Budget 2016 : Sector Impact

Positive for Insurance

Foreign investment in insurance, pension sectors up to 49% via automatic route ( IIFL Hold )

Proposes Rs 5,500 cr for crop insurance scheme for FY17 ( Bajaj Fins,L and T Fin )

NBFC shall be eligible for deduction to extent of 5% of its income in respect of provision for bad debts ( SKS Micro, IIFL,NETWORK 18 )

Propose to launch new health care scheme with Rs 1 lakh as cover per family

Positive for general Insurance companies ( Reliance capital, Kotak )

Target of amount sanctioned under Pradhan Mantri Mudra Yojana (SKS Microfinance, Satin Creditcare )

Amendments in SARFAESI Act 2002 to enable sponsor of an ARC to hold up to 100% stake in ARC

Positive for fertiliser companies

Unified agri market scheme to enhance farmer access to markets (Coromandel Fertiliser,Chambal,GSFC )

Have to give farmers income security, aim to double farmer income

Negative for Auto

To levy 1-4% infra cess on cars, SUVs, higher engine capacity vehicles and 2.5% tax on diesel vehicle

Tax to be deducted at source at rate of 1% on purchase of luxury cars exceeding value of Rs 10 lakh ( Tata motor,Maruti,M&M )

Negative for PSU Bank

FM says Rs 25,000 cr for bank recapitalisation (less than expected, so negative for PSU banks) ( SBI,BOB,PNB)

Positive for PSU Bank

Goverment has option to reduce stake in IDBI below 50% ( IDBI )

Positive for Engineering

Will commission 9 km/day of broad gauge lines in FY18 and 13km/Day by FY19 ( Kalindee rail )

Positive for IT companies

Digital depository for school leaving certificates, college degrees ( TCS,Infosys,Wipro )

Positive for Software and training

set up high education financing agency with Rs 1,000 cr capital ( APTECH , NIIT, zee learn )

Regulatory architecture to be provided to ten public and ten private cos.

BUDGET

Positive for food processing cos

100% FDI to be allowed through FIPB route in marketing of food ( Nestle , Britannia,)

4 new schemes to enhance dairy farming in India at Rs 850 cr ( prabhat dairy )

Positive for Hospitals & Medical Services

Allocation of Rs 1.5 lakh cr for social sector including education, healthcare ( Aptech,Apollo hospital,Fortis,Narayan hrud )

Positive for Ceramics & Granite

FM allocates Rs 9,000 cr towards Swachh Bharat Mission (Nitco Tiles, Kajaria Ceramic, HSIL, Cera Sanitary )

Positive for Chemicals

e-Platform to connect wholesale agri markets ( pdiilite,Tata chem )

Negative for Cigarettes

To raise excise duty on most tobacco products by 10-15%. (ITC, VST Industries, Godfrey )

Positive for Construction & Contracting – Housing

Propose 100% deduction to undertakings for construction of affordable housing (DB Realty, NBCC ,Ashiana Housing , Peninsula Land, Nila Infra )

Raise personal I-T house rent exemption to Rs 60,000 from Rs 24,000/year. ( DLF,Oberoi Reality)

Positive for electricals

All major stations to have CCTVs in phased manner, 311 railway stations currently under CCTV surveillance (Zicom , Bharat electronics, Genus Power, Centum Electron )

Positive for Infrastructure

Investment in road sector, including PMGSY allocation, would be Rs 97000 cr in FY17.

( IRB, ITNL, HCC, Sadbha, L&T, NCC, Ashoka Buildcon )

To issue guidelines for renegotiation of PPP contracts ( L& T,Bhel,Adani ports,Siemens )

Allocate Rs 55,000 cr for roads & highways excluding Rs 15,000 cr NHAI bonds (MEP Infra, MBL Infra IRB Infra, J Kumra )

Improvement of suburban transport systems ( BEML )

Will set up 2 Locomotive Factories at the cost of Rs 40,000Cr (BHEL, BEML)

Positive and Negative for Mining & Minerals

Propose to scrap export duty on low grade iron ore. ( NMDC )

Clean energy cess for coal Rs 400/tonne (- ve for JSW, Coal India)

Plan to establish wi-fi services in 100 more stations in 2016 and 400 stations in 2017, ( D link )

Positive for Oil Drilling And Exploration

Cess on crude reduced from Rs 4500/MT to 20% ad valorem. ( ONGC, CAIRN INDIA)

Positive for pharma

FM propose to exempt parts of dialysis equipment from basic customs duty ( opto circuit )

Positive for Plastics

Propose to spend Rs 86,500 cr on irrigation projects in 5 years,28.5 lakh hectares will be brought under irrigation, Allocation for Accelerated Irrigation Benefits

Programme at Rs 17,000 cr for FY17, Allocation to farming sector at Rs 35,984 cr (Jain Irrigation, EPC)

Positive for Power – Generation & Distribution

Propose Rs 8,500 cr for rural electrification (Power Grid, NTPC, PFC, REC)

Target is to commission 1000 MW of Solar Capacity in next 5 years (Indowind Energy)

Positive for Power – Transmission & Equipment

Government committed to achieve 100% village electrification by May 1, 2018 (KEC international, L&T, Kalpataru Power

FM allocates Rs 9,000 cr towards Swachh Bharat Mission (A2Z Infra)

To up FY17 allocation for electrification by 50% (Kalpataru Power, KEC Intl, Siemens)

Electrification of 2000 Km (KEC international )

No reimposition of custom duty on crude

Negative for Textile

Higher excise on readymade garments priced at Rs 1,000 or more (Arvind)

Positive for Transport & Logistics

Basic custom and excise duty on refrigerated containers reduced to 5% ( snowmen )

Negative on Aviation

Excise duty on aviation fuel increased to 14% from 8% (SpiceJet, Jet, InterGlobe)

Positive for Transport & Logistics

Mission to provide LPG gas connection to women household members (Aegis Logistics)

Positive for Transport & Logistics

Propose to set up 3 Freight Corridors (Gateway Distriparks)

Is APRIL a month of Tax planning ??

YES, is certainly not the activity to start in the last quarter of the financial year. It is a part of the financial planning which is suppose to start from the first month of the financial year i.e. APRIL & is ongoing process.

Through out our career we take life mammoth efforts to earn money for the betterment of our today & future including post retirement life. But hardly we pay attention in investing it in right instrument at right time.

We all are well aware of ELSS scheme of mutual funds but for one stroke investors (not opting SIP) timing is equally crucial while investing in capital market for either entry or exits. Investment made at last minute in hurry may not be a best option for investment or may not generate expected return in comparison of schemes in the same group. People who prefer investing in bank’s tax saver schemes difference of 0.25 per cent in interest rates makes considerable amount of difference due to its long tenure of five year’s.

Investment in tax saving instruments such as post office/ NSC/Kisan vikas patra etc are much talked about & well known, ways of investments. These investments have its own merits & demerits such as long lock in period, interest is not tax free but safe nature of investment. But these options are not the only options. Over a period of time new options have also immerged & can play game changer roll if effectively used it in right manner.

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Such as “GIFT”, spouse if not working or his/ her earning is below the taxable limit or one partner in the third level tax slab & his or her spouse is in the first or second tax slab then this option comes handy because person can give a gift up to Rs:-50,000/- per year to the parents, spouse, children as per the income tax act. Though even if prima fascia it appears small amount but for the next year person can get rid of the liability of interest it will generate if invested, which one needs to consider under the head of interest from investment at the time of calculating the tax liability for filling IT return.

As per the judgment given in the case of Bajrang Prasad. VS. Asst CIT husband can pay rent to his wife on couple of conditions laid down as under

A). The flat would be in the name of the wife.

B). Person should actually incurred expenses on rent in respect of the residential accommodation occupied by him i.e. in short person should actually make a payment of rent to his wife.

it is advisable for People who wants to avail this option, to make its payment through cheque & better if it gets reflects in wife’s income tax return under the head of “ income from other sources”. Also normally tenant born the electricity expenses & it is better husband should pay of electricity bills from his own account.

Another not much discussed option is about the increasing employee’s contribution from the existing 12 % to maximum up to 20% but convenient for people who have made adequate amount of contingencies provisions, medical insurances, all major upcoming responsibilities are well taken off. Benefit of this option is that the person can increase the tax free corpus of provident fund & reduce burden of the next years which it will generate from its investment.

Another popular investment option is public provident fund but it is good to start in the beginning of the carrier because of its 15 years long tenure & strict withdrawal limits. Considering the long tenure & good interest rates in fact parents should open account for there adolescent children to built up a corpus for their education, marriage.

For some specified diseases defined under section 11 DD of the income tax deduction up to Rs:- 40,000/- or actual paid whichever is less OR Rs:-60,000/- actual paid whichever is less for senior citizens are exempt under section 80 DDB.

COMPANY DEPOSITS VS BANK DEPOSITS

Abatement in the bank interest rates, inflation (CPI) remains above the comfort level & range bound volatility in the share market compelling people to look for other avenues of investments. Company deposits is one the options people consider & priorities in this criteria instead of debt funds or bonds. But there some pros & cons for every investment which needs to be consider before investing into it.

Companies required capital for various purposes such as for the business expansion, as a working capital, which they manage with sources such as bank loan, director loan, corporate bonds, commercial papers etc. Companies are allowed to collect deposits from public known as company deposits. People misperceive these deposits with banks deposits .These deposits are governed by the companies acts, where as banks are governed by the Banking regulations act under strict control of the Reserve bank of India. Moreover cooperative banks have duel control i.e. RBI & respective state act administrated by the cooperative department of the every state.

A significant difference between bank & company deposits is that for companies deposits are unsecured loan in its nature so if company comes into problem, repayment of principle & interest may get delay or even differed & in case of bankruptcy investor may lose their money.

fixed-deposit

So whether people should invest in banks or companies. Answer of this question varies from person to person depending upon various factors such as investor’s age ,income, willing to take the extra risk for better returns, appetite in case of delay or deferred repayment of principle by the company,. Inspite of all these issues it is advisable that total allocation of such risky investments shall not be more than 10 % of the entire portfolio.

Not necessary that all companies shall have higher interest rates than banks. Some major well known, well market capitalization, financially well placed companies (i.e. well leveraged balance sheets companies ) are conservative & offers interest rates at per with banks. Companies belong to these categories are better & comparatively safe than other companies. Difference of 4 to 5 % interest rates between bank & companies interest rates required critical analysis as those carries excessive risk & in the absence of this analysis better to avoid investing in to it. So it is crucial to have some criteria such as regular dividend paying company, companies with diversified businesses, companies offering unusually high interest rates, private limited companies while selecting the companies.

In case of any problem with the company FD’s, much time consuming & limited options are available to the investors. Because of its nature of unsecured loan, available legal remedies are such as filing complaint with company law board, filing complaint with SEBI, registering the complaint with ministry of corporate affairs, or filing petition with the EOW( economic offence wing) of the high court. But these remedies too have its limitations such as litigations takes years in the high court & there are several practical problems such as complaint has to be filed with concerned jurisdiction of the high court where the company is registered & the concerned zonal office of the CLB. Travelling for every hearing is practically difficult, time & money consuming as well. So for investors better to prefer investing in the companies registered in their own states.

Thanks to the recent amendments in the company’s act, accordingly companies are required to obtain rating for company FD’s from the credit rating agency, which will help to maintain transparency.

While investing in cooperative banks, people should pay attention to some basic aspects such as banks history, dividend history, total bank deposits sectorial loan allocation of the banks (again thanks to RBI for making stringent rules for banking sector to maintain transparency), size of the bank as one high value loan account becomes non performing assets can put small bank into jeopardize. Similarly though FD holders of the cooperative banks do have a protection of insurance up to rupees one lakh but insurance companies procedures, rules , regulations are very stringent & very time consuming even it takes years if bank comes in to problem, as well as insurance company gives priority to the repayment of small deposits such as up to Rs.10,000/- & keep waiting to the medium, high value depositors.

READY TO MOVE ONE STEP FORWARD IN RELATION INSTEAD OF ONLY SYMBOLIC ACTS ?

Giving a gift on a valentine day is what a common trend in these days. Undoubtedly it is a symbolic act of love with each other & important as well. For years we are celebrating it in a same way. But are we ready to move one step ahead by way of joining financial planning & ready to give an emotional security to our spouse in its true sense especially in the time of uncertainty instead of only symbolic acts.

Today in some families husband & wife are distributing an expense such as EMI, grocery, taxes, electricity bills will be incurred by one partner & other partner shall take care of remaining expenses, gives a feel of live in relationship instead of good healthy relation.

Financial planning for valentine couple

Every one of us is very emotional about his or her earning/savings & vigorously reactive even in discussing about it but instead of that can we be more open & candidly start discussing about our future plans & ambitions, should set a common goal & prepare a plan accordingly. In the process difference are bound to erupt but by accepting & respecting those differences we should set the common goal for big achievement because we understand a basic principle i.e. united we stand.

Yes, sharing entire income may not be possible for both the partners but at least we should share some amount & should transfer that amount to joint account & incur all the expenses through that account.

Equally it is good for better investment planning such as avoiding repetition of investment schemes/ product offering same benefits. If plan together with joint account will open wide range of investment products of different benefits for different tenure & at minimal risk.

Its importance increases more in a relationship where one partner is working & the other partner is taking care of home. It helps to create true a strong bonding in the relation & gives a feeling of togetherness besides the financial security. It is especially beneficial in the emergency when the other partner may not be available for some genuine reason. These small steps develop trust, confidence in each other & results into emotional attachment.

Quick Heal Technologies IPO Review

Issue Detail:

Issue Open: Feb 8, 2016 – Feb 10, 2016
Issue Type: 100% Book Built Issue IPO
Issue Size: Rs.445 crore to Rs.460 crore
Face Value: Rs. 10 Per Equity Share
Issue Price: Rs. 311 – Rs. 321 Per Equity Share
Minimum Order Value: Rs.13,995 to Rs.14,445
Minimum Order Quantity: 45 Shares
Lead Managers: Jefferies India Private Limited, J. P. Morgan India Private Limited and ICICI Securities Limited
Company Promoters:
Promoters of the company includes Kailash Sahebrao Katkar, Sanjay Sahebrao Katkar, Anupama Katkar and Dr. Chhaya Katkar.
Registrar: Link Intime India Private Limited

Objects of the Issue:

The Offer consists of a Fresh Issue by our Company aggregating to 2,500.00 million, and an Offer for Sale of up to 6,814,736 Equity Shares.

1. Advertising and sales promotion;
2. Capital expenditure for research and development;
3. Purchase, development and renovation of office premises in Chennai, Kolkata, Pune and New Delhi; and
4. General corporate purposes.

quickheal

Overview

Incorporated in 1995 and having its registered office at Pune, Quick Heal Technologies is one of the leading providers of security software products and solutions in India under Brand Name of “Seqrite” (enterprise) and “Quick Heal” (home).

Quick Heal Antivirus Technology creates software for computer, mobiles and tablets and support vast platforms such as Windows, MAC, Android, iOS and Linux. The end users of company’s products are home users, small offices and home offices (SOHO), SMBs, enterprises, educational institutions as well as Government Agencies and Departments.

Financials

On performance front, the company has posted an average EPS of Rs. 9.60 (on consolidated basis) for last three fiscals with declining trends in bottom line. During 2010-11 it issued preferential equity at Rs. 768.67 per share.

In December 2015 it issued equity shares in the price range of Rs. 37.50 to Rs. 110. So far it made five bonus issues 2 for 1 (March 2005), 3 for 1 (March 2006), 3 for 1 (March 2007), 3 for 4 (March 2008) and 7 for 1 (February 2014).

Its current equity capital of Rs.62.24 cr. will stand enhanced approx. to Rs. 70 cr. post IPO.

For first half ended 30.09.15 it has clocked in net profit of Rs. 24.22 on a turnover of RS. 152.27.

If we attribute these earnings on annualized basis, then asking price is at a P/E of 45 plus and at a P/BV of 5 plus based on its consolidated NAV of Rs. 58 on the said date. Its RoNW has shown declining trends for last four fiscals.

For this management clarified that in last three years, it has spent more on new products for enterprise module and mobile securities which has been charged to P & L. Rewards on these will be generated in coming years.

Its revenue consists of 87% retail market and rest from other segments. 97% of its revenue is from domestic market and the rest from exports.

It hopes to increase it substantially as its products have been receiving approval from world renowned agencies.

Positive

Quick Heal Technologies was awarded the “Make in India Excellence 2015” award for its contribution towards the economic growth of the country.

Further, company’s solutions have also been certified by AV-Test and AV Comparatives.

Revenue have grown at 22% CAGR in last 5 years.

It generates a healthy margin of more then 20%.

Company is consistently showing good figures of sales and profits. However, a thing to note is that profits figures and RoNW are in declining trend which company needs to worry about.

As of June 30, 2015, company has over 15,000 retail channel partners, 230 enterprise channel partners, 279 government partners and 577 mobile channel partners, who act as the distributors and resellers of company’s solutions.

Negative

Despite healthy CAGR, profit figures, RoNW and EPS figures have been falling continuously from last 4 financial years. EBIDTA Margin and PAT on Sales ratio have also seen heading downwards for the last 4 years.

Company hold 30% market share of Antivirus Software Sector of India however, it is not even counted in Global market.

Company promoters and directors have been named respondents in a criminal proceeding.

Financial results may vary from time to time,due to fluctuations in demand for its solutions,making it difficult to project future results.

Depends heavily on sales to home user of its “quick heal ” branded products and any factor adversely affecting sales of its solutions to home users will negative impact profitability,results of operation and cash flows.

All of its subsidiaries have incurred losses in their respective preceding fiscal year, which may have an adverse effect on its buisness,financial position,results of operation and cash flows.

Conclusion

Although issue appears priced on the higher side, investment for medium to long term may be considered as this issue is from the first mover in the segment.

TeamLease IPO review

A combination of low margins and high valuations

Company Promoters:

The promoters of the company are Manish Mahendra Sabharwal, Ashok Kumar Nedurumalli, Mohitkaran Virendra Gupta, HR Offshoring Ventures Pte. Ltd, MKS Management Consultancy Services LLP, NED Consultants LLP and Dhana Management Consultancy LLP.

Issue Detail:

Issue Open: Feb 2, 2016 – Feb 4, 2016
Issue Type: 100% Book Built Issue IPO
Issue Size: 3,219,723 Equity Shares of Rs. 10
Minimum Bid Lot: 15 Equity Shares and in multiples of 15 equity shares thereafter
Minimum Order Value: Rs.11,775 to Rs.12,750
Issue Size: Rs. 252.75 – 273.68 Crore
Face Value: Rs. 10 Per Equity Share
Issue Price: Rs. 785 – Rs. 850 Per Equity Share
Minimum Order Quantity: 15 Shares
Lead Managers: IDFC Securities Limited, Credit Suisse Securities (India) Private Limited and ICICI Securities Limited
Registrar: Karvy Computershare Private Limited

TeamLease IPO Grading The offer has been graded by CRISIL Research and has been assigned a CRISIL IPO grade of ‘4/5’ indicating that the fundamentals of the offer are above average relative to other listed equity shares in India.

Team-Lease-IPO-Review

Objects of the Issue:

The public issue comprises a fresh issue by the company and an offer for sale by the shareholders.

Company will not receive any proceeds from the Offer for Sale.

The fund raised through fresh issue proposes to utilise the Net Proceeds towards funding the following objects:

1. Funding existing and incremental working capital requirements of the Company;
2. Acquisitions and other strategic initiatives;
3. Upgradation of the existing IT infrastructure; and
4. General corporate purposes.

Company has managed to cater the needs of 1252 clients with a network of 9 offices and 1218 full-time employees across India.To run the complete chain of staffing and recruiting industry.To name a few-Microsoft, ICICI Lombard, Bata, L&T, LG, etc. are among its important clients.
Team Lease has made 1.12 million people employed from 2002 to march 2015. Accounting as per Associate Employees, Team lease had 5-6% of the staffing market share in 2014.

Team Lease has four subsidiaries:

1. IIJT Education Private Ltd (IIJT)
2. Team Lease Education Foundation (TLEF)
3. Indian Tourism and Hospitality Skills Education Private Ltd. (ITHS)
4. National Employment Apprenticeship Services (NEAS)

Selling shareholders

Important among the selling shareholders are ICICI Venture’s India Advantage Fund (15.33 lakh shares), GPE (India) (11.8 lakh shares), Gaja Capital India Fund (2.75 lakh shares), and HR Offshoring Ventures (1.53 lakh shares). HR Offshoring Ventures is the corporate promoter and holds 64.34 lakh shares or 41.97% of the pre-offer capital of TeamLease. India Advantage Fund currently holds 25.55 lakh shares (16.67% of pre-issue capital) while GPE India owns 29.51 lakh shares (19.25% of pre-issue capital). Manish Sabharwal’s HR Offshoring Ventures is among sellers but promoters will continue to own approximately 50.99% in the company even after the completion of TeamLease IPO.

The industry

Although India is the world’s 2nd largest labour market, only 10% of the labourers have formal employment. Staffing sector runs on this little populace only, which includes companies like Adecco, Randstad, Innovsource, Quesscorp to compete with Team Lease.

With very low barriers to entry, this staffing service market is highly competitive and exploded. There is a lot of price competition, not only for the fees, but at what salary package can you get an employee.

At a lower price band of Rs.785 per share, Company’s PE ratio comes at whopping 49X of the FY 2015 earnings, which seems significantly expensive in comparison to the global peers that are trading at maximum PE of 33X.
Based on the above calculation and profits margins of the company, the valuation of the company seems highly priced

Positive

Team Lease is a well claimed brand for staffing solutions in India.

The total market share with Team Lease at present is only 5% but even with a small share like this, it is a name that is well known for its services.

Company has PAN network through its large workforce of 1252 employees and 9 offices.

Company has given a CAGR of 30% over the past 4 years showing high potential in the industry.

CRISIL IPO grade of 4 out of 5

Negative

Both EBIDTA and PAT on sales margins are very thin which translates into struggling future if any other competitor comes into the sector

A combination of low margins and high valuations

There are no dividends that are paid off by the company in the last 5 years and moreover, the profits are also seen from the last 2 years. The 3 years prior to which had no profits.

Some of the promoters and key managerial personnel are facing criminal proceedings.

Conclusion

The company is growing drastically but also needs to improve over the margins. The lower price of each share is expected to be Rs.785 which indicates PE ratio of 49X. This is definitely far expensive than the price of its competitors in the market who trade at PE of 33X. Based on the figures stated above, it states that the company is growing rapidly but at the same time the share are very expensive and not too alluring for investors. Issue is likely to create fancy being first mover IPO in the Staffing segment that has bright prospects ahead. Hence this IPO is worth teaming up with for medium to long term.

Disclaimer:

This article is not an investment advice. We are not authorized to give investment advice nor do we provide it on this website. In case you are interested in investing, I would advise you to contact your advisor for the same. We cannot be held liable for any loss arising due to investment made as per you article.