is financial year-ending for many FIIs. Volume reductions often leads to higher volatility. In this instance, the volumes are likely to be higher but the volatility will also be higher.

The dollar/rupee movements and the impact on Indian stocks will probably be in line with moves in other markets. If the Fed hikes the rate, the rupee will fall. There will also be accelerated selling of Indian stocks (the FIIs are already net sellers of Indian equity in this financial year). If the Fed doesn’t hike, the dollar will harden and there will be some bullish impact on Indian stocks.

The impact of a rate hike in the US on India will be limited because of strong fundamentals
, In 2013, India saw $12 billion in outflows from May to September due to US rate hike worries. A record high current account deficit, double-digit inflation and record-low rupee led to large-scale destruction of shareholders’ wealth back then.

If Fed maintains status quo

If the Fed succumbs to market pressure and decides to not raise rates, global equity markets might rebound. If the Fed does not give a clear deadline or indication of when it wants to raise rates, we could see a bigger rally.

Alkem Laboratories Limited IPO Review

The Mumbai-based company is fifth largest domestic pharma company and ranks amongst top 10 for past 12 years in India.

Alkem Laboratories launched its initial public offer of 1.28 crore equity shares for subscription on Tuesday with a price band of Rs 1020-1050 per share. The company aims to raise more than Rs 1,300 crore through this issue.
It is an offer for sale by selling shareholders, which includes a reservation of up to 2,98,913 equity shares for subscription by eligible employees who are getting a discount of Rs 100 on the offer price. “Company will not receive any proceeds of the offer and all the proceeds will go to selling shareholders,” says the company in its prospectus filed with the SEBI.
The offer constitutes up to 10.75 percent of post-offer paid-up equity share capital of the company. Promoter and promoter group’s shareholding will reduce to 66.23 percent from 70.87 percent post offer.

Objects of the Issue:

1. To achieve the benefits of listing the Equity Shares on the Stock Exchanges and
2. For the sale of 12,853,442 Equity Shares by the Selling Shareholders.

Issue Detail:

Issue Open: Dec 8, 2015 – Dec 10, 2015
Issue Type: 100% Book Built Issue IPO
Issue Size: 12,853,442 Equity Shares of Rs. 2
Issue Size: Rs. 1,311.05 – 1,349.61 Crore
Face Value: Rs. 2 Per Equity Share
Issue Price: Rs. 1020 – Rs. 1050 Per Equity Share
Market Lot: 14 Shares
Lead Managers: Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited
Registrar: Link Intime India Private Limited
Company Promoters: Mr. Samprada Singh and Mr. Basudeo N. Singh
Listing At: BSE, NSE

Company Promoters:

Alkem Labs has 23 Promoters who jointly hold 64,302,440 Equity Shares of the Company which, in aggregate, constitutes 53.8% of the issued and paid-up Equity Share capital of the Company.

Alkem produces branded generics, generic drugs, APIs and neutraceuticals, in India and 55 countries internationally, primarily the US. India branded formulations still brings in 75 percent of Alkem’s revenues, although that is down from 87 percent in FY11.

The company is a clear leader in the highly competitive anti-infective segment with 11.2 percent market share. It has warded off severe price competition from the likes of Mankind, Macleods, and Aristo to retain its market position.

Alkem has generic and branded products for/of:

Central nervous system
Pain management

Positive :

The company is the fifth largest domestic pharmaceutical company, and has 16 brands among the top 300 brands in the country.

Top 10 Pharma

Alkem has acquired three companies in the US in the last few years.

Alkem has reported a strong performance in six months period ended September 2015. Profit shot up 152 percent year-on-year to Rs 431.3 crore and revenue rose over 34 percent to Rs 2,659 crore in H1FY16.

In a short span of just 5 years company has doubled net revenues from international market from 12.6% in 2011 to 25% in 2015.

Company has got 16 manufacturing facilities out of which 14 are located in India and 2 are in United States. Out of these 16 manufacturing units, 5 are approved by USFDA, TGA and UK-MHRA.

Company sells a range of high-quality, cost effective generic drugs to major drug chains, pharmaceutical retailers, wholesalers, food and grocery stores, distributors and managed care companies in the United States.

Company’s top management personnel are highly experience and are associated with pharmaceutical sector for over 40 years.


In a pharmaceutical company, the biggest risk is of course regulatory risk. Company’s 25% revenue comes from international market,primary United States and we all know US is severely strict in quality control and has banned various Indian Pharmaceutical Company from entering in US market (Ranbaxy now Sun Pharma). Thus dependency on one market may harm company revenues and profits.So, in this case also 25 percent business is exposed to international markets.

Second thing is out of their 75 percent business in India, some of the business is in the legacy part like the therapies which have become very common now. So, there the growth potential is less.

Third on the local front they are now gone into respiratory and gas ventralogy which again is a growing segment. So, they have taken care of those risks.


Considering company’s position, popular brands in the pharma sector and the given track records with over 22% CAGR in revenue growth for last five fiscals and over 36% growth in first half of current fiscal, reasonable pricing, it’s a worthy bet for short to long term.


All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception.

Dr. Lal Path Labs Limited IPO Review

About the Company

Founded in 1949,Delhi headquartered Dr. Lal PathLabs Limited is in the business of diagnostic and healthcare tests in India. The Company has developed a national network consisting of its National Reference Laboratory in New Delhi, 163 clinical laboratories, 1,340 patient service centers and more than 5,000 pickup points .

The Company offers 3,368 diagnostic and related healthcare tests.Diagnostic and Healthcare Test is the fastest growing segment in Indian Heathcare sector and the Company is well-positioned in the said segment. The company provides services to individual patients, hospitals and other healthcare providers and also to corporate customers.

In the year 2014-15, the company had earned total income of Rs. 640 crores and net profit of Rs. 87.97 crores.

This is the first IPO of a Diagnostic company and hence is expected to catch fancy of Institutional investors as well as Retail investors and may pave the way for others who have been waiting in the wings ( SRL and Thyrocare ) SRL, a subsidiary of Fortis Healthcare Ltd, had previously filed its documents for an IPO in 2011. Then owned by billionaire brothers Malvinder and Shivinder Singh in their private capacity, the firm was brought under their public listed hospital chain Fortis Healthcare.

Issue Particulars :

Issue Duration : Dec 8, 2015 – Dec 10, 2015
Issue Size: 11,600,000 Equity Shares of Rs. 10
Issue Size: Rs. 626.40 – 638.00 Crores
Face Value: Rs. 10 Per Equity Share
Price Band : Rs. 540 – Rs. 550 Per Equity Share
Market Lot: 20 Shares
Listing proposed at : NSE & BSE

Dr lal

The Promoters of the company :

1. Dr. Arvind Lal
2. Dr. Vandana Lal
3. Eskay House

The object of the Offer :

To obtain the benefits of listing the Equity Shares on the Stock Exchanges

Lead Managers :

Citi Group Global and Kotak Mahindra Capital Company

Discussion relating to Valuation and Price Band :

EPS : for the year ended on March 31, 2015 Basic Rs.16.53For the six months ended September 30, 2015, the basic EPS (not annualized) was Rs. 5.90 and the diluted EPS (not annualized) was Rs 4.47.

Book Value :
As on September 30, 2015, Book Value was Rs. 61.78 per Equity Share on a consolidated basis and Rs. 57.77 per Equity Share on an unconsolidated basis.

The offer for share at upper price band of Rs. 550 is at PE multiple of 35 on the basis of estimated EPS of Rs. 19.25 for the year 2015-16.


Business model focused on the patient as a customer and an established consumer healthcare brand associated with quality service, in a market where patients generally choose their diagnostic healthcare service provider.

Attractive financial performance ,financial profile and return on investment capital.

Experience leadership team with strong industry expertise and successful track record.


Intense competition from major players such as Fortis,Metropolis and Thyrocare and small independent Laboratories those exist in every nook and corner of country.

The diagnostic service industry is faced with changing technology and new product introductions.

Conclusion / Investment Strategy

As this is the first company under consumer healthcare diagnosis services sector having established brand and has no listed peers to compare with, it may enjoy the benefit of first mover of the sector and hence may attract fancy of investors. Although it being an expensive offer, moderate investment for short to medium term may be considered.