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

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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.

Secure your Future with the Best Retirement Plan?

The best part of retirement is when you get rid of a daily 9 to 5 job. But the worst part is there is the lack of a salary. To live the same life that you used to live before your retirement requires a substantial corpus which will last till your lifetime. If you will have a shortage of funds, then you will have to cut down your expenses and will have to compromise in every situation. And this is definitely not a solution to this problem. If you start investing wisely from the early stage, then you’ll don’t have to face any of these problems after your retirement.

secure

When we a look at the stats, it clearly says that India has more than 50% of its population below 25 years and 65% of the population is below 35 years. Before Jan 1, 2004, the government of India used to give pensions to their employees after the retirement which was quite important for the employees. Nowadays employees or people have to start Retirement planning their post-retirement from the early stage to make them financially independent.

Review of HDFC small cap fund

We all need money for our living. It is our first necessity. And to earn money a person needs to work. But we cannot work for a lifetime. There will come a day when we will have a loss of stamina to work. A fact says that, in India, average retirement age is 60 years. But, many retire before with their choice and sometimes with some other causes like job loss, disability, etc.

We can see that as per some of the norms of the profession, employees can even work till 70 if they are well. And in some professions, people have to retire early like in sports. In these cases, the different situation will have different financial consequences. Therefore, it is required to make a hand full of the corpus live a standard life after retirement.

Following are the factors which make an impact on your retirement corpus:

  • Cost of inflation-

Inflation reduces your purchasing power and also consumes your savings faster since due to inflation, the value of money goes on decreasing year on year.

  • Drop in rates of fixed income-

A few years back, you were able to maintain a particular income level by choosing fixed income instruments for investments, as they were providing high returns. But today, interest rates are dropping down which is the reason why this generation has to manage their income for their better living condition.

Parents are Better Teacher of Financial Planning than School

  • Increase in life expectancy-

Since the medical technologies are being advanced day-by-day and so people are expected to live more than usual. Due to this, more corpus is needed for the people to maintain their living after the retirement.

  • People shifting from joint family to nuclear family-

Earlier, there was the huge privilege of the joint family system in India due to which the younger generation could take good care of the old age person in the family. But due to the better employment facilities at different places, people are shifting from joint family to nuclear family. So, planning for the retirement from the early age has become must these days.

  • Medical expenditure-

When you get close to the old age, there can be several medical issues which require a huge amount of money which get add up on your daily or monthly expenses. And the medical cost is also rising up day-by-day. So, to get rid of this situation in future, you have to invest enough in your medical.

EXAMPLE:

retirement

reitrement 2

From the above example, Mr. X would just need to invest Rs 7,927 monthly. And, Mr. Y won’t be able to achieve the corpus, even if he invests Rs 40,000.

So, to generate a good corpus, early investment is very much required to get a standard living after the retirement.

Disclaimer:

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any agency of the Indian government. Examples of analysis performed in this article are only examples. They should not be utilized in real-world analytic products as they are based solely on very limited and dated open source information. Assumptions made within the analysis may or may not be reflective of the position of any entity.

Why is equity the most preferable long-term asset class?

It has been an eminent journey for the Indian mutual fund industry since now. The MF industry has made outstanding steps over the past few years. The investors have raised a substantial ₹1.3 lakh crores in equity mutual funds in 2017. But, the percentage of mutual fund assets in household savings is very less in India.

equity

According to the data from RBI, the percentage of mutual funds in financial assets is as low as 13%. The percentage of mutual funds will be even lesser if we add household savings in the physical assets, i.e., gold, petroleum, real estate etc. Even after the immense success of the Indian MF industry, the most selected choice for people is still bank deposits which are approx. 50% of the household financial assets.mutualSource: RBI

One can see that mutual funds savings are even less than 22% of the total bank deposits. The similar percentage in the US (United States) is around 101%. Moreover, almost the top 60 district of India hold the immense percentage of the mutual fund industry AUM. Except for those districts, the penetration of mutual funds in household savings in remaining part of India is appallingly less. One of the numerous reasons behind the low penetration of mutual funds in the country is the deficiency of financial awareness.

Risk factor

Doubtlessly equity is an uneasy and unpredictable asset class. There are sudden fluctuations in the stock market and this is called volatility. If you have invested in equity and your investment generally makes more hike in up-markets than it drops in down-markets, then it is a sign that your probability of getting impressive results are very high than of suffering loss over long investment tenure which is very low.

Mutual funds reached to 21% of total bank deposits

Performance in 5 years

The time period of five years, i.e. from 2014 to 2018 covers uncommon market conditions. 2014 was a year with a rising price. It was the year with a bull market with Lok Sabha elections and BJP coming to authority. 2015 was a good year stock market-wise having a correction worldwide as well as in India. 2016 started with a significant drop within the first 2 months, followed by an improvement. 2017 was a contrary year to a bull market. 2018 started with a volatility period of 3 months in the market, and since then the market is mostly seen as range-bound.

Different asset class

In this exploration, BSE-100 is taken as the proxy for the equities. BSE-100 symbolizes the large-cap province of stocks. Large-cap stocks hold the immense majority of overall market capitalization in the stock markets. CRISIL Composite Bond index represents the long-term i.e. more than 5 years, medium i.e. 3 to 5 years and short-term i.e. 1 to 3 years fixed income investment. CRISIL liquid fund index represents very short-term fixed investments i.e. less than a year and this index is similar to the savings bank.

Performance in 2014

2014Source: CRISIL, BSE, Goldprice.org

As mentioned 2014 was a year with a rising or a bull market year. All the asset classes performed well in 2014 except gold. And BSE-100 was outperformed.

Performance in 2015

20141Source: CRISIL, BSE, Goldprice.org

2015 started amazingly for equities but there was a great rectification in the month of March and there was high volatility in the stock market for the rest of the 9 months period with a downward bias. Predictably, equity not performed so well in such market-conditions but still is the best performer if we combine the 2014 and 2015 performance of all asset classes.

Warren Buffett that may help you to create wealth in long-term

Performance in 2016

2016Source: CRISIL, BSE, Goldprice.org

2016 started with under-performance by equity, driven mostly because of the slowdown in economy on the back of dropping prices of crude oil. But the stock market made a recovery in the month of March and maintained it or the remaining year.

Performance in 2017

2017Source: CRISIL, BSE, Goldprice.org

2017 was the great year for the stock market. Equity performed exceptionally well in 2017 and after the under-performing period of 2 years, BSE-100 provides more than 30% returns.

Performance in 2018

2018Source: CRISIL, BSE, Goldprice.org

2018, as many investors know, saw a lot of volatility and the market has been range-bound over the last few months. Let us how different asset classes have performed so far this year.

Large-cap equity vs. mid and small-cap

According to the data, mid-cap and small-cap stocks have dropped 20% to 30% in 2018. Even though mid-cap and small-cap funds are capable enough to provide high returns in the long-term period but large-cap funds and stocks are less volatile than them. Large-cap funds deliver balance to the investment portfolio and these funds should contain the core of the portfolio.

Conclusion

CONCLUSIONSource: CRISIL, BSE, Goldprice.org

Equity seems to be the worst performing asset class in 2018 but the outstanding performance between the period of 2014 and 2017 ensures that equity shows itself as the best performer over the entire period.

 

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.

Review of HDFC small cap fund

It was almost a decade from now when the HDFC small-cap fund was introduced on 10th April 2008. Well, at that time it was named as Morgan Stanley ACE fund and a multi-cap scheme was followed. But in mid-2014, Morgan Stanley MF was procured by HDFC Mutual Fund, that time the investments scheme were changed and the scheme was renamed as HDFC small and mid-cap fund. Again in November 2016, it was rechristened as HDFC small-cap fund.

The fund invests primarily in small-cap corporations and pursues to deliver long-term capital income. CMFR (Crisil Mutual Fund Ranking) rated it as the number one in the small-cap funds’ list for the first quarter of 2018. The manager of the fund since June 2014 is Mr. Chirag Setalvad who has more than 20 years of experience.

hdfc small

The fund’s AUM (Assets under Management) of the month-end arose more than 4 times which is ₹4578 Crores in May’18 from ₹909 Crores in June’15. Also, the fund has provided much higher average daily returns in more than last three years in comparison to the standard and rivals and with lesser volatility.

Refrain these mistakes while rebalancing the portfolio

Download the Fund Factsheet

Download (PDF, 158KB)

SIP Performance

chart1

Amount SIP Date  Start Date End Date Total Inv. Amount Worth of Investment CAGR
Rs.10000/- 25 1 st Aug. 2013 13 th Aug. 2016 Rs.610000/- Rs.1055000/- 21.66 % p.a.
1 Years 3 Years 5 Years
Fund 23.70% 18.71% 24.62%
Sector 5.99% 11.16% 26.82%

Overall returns

The fund has constantly surpassed the standard (BSE 200 TRI) and the listing (illustrated by funds placed in the small-cap funds listing in Crisil MF rank) overall dragging phase under analysis.

Risk analysis

Alpha 7.69
Beta 0.95
Downside Risk 18.91
Info Ratio Rel. 1.99
Jensens Alpha 7.34
Max. Drawdown -18.11
Max Gain 36.70
Max Loss -18.11
Negative Periods 11
Positive Periods 25
r2 0.96
Relative Return 7.17
Return 18.24
Sharp 0.62
Sortino 0.59
Tracking Error 3.60
Trenyor 11.25
Volatility 17.43

Portfolio analysis

Since last 3 years, the fund’s small-cap provided an average of 61.04%. The small-cap allocation has made a hike since November’16 after the fund was rechristened as a small-cap fund. Talking about sectoral level, in the last three years there were 5 primary sectors which contributed approx. 47% of the fund’s equity portfolio. During that phase, the main sector allocations involve construction projects, pharma companies, banks, industrial products and auto auxiliaries.

Download (PDF, 120KB)

One of the major contributors during that phase was VIP industries, Balkrishna industries, Aarti industries and KEC international.

In this listing, Dilip Buildcon has been the biggest contributor to the fund’s achievement. Up to May’18 Industrial products has been the highest component of the fund’s equity portfolio which was 16.2% then software-13.12%, banks-8.3%, auto auxiliaries-6.75% and pharma industries-5.3% respectively.

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The fund has invested in 124 stocks in the last 3 years, of which 22 were constantly clutched. The biggest contributors to the fund’s achievement between the constantly held stocks were Banco products, Swaraj Engines, NIIT technologies, Kalpataru power transmission and Carborundum Universal.

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.

A significant 25 years journey of Mutual Funds

“Active fund managers in India have convincingly outperformed benchmarks over 5, 10 and 20-year time frame.” The industry of mutual fund was open to private sector encounter for the first time in 1993.

The former Kothari Pioneer Mutual Fund which is named as Franklin Templeton MF introduced Prima & Blue chip fund on 1st Dec.’93. Initiating from these two funds, there were 9 equity fund schemes obtainable in India. A total of six schemes were introduced in 1993 and two were introduced before ’93. to develop the assets under their enclosure to nearly ₹7 lakh crores from ₹48,000 crores, it takes almost 20 years of efficiently period.

mf

Indian MFs have multiplied their assets to more the ₹23 lakh crores in the past 5 years without any exertion. Almost ₹70,000 crores of the yearly MF Flows now floats in through the SIP (Systematic Investment Plan). These days the SIPs capture prime recall for the new and upcoming investors but competing with the old preferences like insurance plans and bank deposits have never been such easy-going.

For the current position of the industry, the excellent ones are the asset managers, advisors, and the regulators. The credit must go to these three positives of the MF industry. There was a time when the fund managers have struggled in the developed markets to keep it and match up with the markets, active fund managers in India have definitely outperformed benchmarks over 5, 10 and 20-year time frames. The 10-year category returns on sincerely organized small-cap, mid and large-cap funds are ahead on the Nifty50, Nifty Midcap100 and Nifty Small cap 100 by compelling margins of 100, 300 and 700 basis points even in spite of recent fluctuations. The supremacy of the open-end funds has also made it clear that the worst performing ones lose assets to the good performing ones.

Fact sheet of Women fund managers who have outperformed or Underperform over the long-term

By continuously prioritizing investor’s concerns, SEBI has shown that it’s a strong regulator. SEBI has played a crucial role in establishing MFs by the’ advanced tightening of its rules on revelation, efficient exposures, and governance.

Despite the outstanding performance of the MF industry, there are some misses that should be developed. Indian MF industry is mainly marketed on their current 1-year, 3-year, and 5-year records. According to the sources, approx. 55% of retail investors had only 2-year holding period on equity funds and that time is too less and barely provide the benefits of investing in equity. A large number of domestic equity funds exhibit portfolio turnover ratios of more than 50% that means minimum half stocks are replaced within a year. The industry must shift the goal-line to more long-term performance course to entice better fund managers and more stable assets. The salary of fund managers must benefit into constancy and tenure, and not just to master the 1 to 3-year rankings.

Mutual funds reached to 21% of total bank deposits

In India, Equity MFs are still categorized on the basis of a sole-dimensional market-cap viewpoint which is an idea introduced in 1993 by the Kothari Pioneer MF. Debt funds are even adapted more to corporate treasuries than the new and retail investors. Also, ETFs and good passive funds are lost in action while there is a group of many active funds. In the past years, new launches have focused around common closed-end funds, thematic funds or equity saving funds, intended to utilize tiny loopholes in constantly changing tax laws. Rather than, investors will like to invest in 10 to 15-year debt funds and pension funds that provide tax-efficient income or ETFs with micro-cap or wide-market portfolios.

After putting barriers on liquidity and declaration with their open-end funds MFs have been reverting recently, by turning out series after series of closed-end funds with indefinite instruction. Close-end schemes at 1002 are numerous than open-end schemes i.e. 811.

It can be strange to worry about diminishing competition in an industry with about 2000 schemes and 40-odd players. But the reality is that the industry is rapidly becoming a horse race. Talking about today, the topmost 5 AMC in the industry manage almost 57% of the assets. Moreover, this listing has rarely any changes in the past 10 years with large AMCs easily growing larger.

In addition, it seems to be a far better option that MF industry self-regulates itself on these particular outlooks. Without remaining awaited for the SEBI to add some more pages to its already long rule-book.

 

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

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 prior to making any actual investment decisions, based on information published here.

CreditAccess IPO Review and the list of anchor investors

CreditAccess Grameen is a Bengaluru-based leading micro-finance institution, focused on providing micro-loans to women customers predominantly in rural areas in India. It is the third largest NBFC-MFI in India by gross loan portfolio end March 2017. The wide range of lending products addresses the critical needs of customers throughout their life cycle and includes income generation, family welfare, home improvement and emergency loans. The customer-centric business model, wide range of product offerings, as well as well designed product delivery and collection systems, has enabled the company to achieve high customer retention rates and low credit costs.

The company focuses on customers in rural areas in India, who largely lack access to the formal banking sector and present a latent opportunity for offering micro-loans. The products are built on a deep understanding of the requirements of customers. The flexibility of products in terms of ticket sizes, end-uses and repayment options etc. and the manner of their delivery differentiates it from competitors and generates customer loyalty.

CreditAccess

CreditAccess Grameen raises Rs 339 cr from anchor investors.

The company has allotted 80,41,617 equity shares to 21 anchor investors

Among the anchor investors are Neuberger Berman Emerging Markets Equity Fund, Eastspring Investments India Equity Open, Pictet – Indian Equities, ICICI Prudential Banking and Financial Services Fund, Sundaram Mutual Fund, Citigroup Global Markets Mauritius and BNP Paribas Arbitrage.

List of anchor investor

Download (PDF, 1.13MB)

IPO Dates & Price Band:

  • IPO Open: 08-August-2018
  • IPO Close: 10-August-2018
  • IPO Size: Approx Rs.1130 Crore (Approx)
  • Face Value: Rs.10 Per Equity Share
  • Price Band: Rs.418 to 422  Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 1,02,81,317 Shares

Market Lot:

  • Shares: Apply for 35 Shares (Minimum Lot Size)
  • Amount: Rs.14,770

Allotment & Listing:

  • Basis of Allotment: 16-August-2018
  • Refunds: 20-August-2018
  • Credit to demat accounts: 21-August-2018
  • Listing: 23-August-2018
  • Category-wise Break up:

Anchor – 80,41,618 Shares = 339.36Crs

QIB – 53,61,079 Shares = 226.24Crs

NII – 40,20,809 Shares = 169.68Crs

RII – 93,81,888 Shares = 395.92Crs (Lot size: 35 = 2,68,054 Forms)

  • Total Issue – 2,68,05,394 Equity Shares = 1,131.19Crs.
  • Lead Managers:

ICICI Securities Limited

Credit Suisse Securities (India) Private
Limited

IIFL Holdings Limited

Kotak Mahindra Capital Company Limited

  •  Registrar to the IPO

Karvy Computershare Private Limited

The Promoters:

The  Promoter is CreditAccess Asia N.V., a multinational company specializing in MSE financing (micro and small enterprise financing), which is backed by institutional investors and has micro-lending experience through its subsidiaries in four countries in Asia. The Promoter has provided capital funding to the company, from time to time and provides with access to potential fundraising opportunities in the debt capital markets.

Objects of the Issue:

The Offer comprises of the Fresh Issue and the Offer for Sale.
The Company will not receive any proceeds from the Offer for Sale.
The net Proceeds from the Fresh Issue will be utilized towards augmenting the capital base to meet future capital requirements of the company which are expected to arise out of growth in the Company’s assets, primarily the Company’s loans and advances and other investments.

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

Adult population with bank account

111

Strengths:

Customer-centric business model resulting in high customer retention.

Deep penetration in rural areas characterized by low competition and built through contiguous district-based expansion.

Robust customer selection and risk management policies resulting in healthy asset quality.

Strong track record of financial performance and operating efficiency.

Diversified sources of borrowings and effective asset-liability management

graph

Negative:

Operations of the company are concentrated in Karnataka and Maharashtra, with 191 of 516 branches located in Karnataka and 144 branches located in Maharashtra. About 58.1% of gross AUM is originated in Karnataka and 26.7% in Maharashtra. In the event of a regional slowdown in the economic activity in these states, or any other developments including political unrest, drought/floods and other natural calamities, or social upheaval in these states can affect its financials and prospects adversely.

Microfinance loans are unsecured and are susceptible to various operational and credit risks which may result in increased levels of NPAs, thereby adversely affecting business. Furthermore, as there is typically limited financial information available about focus customer segment and many of customers do not have any credit history supported by tax returns, bank or credit card statements, statements of previous loan exposures, or other related documents, it is difficult to consistently carry out credit risk analyses on customers.

An increase in its portfolio of non-performing assets and its provisions may materially and adversely affect its business and results of operations.

The past performance and growth of its business are not indicative of its future performance and growth.

Creditaccess’s business is particularly vulnerable to interest rate risk, and volatility in interest rates could have a material adverse effect on its net interest income, net interest margin and its financial performance.

Any downgrade of its credit ratings may increase its borrowing costs and constrain its access to capital and debt markets and, as a result, may adversely affect its net interest margin and its results of operations.

Creditaccess’s Promoter has invested in Sahayata Microfinance Private Limited, which has been involved in various financial irregularities and discrepancies in the past.

Competition from banks and financial institutions, as well as state-sponsored social programs, may adversely affect its profitability and position in the Indian microcredit lending industry.

There are outstanding legal proceedings involving its Company and some of its Directors, and adverse outcomes in such proceedings may negatively affect its business and results of operations.

There is significant competition from other MFIs and banks in India (including SFBs). Some commercial banks are also beginning to directly compete with for-profit MFIs for lower income segment customers in certain geographies.

The rise of digital platforms and payment solutions may adversely impact the business model and there may be disintermediation in the loan market by fintech companies.

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Au Financiers (India) Limited IPO! Put in or out ?

Valuation:

The annualized EPS on post-issue equity works out to Rs 8.69 for FY2018. At the price band of Rs 418 to Rs 422, P/E works out 48.1 to 48.5 times.

Post-issue, the book value (BV) is Rs 143.41 at the issue price of 418 and Rs 143.55 at the issue price of Rs 422. P/BV works out to 2.91 times at lower price band and 2.94 times at the upper price band.

Among peers, Bharat Financial Inclusion is trading at P/BV of 5.69 times, Satin Creditcare at P/BV of 1.55 times and Equitas Holdings at P/BV of 2.19 times.

CreditAccess Grameen: Financials
1403 (12) 1503 (12) 1603 (12) 1703 (12) 1803 (12)
Income from operations 142.34 268.16 456.95 701.75 865.55
Other Income 5.49 13.27 9.77 7.52 9.65
Total Income 147.83 281.43 466.72 709.26 875.21
Interest Expended 72.25 129.05 208.25 316.54 354.57
Operating Expense 44.52 68.70 112.31 155.39 194.50
Operating Profits 31.05 83.68 146.17 237.33 326.14
Depreciation / Amortization 0.53 1.92 2.61 4.43 5.17
Profit before tax and Provisions 30.53 81.76 143.56 232.90 320.97
Provisions and write off 5.73 6.84 14.02 108.60 128.12
Profit before tax 24.80 74.92 129.54 124.30 192.86
Provision for tax 8.17 26.19 46.30 44.00 68.22
PAT 16.63 48.73 83.24 80.30 124.64
EPS*(Rs) 1.16 3.40 5.81 5.60 8.69
* Annualized on post issue equity of Rs 143.36 crore, Face value Rs 10 per share, Figures in Rs crore
Source: Source: CreditAccess Grameen Prospectus

The following table sets forth our key financial and operational metrics as of or for the periods indicated

The following table sets forth our key financial and operational metrics as of or for the periods indicated

Comparison with Listed Industry Peers

PE

Grey market premium:

GMP as on 8th Aug 2018 @ 16.00 is Rs. 10 /- , Kostak is Nil /- 

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

Analysing the Axis Long – Term Equity Fund

Axis Long Term Equity Fund is an ELSS (equity-linked savings scheme) fund managed by the AMC Axis Mutual Funds. It is designed to provide subscribers with tax savings benefits under section 80C of the IT Act 1961. This fund invests exclusively in equity and equity-linked instruments such that it features a high degree of growth with the potential of providing high returns to those investing the Axis Long-Term Equity Fund scheme. Like any other equity mutual fund, the Axis Long-Term ELSS is traded in stock markets, and its unit price is subject to daily change.

axis

Fund features:

This ELSS mutual fund is an open-end scheme, i.e. investors are free to invest in it or liquidate it as per their investment requirements. Additionally, it is an equity-linked savings scheme (ELSS) hence it provides tax deduction benefits under section 80C with the mandatory 3-year lock-in requirement. It is, however, important to note that investors can choose to remain invested in the scheme beyond the mandatory 3 year lock-in period to make his/her wealth grow even further.

Risk Level:

The expected level of risk undertaken by an investor of this key mutual fund is classified as moderately high due to its high equity exposure. However, this does increase the chances of potentially high returns for those remaining invested in the scheme for a longer tenure.

Facts about the fund:

Launching date- 29th December’09

Categorisation- Equity

Type- ELSS (Equity Linked Saving Schemes)

Average AUM – ₹ 17,299.43 Crores

Benchmark – S&P BSE 200 Index

NAVs {as on 06 Aug ’18}

Growth option – ₹ 45.12

Dividend option – ₹23.53

Minimum investment amount – ₹ 500

Minimum SIP – ₹ 500

Exit load- nil

Manager of the fund- Mr. Jinesh Gopani

Tenancy period- 7 years 4 months

Education (degree)- B.Com (H), MMS

10 things I have learned about investing

Fund manager:

Mr. Gopani is a B. Com (H) and MMS from Bharati Vidyapeeth Institute of Management Studies and Research. Before joining Axis AMC he has worked with Birla Sun Life AMC, Voyager India Capital Pvt. Ltd., Emkay Shares & Stock Brokers Limited and Net worth Stock Broking Limited.

Investment Philosophy:

As mentioned earlier, this scheme is designed to provide income and long-term capital appreciation to investors by investing in a wide range of equity and equity-linked investments. As a rule, this ELSS mutual fund from Axis has focused on organizations that have robust growth prospects or have proven performance track record in their area of expertise. The fund invests in company equities across key segments such as large cap, mid cap and small cap irrespective of the sector the companies belong to.

Performance of the fund so far:

The fund has surpassed the benchmark index (12.07%) and the bracket average i.e., 13.66% providing a return of 19.22% within 7 years. The fund has made an outstanding track record of outshining since the initiation.

BENCHMARKAnnual performance (in percentage):

The fund has provided exceptionally good performance beyond time periods.

axis graph

‘Ujjwal Bharat’: ABSL Resurgent India Fund – Series 6 Review

Year-wise performance (in percentage):

The fund saw a drop in return profile in the past 2 years

axis graph 2Where does the fund make its’ investments?

The fund draws huge positions in its uppermost picks, keeping a compact portfolio.

Latest Portfolio:

portfolio axis

Download the portfolio:

Download (PDF, 115KB)

Risk factor:

ratio final

The fund has appeared to be more vigorous in this year, overcoming all its peers easily after a small drop in the return profile in past two years. The fund manager’s uncompromising attention on the standard of underlying portfolio and leaning towards large caps has improved it to deliver outperformance between the deficiencies in the broader market. The fund takes a top-heavy approach with a huge position in its uppermost picks even it constantly runs a compact portfolio with a gush in its asset base. It also acquires a high benchmark skeptic perspective, comfortable in taking remarkably higher exposure about an index. With its big skew to towards financials, this adds a portion of aggression to the fund even its firm stance on retaining the quality. A supportable pick-up in return profile will show its long-term achievements.

 

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.

 

Refrain these mistakes while rebalancing the portfolio

Rebalancing portfolio has its own compulsion as rebalancing can help you to return on the route if you have deviated away from your primary asset allocation. Also, rebalancing can secure your portfolio from the volatility of the market in the case you want to minimize your investment risk. There can be several reasons that may lead you to rebalance your portfolio like a change in your financial situation or in the case if you have acquired your goals, rebalancing the portfolio is a must.

portfolio

But there is a set of rules while rebalancing the portfolio otherwise you will end up going beyond the defined level for your debt as well as an equity component. There are a lot of consequences and implications in terms of taxes, the effect on goals etc. while rebalancing the portfolio.

There are some common and avoidable mistakes that one must not do while rebalancing.

Focusing on the losers only rather than current winners

While rebalancing, it is a most important thing to keep in mind that it is necessary to take a look at the investments that are performing well while it’s alright to replace the investments that are leading you to lose your money otherwise you will end up exposing yourself to a big risk. It’s always a better plan to take a step back if you are willing to reorganize things throughout your portfolio.

LONG TERM AVERAGING OF EQUITY SIP’S IS RAPIDLY BUILDING WEALTH

To manage rebalancing by presumptions

Rebalancing is too important to be done only by one’s presumptions as you may assume that rates are going to get down in upcoming months and you move your debt portfolio in favor of funds that are long-dated. Reversely, you may have a feeling that the equities are going to get overpriced and a result of that you may want to shift more into low beta equities. Both views are based on just presumptions and may vary in reality. So, it is good to do rebalancing according to the rules.

Disregarding the tax factors

It’s very important to rebalance carefully when it comes to the tax bill. One must be attentive to how it might affect. You need to know while rebalancing that even the equity funds have to pay the LTCG tax on profits more than ₹1 lakh per year which is 10%. When you are exiting out of debt funds, tax bills can be higher. The taxes can be at the highest rate that is 20% after evaluating the benefit of indexation if you are selling out in less than 3 years. The tax costs can change the economics of rebalancing the portfolio.

Rebalancing without any supervision

It’s always a great decision to be on yourself and to do things on your own but sometimes a little guidance can take you out of the future risks. Like in rebalancing, it is always a better decision to take an advice of any expert while rebalancing your portfolio. An expert can help you in making quick and fruitful decisions and may tell you the do’s and dont’s of rebalancing. Those will make more comfortable for you to make further decisions about your long-term goals.

Rebalancing without any particular investment goal

One of the most common mistakes is rebalancing without any particular investment goal. Also, It is always a better decision to stay in liquid funds and not to rebalance it when you are close to your goals. Rebalancing is an important decision concerning the portfolio, the only thing is it must always be linked with your long-term goals and the costs do not exceed your benefits of rebalancing.

Conclusion –

Rebalancing portfolio is not as hard as it seems but if one is willing to take proper gains from the benefits it gives, then there is a necessity to follow some rules and take some guidance in order to maximize the returns of your investments and minimize the risk factor.