Aavas Financiers IPO Review and list of anchor investors

Aavas is a retail, affordable housing finance company, primarily serving low and middle-income self-employed customers in semi-urban and rural areas in India. A majority of its customers have limited access to formal banking credit. According to ICRA Report, the Company had the lowest GNPAs as of March 31, 2018, and the second highest growth rate of assets under management for the last three financial years, among affordable housing finance companies that had assets under management between Rs 25 billion and Rs 200 billion.

aavas

Aavas Financiers raises Rs 520 cr from 34 anchor investors

List of Anchor investors:

 

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IPO Dates & Price Band:

  • IPO Open: 25-September-2018
  • IPO Close: 27-September-2018
  • Issue Size: Approx Rs. 1734 Crore
  • Offer for Sale: 16,249,359 Equity Shares
  • Face Value: Rs.10 Per Equity Share
  • Price Band: Rs. 818 to 821  Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%

Market Lot:

  • Shares: Apply for 18 Shares (Minimum Lot Size)
  • Amount: Rs.14,778

Allotment & Listing:

  • Basis of Allotment: 03-October-2018
  • Refunds: 04-October-2018
  • Credit to demat accounts: 05-October-2018
  • Listing: 06-October-2018

Lead Managers:

  • Edelweiss Capital Limited
  • HDFC Bank Limited
  • ICICI Securities Limited
  • Spark Capital Advisors (India) Private Limited
  • Citigroup Global Markets India Private Limited

Company Promoters:

  • Lake District Holdings Limited
  • Partners Group ESCL Limited

share holder

Main object of the issue:

The Offer comprises a Fresh Issue by our Company and an Offer for Sale by the Selling Shareholders.The object for which the Net Proceeds of the Fresh Issue will be utilized towards augmenting its capital base to meet its future capital requirements arising out of growth in the business.

Competitive Strengths:

The company has a strong distribution network with deep penetration serving underserved customers in rural and semi-urban markets.

In-house sourcing model is leading to superior business outcomes: A direct sourcing and collection system enables a company to optimally price offerings and maintains asset quality.

The company has implemented a robust and comprehensive credit assessment, risk management and collections framework to identify, monitor and manage risks inherent in operations.

The company has access to diversified and cost-effective long-term financing.

The company has made significant investments in information technology systems and implemented automated, digitized and other technology-enabled platforms and proprietary tools, to strengthen offerings and derive greater operational, cost and management efficiencies.

Company’s management team has extensive knowledge and understanding of the housing finance business and the expertise and vision to organically scale up business.

penetration

loan penetration

U.S. Student Debt – The Next Financial Crisis?

Strategies:

The company intends to continue to expand in an on-ground contiguous manner, to drive greater and deeper penetration in the eight states in which it operates and sets up an additional 70 branches during Fiscal 2019.

The company plans to continue to focus on low and middle-income self-employed customers and increase the market share of existing products in the rural and semi-urban markets of India.

The company has been able to access cost-effective debt financing and reduced average cost of borrowings over the years due to several factors, including financial performance and improving credit ratings.

The company intends to increase product portfolio and improve cost efficiency through the use of technology and data analytics

The company intends to continue to undertake initiatives to increase the strength and recall of ‘Aavas’ brand to attract new customers.

world to gdpLoan penetration

loan penetration

The housing shortage in India

The housing shortage of india

CreditAccess IPO Review and the list of anchor investors

Financials:

  • The company consistently delivered high-profit growth in the last five years.
  • It invested in creating capacity and increasing the number of branches, which helped its loan book grow at an annualized rate of 58.6 percent and profit at 71.3 percent.
  • Gross non-performing loans were 0.34 percent of total advances as of March, while its net interest margin is high at more than 7 percent.
  • Aavas has a strong capital adequacy ratio of 61.55 percent, leading to a lower return on equity of 11.2 percent in the year through March.

Ownership vs rented scenario

ownership vs rented

Negative:

Aavas business requires substantial capital and any disruption in its sources of capital could have an adverse effect on its business, results of operations, financial condition and cash flows.

The risk of non-payment or default by borrowers may adversely affect its business, results of operations, financial condition and cash flows.

Aavas are affected by changes in interest rates for its lending and treasury operations, which could cause its net interest income to decline and adversely affect its business and results of operations.

Aavas downgrade in its credit ratings could increase its borrowing costs, affect its ability to obtain financing, and adversely affect its business, results of operations, financial condition and cash flows.

Aavas may face asset-liability mismatches, which could affect its liquidity and adversely affect its business and results of operations.

Aavas operations are concentrated in four states of western  India,  particularly Rajasthan and any adverse developments in this region could have an adverse effect on its business, results of operations, financial condition and cash flows.

Aavas inability to recover the full value of collateral, or amounts outstanding under defaulted loans in a timely manner, or at all, could adversely affect its results of operations.

The Indian housing finance industry is highly competitive and its inability to compete effectively could adversely affect its business and results of operations.

Aavas are exposed to operational and credit risks which may result in NPAs, and Aavas may be unable to control or reduce the level of NPAs in its portfolio.

Aavas Company and its Directors are involved in certain legal and other proceedings. Any adverse outcome in such proceedings may have an adverse effect on its business, results of operations and financial condition.

The bankruptcy code in India may affect its rights to recover loans from its customers.

Valuations:

At the upper end of the price band, the company demands a price that is 4.1 times its post-infusion book value for the year 2017-18. That’s higher than its established peers, especially when it offers a lower return on equity.

Comparison with Peers:

PEERS

Grey market trend:

Current Grey market premium is Rs. 25/- ( Fall from Rs. 170/- )

DISCLAIMER:

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. 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 before making any actual investment decisions, based on information published here

Ircon International IPO Review and current GMP

Ircon International is a government company under the Ministry of Railways. Ircon International is a leading integrated Indian engineering and construction company in India. Ircon is integrated Indian Engineering and construction company, specialising in major infrastructure projects including railways, highways, bridges, flyovers, tunnels, aircraft maintenance hangars, runways, EHV substations, electrical and mechanical works, commercial and residential properties, development of industrial areas, and other infrastructure activities. It provides EPC services on a fixed-sum turnkey basis as well as on an item-rate basis for various infrastructure projects.

In 2016, it ranked number 248 in the list of the top 250 international contractors by Engineering News Records of the United States. Headquartered in New Delhi, it has 26 project offices and five regional offices to support and manage its business operations throughout India and five overseas project offices in SriLanka, Bangladesh, Malaysia, South Africa and Algeria to provide onsite support overseas.

As on December 2017, it had an order book of Rs. 22387 crore.

IRCON

Its workforce as of January 2018 consisted of 1175 full-time employees i a stand-alone basis. It has a debt-free financial profile and comfortable liquidity position. The company has received several awards including Dun and Bradstreet Infra Awards 2016 in Construction & Infrastructure development Railways, CIDC Vishwakarma Awards 2016 and the India Pride Awards 2015-16.

IPO Dates & Price Band:

  • IPO Open: 17-September-2018
  • IPO Close: 19-September-2018
  • IPO Size: Approx Rs. 470 Crore
  • Face Value: Rs.10 Per Equity Share
  • Price Band: Rs. 470 to 475  Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 99,05,157 Shares
  • Discount: Rs.10 (Retail & Employees)

Market Lot:

  • Shares: Apply for 30 Shares (Minimum Lot Size)
  • Amount: Rs. 13,950 (For RII & EMP)
  • Amount: Rs. 14,250 (For QIB & HNI)

Allotment & Listing:

  • Basis of Allotment: 25-September-2018
  • Refunds: 26-September-2018
  • Credit to demat accounts: 26-September-2018
  • Listing: 28-September-2018

Lead Managers:

IDBI Capital Markets & Securities Limited
Axis Capital Limited
SBI Capital Markets Ltd

Registrar to the IPO:

Karvy Computershare Private Limited.

Competitive Strengths:

Our business operates in diverse sectors covering many countries;

Excellent execution track record through strong operating systems and controls;

Strong financial performance and credit profile;

Visible growth through robust order book and steady execution; and
Qualified and experienced employees and proven management team.

Business Strategy:

Continue expanding our geographical footprint within and beyond India.

Paradigm shift in revenue generation.

Focus on high-value projects in the construction business to benefit from economies of scale.

Actively bid for new projects.

Maintain favorable financial risk profile.

Explore different models of project execution to optimize our project portfolio.

Explore potential ways to capture sectorial initiatives undertaken by the Government to improve economic growth.

Attract and retain talented employees.

The promoters:

The President of India acting through the ministry of Railways.

share holder

Objects of the issue:

To carry out the disinvestment of up to 9,905,157 Equity Shares and
to achieve the benefits of listing the Equity Shares on the Stock Exchanges.

The Company will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder.

HDFC AMC IPO Review, Current GMP and List of Anchor Investors

  NHAI awarding is expected to rise over the next three years (km)   

NHAI

Company Financials (Reinstated-Standalone):

The company generated revenue of Rs 4,158.8 Crores for the year ended Mar-14 and Rs 4,123 Crores for the year ended Mar-18.

The company posted a profit of Rs 740 Crores for the year ended Mar-14 and profit of Rs 390.8 Crores for the year ended Mar-18.

Its EPS for FY18 was Rs 40.1 and 3 years average EPS is Rs 38.65.

road

national

Negative:

Ircon’s business and revenues are substantially dependent on construction and infrastructure projects are undertaken or awarded by government authorities and other entities funded by the government. Any change in government policies, the restructuring of existing projects or delay in payments to us, may adversely affect its business and results of operations.

If Ircon faces adverse publicity and incur costs associated with warranty claims or from defects during construction, its business, results of operations and financial condition could be adversely affected.

Projects included in its order book and its future projects may be delayed, extended, modified or canceled for reasons beyond its control which may materially and adversely affect its business, prospects, reputation, profitability, financial condition and results of operations. Revenues generated from its projects are also difficult to predict and are subject to variations driven by various factors.

If Ircon is not successful in managing its growth, its business may be disrupted and its profitability may be reduced.

Bandhan Bank IPO Review and the list of anchor investors

Railway sector projects contribute approximately 86.70% of its Order Book as of March 31, 2018. Any change in the sector causing a decline in the numbers of project available may adversely affect its revenues and profitability.

Ircon’s projects are exposed to various implementation and other risks and uncertainties which could lead to material adverse effect on its business, prospects, financial condition and results of operations.

Ircon’s projects may be adversely affected by public and political oppositions, conflicting local interests, elections and protests.

There are certain legal proceedings pending against us and some of its Subsidiaries, which, if determined against them or us, may have a material adverse impact on its business, its financial condition, its reputation and results of operations.

Valuation:

Valuation of the company now. On FY2018 consolidated EPS of Rs 42.13 and on an upper price band of Rs 475, P/E works out to be 11.2x. On last 3 years average consolidated EPS of Rs 40.62, P/E works out to be 11.7x. Similarly, for standalone nos, the P/E is in between 11.9x to 12.2x. Means company is asking for a higher price band Rs 475 where P/E would be in the range of 11.2x to 12.2x. No listed peers are doing similar business.

Grey market trend:

Current GMP is is Rs. 40/-, and Kostak is Rs. 225/-

DISCLAIMER:

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. 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 before making any actual investment decisions, based on information published here

51% of investors withdraw their investment from equity mutual funds within less than a year

Almost every investor is familiar with the SIPs (Systematic Investment Plan), where you aim for making a corpus depending on your goals by investing a fixed amount every month in a mutual fund. As per Data from the (AMFI), shows that just 29% of equity assets stay invested for more than two years. A huge 51% of equity assets get withdrawn before a year gets over and more shocker is 10 % invest only for one month.

equity withdrwal

To generate a corpus, equity funds are one of the good options to invest in as they can deliver a fruitful result. But the significant thing to know about equity funds is that one should hold on their investments for at least 5 years or even more to get a worthwhile result.

EMI VS SIP ( Be controlled or take control )

Equity mutual funds not only provide you a beneficial result but also balance your portfolio. Also, depending on your goals, equity mutual funds give you high returns on your investment and tax benefits. They are one of the most profitable and preferable investment methods present in the market these days. People have switched from low-return instruments like bank FDs (Fixed Deposits), PF (Provident Fund), NSC, REAL ESTAE  ( 1% to 2% p.a. rental yield )to mutual funds across the time period. Equity funds help in tax-savings along with capital enhancement. Moreover, equity funds might deliver you the inflation-beaten returns in the upcoming period. There are even some options present in equity funds which are intended to provide you benefits in tax.

These days, investors are attracted towards SIP in mutual funds. They are investing their money in MFs through SIP but they are missing something beneficial and that is holding on for a longer period of time.

A campaign by the mutual fund industry of India named ‘Mutual Fund Sahi Hai’ and the anticipation of economic change has spread a successful awareness in the last two years among the investors. Even the SIP inflows in mutual funds have increased amazingly in the recent years but the investors must understand that if they don’t hold their investments for a longer period, they are slashing their returns by themselves.

One of the several reasons behind people attracted to invest in mutual funds is the diminishing rates of bank fixed deposits. It makes investors invest in their choices of mutual funds, usually in balanced funds and debt funds. The demonetization act happened in 2016 also encouraged investors to switch to mutual funds from gold and real estate investments and this led to a greater proportion of savings. The monthly inflows through SIP have also increased incredibly in the last two years as more than ₹7500 Crores flowed into equity funds in July’ 18. These figures were ₹3122 Crores in April’16.

“Some investors prefer the classical method of investment i.e. staying invested only for one year like people used to do before while investing in 1-year bank FDs. This could be a reason why several investors stay invested only for 1 year. On the other side, some smart investors hold their investments for a very long period of time.”

Do Not Compare Yourself with Other Investors While Making Investment

Most preferred & profitable period to stay invested

According to a research on the efficacy of the returns delivered by the SIPs, the investors who have their running SIPs for more than seven or eight years have hardly any probability of facing any loss while the investors who run their SIPs for a shorter period of time say, between one to two years have a higher probability of suffering losses. Investors must stay invested in equity for at least 5 years to get expected results.

One can see in the chart, how many investors (in %) hold their investments for a short period and how many of them hold it for a longer period.

equity

“One more reason behind investors exiting in short-period is their wrong approach towards investing as numerous investors pool in their money unsystematically and without any proper planning and asset allocation for their long-term goals. They invest their money expecting that they will get higher returns in just 2 or 3 years or a short period of time. And that results in unexpected returns and a bad experience, so they withdraw their investment.” Moreover, one must try to check once in every five or six months that how far they are from the goals now. Making investments by carrying long-term financial goals in mind is the correct way to grow patience.

 

Note: Past performance of fund does not guarantee the future returns.

Mutual Fund Investment are Subjected to Market Risks, Read all Scheme Related Document Carefully.

Disclaimer: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. 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 before making any actual investment decisions, based on information published here.

U.S. Student Debt – The Next Financial Crisis?

Higher education has become one of the biggest money-making scams in America.  We tell all of our young people that if they want to have a bright future, they must go to college.  This message is relentlessly pounded into their heads for their first 18 years, and so by the time high school graduation rolls around for many of them it would be unthinkable to do anything else. And instead of doing a cost/benefit analysis on various schools, we tell our young people to go to the best college that they can possibly get into and to not worry about what it will cost.

Real estate rental yield is below one percent

We assure them that a great job will be there after they graduate and that great job will allow them to easily pay off any student loans that they have accumulated.  Of course most college graduates don’t end up getting great jobs, but many of them do end up being financially crippled for decades by student loan debt.

In all of American history, we have never seen anything quite like this student loan debt bubble.  Since 2007, the total amount of student loan debt in America has nearly tripled.

Let me repeat that again.

Since 2007, the total amount of student loan debt in America has nearly tripled.

DmNzSBjW4AAfXt-

But of course the quality of college education has not tripled over that time.  Instead, it has progressively gotten worse.  At this point most college courses have been so “dumbed down” that the family pet could pass them.  If you would like to look into this more, you can find a list of 37 of the most idiotic college courses in America right here.

These days, most college courses do not require any actual writing.  Instead, your performance is judged by a series of “tests” consisting of multiple choice, fill in the blank, and true/false questions.  And the questions are usually ridiculously easy, because most of our high school graduates need to take remedial courses in basic skills when they get to college.

I spent eight years at public universities, and the quality of education that I received was a joke, and that was many years ago.  Now the quality of education has deteriorated so dramatically that most college degrees are essentially worthless from a practical standpoint, but for many professions you still need that “piece of paper” in order to “qualify” for certain jobs.

So the scam continues, and thousands upon thousands of “administrators”, “diversity specialists”, “career counselors” and “college presidents” are taking home massively bloated salaries at our expense.  Beautiful new lecture halls, residential complexes and sports stadiums are going up at colleges and universities all over the country, and textbook publishers are laughing all the way to the bank.

More than 4 lakh Pune flat buyers are victims of the builders

If everything but the basics was stripped away, the cost of actually delivering a college education to students would be quite low.  In fact, most learning could be done over the Internet.

But instead, the “college education industry” has convinced all of us that we desperately need their services, and that we shouldn’t care about the price.

Of course many of our young people are filled with regret once they get out into the real world and they realize that student loan debt is going to financially cripple them for the rest of their lives.

At this moment, America is drowning in more student loan debt than ever before.  The following are 11 rage-inducing facts about America’s wildly out of control student loan debt bubble…

#1 The student loan debt bubble has now grown to 1.4 trillion dollars.

#2 In 2007, the total amount of student loan debt in the U.S. was just 545 billion dollars.

#3 Over the previous ten years, student loan debt has grown by a staggering 176 percent.

#4 Americans now owe more on their student loans than they do on their credit cards.

#5 In 2003, student loan debt accounted for just 3.3 percent of all household debt.  Today, that number has grown to 10.5 percent.

#6 The current student loan 90-day delinquency rate is 11.2 percent.

#7 30 percent of all student loans in the United States are either in “deferment” or “forbearance”.  The most common reason a loan is placed into one of those categories is because the borrower cannot pay.

#8 It is being projected that a whopping 40 percent all student loan borrowers will default on their loans by 2023.

#9 From 2007 through 2017, “college tuition costs jumped 63 percent, school housing surged 51 percent and the price of textbooks by 88 percent.”

#10 In 2001, 18.6 percent of all U.S. households led by someone in the 18 to 34 age bracket were carrying household debt.  Today, that number has jumped to 44.8 percent.

#11 Each year, more than a million Americans default on their student loans.

 

This article originally appeared on The Economic Collapse Blog.  About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

DSP Mutual Fund to reopen DSP Small Cap Fund for SIPs/STPs only

From 3rd September 2018, the DSP mutual fund is going to accept investments through Systematic investment plan (SIP) and Systematic Transfer Plan (STP) in the DSP Small Cap Fund. However, as before the fund will continue to not accept lump-sum investments. Also, large valuations have come across in the small-cap fund. Therefore, there could be volatility over the next one year for the investors to grab the changes made. And this volatility can be conquered by the investors to add to small caps using SIPs.

Since the last 5 years and 10 years period, DSP Small Cap Fund has been consistently performing the best in the small-cap category and has consistent returns of annualized 34% and 20%, respectively.

However, from the last 1 year, the fund performance has been dragged that of peers with the slow return of only 2.3% as compared to 7.4% which is its benchmark of average return.

The BSE Small Cap Index is decreased to 19%. Well, other stocks lose 25-35%. As the economy improves, the earnings prospect for many stocks is going to rise.

dsp

Investment Objective:

The aim of the fund is to seek long-term capital appreciation by investing in a portfolio that is substantially constitutes of stocks of small cap companies.

Biography of Fund manger:

Mr. Vinit Sambre (Co-manager):Mr. Sambre is a B.Com and FCA. Prior to joining DSP BlackRock he was associated with DSP Merrill Lynch Ltd.(Nov 2005 to Jun 2007), IL & FS Investsmart Ltd. (Dec 2002 to Oct 2005), Unit Trust of India Investment Advisory Services Ltd.(Jun 2000 to Dec 2002), Kisan Ratilal Choksey Shares and Securities Pvt. Ltd. (March 1999 to May 2000) and Credit Rating Information Service of India Ltd.(Apr 1998 to Feb 1999).

Mr. Jay Kothari (Co-manager):Mr. Kothari is a BMS and MBA from Mumbai University . Prior to becoming the fund manager in DSPBR he has worked as the Vice President in the equity investments division as well a product strategist in DSPBRIM.

Mr. Resham Jain (Co-manager): Resham joined DSP Investment Managers in March 2016 as Assistant Vice President in Equity Income Team. He has over 9 years of experience. Prior to joining DSP Investment Managers, he worked for B&K Securities (I) Private Limited, Jaihind Projects Ltd & Arvind Ltd.

Do Not Compare Yourself with Other Investors While Making Investment

Correction in the small-cap segment:

smallWhy did DSP small-cap fund was closed before?

  • Hyper Valuations
  • Limited investment opportunities
  • Massive Inflows

DSP small-cap fund portfolio stats:

PE

The reason behind the re-opening of fund:

  • Post the recent market correction; valuations have become more reasonable for both.
  • Selective stocks within the portfolio
  • Other stocks in the radar.

Current changes to the portfolio:

PORTFOLIO1

  • Overall, it has increased weights in consumer-oriented names to add more stability to the portfolio.
  • Increased sector weights by Auto (3.9%), Chemicals (3%), and Textile (2.5%).
  • Increased concentration in stocks where they have conviction and were available at reasonable valuations.

Performance Chart:

CHART

SIP Performance:

Principal invested: Rs.  10,000 x 121 installments = Rs.  1,210,000

DSP SMALL S&P BSE Sma # NIFTY 50 TR # Gold PPF
Current value Rs.  4,145,243 Rs.  2,728,968 Rs.  2,471,110 Rs.  1,551,982 Rs.  1,931,010
Absolute growth 242.58% 125.53% 104.22% 28.26% 59.59%
Annualized growth 23.40% 15.67% 13.82% 5.02% 9.19%

Rolling Return:

rolling

Top 10 holdings as on 31st July:

TOP 10

Download (PDF, 101KB)

10 things I have learned about investing

Risk analysis:

Alpha -0.07
Beta 1.05
Downside Risk 22.66
Info Ratio Rel. 0.10
Jensens Alpha 0.28
Max. Drawdown -19.78
Max Gain 51.30
Max Loss -18.69
Negative Periods 11
Positive Periods 25
r2 0.95
Relative Return 0.38
Return 13.77
Sharp 0.34
Sortino 0.28
Tracking Error 4.01
Trenyor 5.98
Volatility 18.70

Note: Past performance of fund does not guarantee the future returns.

Mutual Fund Investment are Subjected to Market Risks, Read all Scheme Related Document Carefully.

Disclaimer: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. 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 before making any actual investment decisions, based on information published here.