What happens to MF exposure to DHFL debt after downgrades by CARE

For mutual funds with exposure to DHFL debt, a rating downgrade means that there will be a mark to market impact on individual bond prices, also affecting NAV

After CARE cut ratings from “AAA” to “AA+” for debentures, loans and deposits. Rating for commercial paper (“A1+) has kept under watch with developing implications.

With DHFL group companies debt mess coming under the lens, global brokerage Credit Suisse has warned that it could trigger a second wave of risk aversion in India’s debt fund industry.

Earlier, India’s debt mart faced a major risk aversion during September-October following a debt default by the IL&FS group.

The DHFL debt mess is expected to have a resonating effect as the company is among the larger borrowers from mutual funds (MFs) and their aggregate exposure stood at around Rs 8,650 crore as of December 2018. That amounts to about 0.7 per cent of debt mutual funds asset under management as of December 2018.

DHFL ALLOCATION

About Rs.7,800 crore of such debt has been purchased by open-ended MF schemes, while the rest of the money is with closed-ended funds. Open-ended funds are where investors have the highest liquidity since you can come in or go out anytime. Closed-ended funds don’t allow you to exit before maturity.

Several fund houses have large exposures to DHFL, at 2-15 per cent of total debt AUM, with some schemes having up to 30 per cent of their AUM to DHFL

dhfl mf

UTI Mutual Fund had the maximum exposure of around Rs 2,144 crore as of December 31, 2018, followed by Reliance AMC at Rs 1,488 crore, Axis AMC at Rs 771 crore and Franklin Templeton Rs 571 crore.

Master

Master (1)

Master 3

Master 6

The DHFL issue may result into more scrutiny of credit risk in debt funds, and considering the fact that NBFC funding relies on MFs for 10-30 per cent of their borrowings, debt funds flow will see some hiccups in the coming days.

Some schemes have taken mark-to-market (MTM) losses on this exposure with DHFL paper being repriced at higher yields. Credit Suisse warned if this continues and leads to redemption pressure, it may cause a second wave of risk aversion in domestic debt funds and volatility in their flows.

In the open-ended space, about Rs 300 crore of exposure is to Aadhaar Housing Finance, which will now become the responsibility of Blackstone. DHFL is a Rs 6,200 crore of debt exposure for funds.

Debt raised by firms like DHFL is repaid within a few months (or years) as per maturity. If DHFL at some point is not able to honour its obligations, then that will be default like situation eg. IL&FS. However, such a situation may not really happen.

As a precautionary measure, some mutual funds may, however, write down the value of the bonds.

There is also the option to segregate or side-pocket bad assets so that the impact of the downgrade does not lead to panic redemptions. However, side pocketing can happen only in extreme cases, and that too when there is a default-like scenario.

Existing investors – For mutual funds with exposure to DHFL debt, a rating downgrade means that there will be a mark to market (MTM) impact on individual bond prices. This means there will be an impact on the Net Asset Value (NAV) of the funds.

In some cases, the MTM impact of the first series of downgrades on bond prices can be as significant as 25%. This means a 5% position for the bond in a fund would result in a negative 1.25% MTM performance attribution due to bond holding.

Any redemption from such funds at this point would result in an actual booking of losses.

Keep an eye on schemes with 10-33% exposure to single DHFL security.

Such examples are DHFL Pramerica Ultra Short Term (Dewan Housing Finance Corpn. Ltd. TR-1(30-Apr-19), JM Income (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), JM Short Term Fund (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), JM Low Duration (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), Baroda Dynamic Bond (Dewan Housing Finance Corporation Ltd. SR-III CATG III & IV 09.25% (09-Sep-23)), DHFL Pramerica Medium Term (Dewan Housing Finance Corporation Ltd. SR-II CATG III & IV 9.15% (09-Sep-21)), DHFL Pramerica Floating Rate (Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)), DHFL Pramerica Low Duration (Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)), BNP Paribas Medium Term (Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)), BOI AXA Short Term Income (Dewan Housing Finance Corporation Ltd. CATG I & II SR-IV 9.1% (16-Aug-19)), Tata Medium Term (Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)).

 

Note: Mutual fund investments are subject to market risks read all scheme related documents 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.

 

Mistakes investors make without an advisor

Easy access to financial information on the internet means that any investor can access a list of top performing schemes. Newer, easy to use online investment platforms have also taken the pain out of the transaction process. So do investors need expert guidance on financial matters?

The answer is a resounding yes. This is because an advisor’s role is not limited to identifying the best performing schemes; he matches client needs to right investments and helps them make wiser investment choices.

Here are seven investment mistakes that clients tend to make without the guidance of an advisor.

mentor1

Saving but not investing:

Most individuals save a certain portion of their earnings. However, these savings are often lying idle in their bank accounts. Owing to their busy work-schedule, investors may not get time to immediately research and invest their savings.

A financial advisor helps investor channelize his savings into investments. By helping an investor budget his earnings and expenses, he reduces the amount of cash lying idle in the bank. In short, an advisor helps an investor manage his money better and invest more.

cash

Starting late:

Delaying financial planning is quite common among investors. Goals like retirement and financial planning for a family seem far away for a millennial investor. However, many of them forget that time is the best friend of investments. Starting early gives investors more time to accumulate the required corpus. It allows them the flexibility to stop or adjust their investments temporarily in case of an emergency. Starting late can put a financial burden on investors, as they will have to save more to reach their key financial goals such as retirement.

Often people splurge their earnings on items they really don’t need.  Through a discussion on financial goals, an advisor can help the individual visualise the corpus he needs to accumulate to fulfil his financial dreams. This may encourage an individual to invest rather than spend frivolously.

compound

Wrong investment choices:

Wrong investment choices do not just refer to investments made in a Ponzi scheme; it also includes investments made out of line with an investor’s risk-return profile. To elaborate an investor may consider himself to be a risk-taker and invest in high yield bonds. Alternatively, he may invest a majority of his corpus in equities. However, in reality, his personal responsibilities and goals require him to take a more conservative approach. This is an example of a wrong investment choice.

A financial advisor makes a holistic evaluation of the investor’s risk tolerance, liquidity needs, goals and income before recommending an investment. This analytical and exhaustive approach helps advisors recommend the most suitable investment options to their clients. Moreover, an advisor can also help warn you against any investment scam.

New ImageInvesting based on the preconceived notion:

Our friends, family members often influence our investment decisions. For example, a young professional may invest the majority of his money in gold and FDs just like his parents. He may shun equities having seen his relatives lose money in day-trading. However, based on risk profile and age, he may be better off investing in riskier products.

Financial advisors can help clear any investment related misunderstandings from the minds of investors and guide them on making better investment choices.

LIC Jeevan Shikhar Plan : Tax Saver or Loser

Letting behavioural biases influence their decision:

Selling off their investments during a slight market correction, holding on to loss-making investment, ignoring research which does not align with the investor’s view are all examples of behavioural biases influencing investor’s decisions.

Advisors can help investors identify these biases and encourage them to stick to their financial plan rather than acting under the influence of emotions.11111

Taking too much debt:

Many investors dream of building their own home or buying a car. Generally, investors fund these purchases through a loan or EMI. If the amount of debt is not kept in check, it can balloon and become unmanageable. Excess debt may also hurt an investor’s credit score which in turn lead to higher rates on future loans.

By budgeting their income and expenses, advisors help evaluate whether an investor can comfortably service a loan.

Future Supply Chain Solutions Ltd IPO Review

Future Supply Chain Solutions Ltd. (FSC) is a supply chain and logistics company. Future Supply Chain Solutions is part of Kishore Biyani’s Future Enterprise Ltd. The company was incorporated in 2006. The company offers automated and IT-enabled warehousing, distribution and other logistics solutions. It has customers in various sectors all across India, including ATMs, automotive and engineering, retail, fashion & apparel, food – beverage, FMCG, e-commerce, health-care, electronics and technology, home and furniture.

It has 42 distribution centers across India, which covers approximately 3,500,000 square feet of warehouse space.

List of anchor investors

Download (PDF, 601KB)

The company offers customers services in three key areas:

  1. Contract Logistics
  2. Express Logistics
  3. Temperature-Controlled Logistics

The promoters :

Future Enterprises Limited ( Kishore Biyani Group company)

Main objects of the issue are:

1. Avail the benefit of listing of the Equity Shares on the Stock Exchanges;
2.To Enhance stability and brand image and
3.To provide liquidity to its existing shareholders.

FUTURE

IPO Dates & Price Band:

  • IPO Open: 06-December-2017
  • IPO Close: 08-December-2017
  • IPO Size: Approx Rs. 650 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 660 to 664 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 9,784,570 Shares

Market Lot:

  • Shares: Apply for 22 Shares (Minimum Lot Size)
  • Amount: Rs.14,608

Allotment & Listing:

  • Basis of Allotment: 12-December-2017
  • Refunds: 14-December-2017
  • Credit to demat accounts: 14-December-2017
  • Listing: 18-December-2017

IPO Registrar:

Link Intime India Private Ltd

Lead Managers:

  • IDFC Bank Limited
  • IIFL Holdings Limited
  • Yes Securities (India) Limited

Do Not Compare Yourself with Other Investors While Making Investment

Risks and Upsides

Logistics service providers face the following general challenges in the market:

Foreign direct investment activity is uncertain and is dependent on global policies and market volatility.

A slowdown in the user industry could affect the volumes handled by logistics service providers.

Quality and availability of infrastructure could impact performance.

Intense competition and low barriers to entry in certain segments could affect logistics service providers.

Increasing scale could be challenging.

The express logistics industry is sensitive to high operating costs; and

There is a need to continuously invest in and evolve technology.

Strengths

One of the largest service providers with an extensive network of facilities in a fast-growing third-party logistics market.

Comprehensive solution for supply chain requirements.

Diverse customer base across many sectors.divrsificationAt the forefront in introducing new standards of technology and automation in the logistics industry in India.

Longstanding relationship with Future Entities.

Experienced management team with logistics and retail sector-specific knowledge.

Khadim India Limited IPO Review

Strategies

Capitalise on the growth of the third-party logistics industry in India.

Target growth by identifying new customers, increasing its share of existing customers’ third-party logistics spending and leveraging existing relationships.

Expand addressable market through customized and new service offerings.

Invest further in infrastructure and expand its network.

Explore inorganic growth opportunities.

Continue to improve operating efficiencies and implement technological and process enhancements.

indian log mktNegative

The Future Entities are its key customers and its Promoter and certain of its Group Companies account for a significant portion of its revenue. Any failure to maintain its relationship with these customers will have a material adverse effect on its financial performance and results of operations.

FSC’s business is affected by prevailing economic conditions in India and indirectly affected by changes in consumer spending capacity in the sectors we serve within India.

FSC may face competition from a number of international and domestic third-party logistics companies, which may adversely affect its market position and business.

Delays or defaults in payment by its customers could affect its cash flows and may adversely affect its financial condition and operations.

An inability to pass on any increase in operating expenses to its customers may adversely affect its business and results of operations.

FSC are heavily dependent on machinery and equipment for its operations. Any breakdown of its machinery or equipment will have a significant adverse effect on its business, reputation, financial results and growth prospects.

FSC business is highly dependent on technology and automation and any disruptions of or failure to update such technology or automation could have an adverse effect on its results and operations.

Changing regulations in India could lead to new compliance requirements that are uncertain.

The trend toward outsourcing of supply chain management activities, throughout India or within specific sectors, may change, thereby reducing demand for its services.

Conditions and restrictions imposed on FSC by the agreements entered into with some of its customers could adversely affect its business and results of operations.

The performance of its express logistics and temperature-controlled businesses may continue to decline.

Dependence on third-party vendors could have an adverse effect on its business financial condition and results of operations.

Some of its lease agreements may have certain irregularities.

FSC’s Promoter, Group Companies, and Directors are involved in certain legal proceedings and potential litigation.Any adverse decision in such proceedings may render us/them liable to liabilities/penalties and may adversely affect its business and results of operations.

Compititive positioning of Logistics service providers 

KEYFinancials

For FY 2017, 2016 and 2015, the revenue from operations was Rs. 5,611.83 crores, Rs. 5,198.70 crores, and Rs. 4,079.63 crores, respectively. (A CAGR of 17.3%.)

For FY 2017, 2016 and 2015, the net profit was Rs. 457.54 crores, Rs. 294.27 crores, and Rs. 246.57 crores, respectively, (A CAGR of 36.2%.)

For FY 2017, 2016 and 2015, the EBITDA was Rs. 742.82 crores, Rs. 699.40 crores, and Rs. 639.40 crores, respectively, (A CAGR of 7.8% during the last three Fiscals.)

Financial snapshot of Key companies.

financial snapshotValuations

On the upper price band of Rs.664/- and Restated FY17 EPS of Rs.11.69, P/E ratio works out to be 56x. Even based on last three years restated EPS of Rs. 9.41, P/E ratio works out to be 70x. Means, companies are asking higher price band of Rs.664/- in the P/E ratio of 56x to 70x. Its only listed peers Mahindra Logistics Ltd. is trading at P/E ratio of 68x. Hence we compare this way; Future supply chain is overpriced.  

Grey market premium

Currently, Grey market premium is Rs. 20/- ( Seller )

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.

 

Under performance of Equity Mutual Fund against their respective Benchmarks

A large number of equity mutual funds in the country has underperformed against their respective benchmark indices over the last five years.

Around 44% of the open-ended diversified equity mutual fund schemes failed to beat their benchmark in the last year. Nine schemes underperformed their benchmarks by over ten percentage points. 31 schemes underperformed by five to ten percentage points. There are 275 open-ended diversified equity schemes.

MFEven the schemes that managed to beat their benchmarks in the last year, 26 schemes outpaced their benchmark by only up to two percentage points.

Moving to specific categories, out of 65 large cap schemes, 30 schemes underperformed their benchmark.

What are Dynamic Funds? ( Video )

The mid-cap category was the worst hit, with 62 percent schemes underperforming. We had a total of 34 mid-cap schemes on our list. 

Around 50 percent multi-cap schemes failed to beat their benchmark. Four in seven small-cap schemes remained under-performers.

Sectoral schemes, which are considered risky because of their focused sector exposure, had 11 under-performing schemes out of 49 schemes in total.

We have compiled a set of top under-performing funds in one-year period across equity categories given in the following table.

return

The scorecard reveals a majority of large-cap equity funds failed to beat the S&P CNX Nifty, the benchmark for large caps, with 53.33 percent underperforming their benchmark over the last five years, 57.14 percent during the previous three years and 52.63 percent over the previous year.

The percentage of actively managed equity funds underperforming the benchmark indices has seen a declining trend since December 2010. However, their number still exceeds those outperforming the index.

Retirement Fund : What is a Systematic Withdrawal Plan ( VIDEO )

Many actively-managed equity mutual fund schemes have failed or struggled to beat their benchmarks. Always place a lot of emphasis on consistency of performance while choosing a scheme to invest. As a rule, ignore short-term scorching performance while picking a scheme.

However, data from the diversified funds and equity-linked saving schemes (ELSS) suggests a percentage of funds outperforming the benchmark in both one-year and three-year period is stable as compared to five-year period.

Active managers of equity-oriented hybrid funds have also fallen behind benchmarks over both the one-year and five-year time frames.

 

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.

LIC CANCER COVER PLAN – REVIEW

LIC had launched its second health insurance related plan which is named as LIC Cancer Cover (Plan-905) on 14th November 2017. LIC’s Cancer Cover is a regular premium payment health insurance plan which provides financial protection in case the Life Assured is diagnosed with any of the stages of Cancer during the policy term. This plan covers both the early stage cancer and significant stage cancer.

It is an online health insurance plan which has low premiums, and it comes with some benefits and add-on features.

LIC CANCER PLANFeatures-

It comes with numerable benefits like lump sum benefit, premium waiver benefit, income benefit which would be paid till ten years every month, and many more.

  • This plan has one month grace period.
  • Loan facility is not available in this policy as the policy will not acquire any paid-up value or surrender value.
  • The term period of policy is 10-30 years.
  • Tax rebate available under Income Tax under section 80D for premium amount paid.
  • It comes with two sum assured plans, i.e., Level 1 and Level 2.
  • This policy is non-linked and regular premium paying health insurance plan.
  • Basic sum assured is between Rs 10 Lakhs to Rs 50 Lakhs.
  • Free look period of 15 days if the policyholder is not satisfied with terms and conditions of the policy.
  • The policy will lapse if premium not paid within the grace period, though it can be revived but within two years of first unpaid premium.
  • The policy can be bought through online on LIC website.
  • No third party agencies are involved in this policy.
  • Nominations are available in this plan.
  • Policy can be assigned under as per Sec 38 of Insurance Act 1983.

Say a strict no to Guaranteed Life Insurance Plans

Sum Assured Options-

  • Level Sum Insured

The basic sum insured will remain the same throughout the policy term period.

  • Increasing Sum Insured

The sum insured increases by 10% of basic sum insured each year for first five years starting from the first policy anniversary or until the diagnosis of  first event of cancer, whichever is earlier. On diagnosis of any specified cancer as mentioned above, all the claims will be based on the increased sum insured at the policy anniversary coinciding or prior to the diagnosis of the first claim and further increases to this sum insured will not be applicable.

Benefits-

  • Lump sum Benefit-
  1. Early stage cancer In this stage, the early stage cancer is diagnosed, 25% of sun insured would be paid immediately to be insured.
  2. Major stage cancer in this stage of cancer, 100% sum insured would be paid on being diagnosed.
  • Premium Waiver Benefit-
  1. Early stage cancer In this stage of cancer, first three years premium would be waived and later the premium payment to be continued.
  2. Major stage cancer In this stage, all future premium payments would be waived off.
  • Income Benefit-
  1. Early stage cancer benefit is not available.
  2. Major stage cancer In this stage, 1% of basic sum insured would be paid every policy month for ten years irrespective of the policy term, i.e., even if policy tenure is over, this benefit amount has been paid.

LIC Jeevan Shikhar Plan : Tax Saver or Loser

  • Tax Benefit-

Tax benefits are available under section 80D of medical insurance but not under 80C as this is health insurance plan and not life insurance plan.

  • No Maturity and Death Benefit is available in this plan.

Eligibility Criteria for this plan-

LIC TABLEPremiums Payable under this plan-

For 20 years of term period and sum insured of Rs. 10 lakhs would have premiums accordingly:

  • Male whose age is 30 years For level 1 premium is Rs. 1,404 and for level 2 premiums is Rs. 1,841.
  • Male whose age is 40 years For level 1 premium is Rs. 3,044 and for level 2 premium is Rs. 4,224.
  • Male whose age is 50 years For level 1 premium is Rs. 9,936 and for level 2 premium is Rs. 14,101.
  • Female whose age is 30 years For level 1 premium is Rs. 2,856 and for level 2 premium is 3,953.
  • Female whose age is 40 years For level 1 premium is Rs. 5,546 and for level 2 premium is 7,753.
  • Female whose age is 50 years For level 1 premium is Rs. 9,900 and for level 2 premium is Rs. 13,476.

Waiting periods in this plan-

A waiting period of 6 months will be applied from the date of issuance of policy or date of revival of risk cover whichever is later, to the first diagnosis of any stage of cancer.

What are the Reasons Behind Most Women not Having a Health Insurance Cover?

Exclusions-

  • Any Pre-Existing Condition.
  • If the diagnosis of a Cancer was made within 180 days from the Date of issuance of policy or date of revival of risk cover whichever is later.
  • For any medical conditions suffered by the life assured or any medical procedure undergone by the life assured if that medical condition or that medical procedure was caused directly or indirectly by Acquired Immunodeficiency Syndrome (AIDS), AIDS-related complex or infection by Human Immunodeficiency Virus (HIV).
  • For any medical condition or any medical procedure arising from the donation of any of the Life Assured organs.
  • For any medical conditions suffered by the Life Assured or any medical procedure undergone by the Life Assured, if that medical condition or that medical procedure was caused directly or indirectly by alcohol or drug (except under the direction of a registered medical practitioner).
  • For any medical condition or any medical procedure arising from nuclear contamination; the radioactive, explosive or hazardous nature of nuclear fuel materials or property contaminated by nuclear fuel materials or accident arising from such nature.

 

DISCLAIMER

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.

Do Not Compare Yourself with Other Investors While Making Investment

There is very fine line said by Dan Jensen that, ‘The only goal is to be better than myself, my biggest competition is with no one but myself only.’ that simply means that one should not compare himself with others in any aspect of life but try improving his own work and skills and same applies while making an investment and expecting positive results from it.

In other words, comparing yourself with others can be a very futile and caustic act as we all have our own different goals and skills and we all are not in the same race, our ways to make investments are dissimilar.

Have you ever seen Warren Buffett making any investment with Carl Ichan strategies or Peter Lynch making any investment in David Tepper’s style? The answer is a clear No because they all have their own rules and strategies to make investments and create positive results out of it. Some ways of investing are for long-term, some are short-term, some are for value, some are for growth, some bet on the change and some bet on the things that won’t. It’s even more captivating to hear the different opinions from the two value investors looking at the same company. So, the key point is not making a comparison with others instead compared you with yourself one or two years ago.

compare

Also, one must keep in mind that to be a good investor he must follow more discipline and try to make less investment decision as possible. That simply means you have to believe in your investment decisions that will do good without your involvement. Not comparing yourself to other investors and their performance is not enough for you; you must not worry about other’s opinion also. If you are a contrarian investor, you should not even listen to and worry about people’s opinion about yourself. If you listen to their opinion, it is because you are having more confidence in them than you have in yourself.

Download our first e-book on Higher education costing in foreign countries.

Here are three key points that can help you in making beneficial results from the investments-

Believe in yourself

If you see yourself as a successful investor in future, you must believe in the rules made by you for you. You must have proper planning and strategies for different investments, and you have to believe in that philosophy and the strategies even during tough times. The thing is if you are not willing to take risks and you do not have courage and patience then you can never be an investor.

Do not make unnecessary investments

It is mandatory to know that every investment is not going to give you positive results, so you do not have to invest in all kinds of opportunities or environment. For example, in 1999 the technology is in boom period but Warren Buffett did not make any investment in it, and people said, ‘that’s it for Buffett, he’s too old now.’ And at that time Warren said that ‘I don’t do tech because I don’t understand it and I think it is not for me. I am going to sit it out.

Have the guts to face the failure

The more you get experience in making investments you will come to know that discipline is a must in investing. Sometimes you have to sit out and watch other investors making money in the exact investments that you have already passed on. It is not necessary to follow the trend and invest in everything; you only have to make investments in the things you really know about and then stick to your process with confidence.

Download our first e-book on Higher education costing in foreign countries.

Access to higher education is easier now, with good colleges in India and foreign universities wooing students. But, parents must plan and start saving early to build a corpus for their children’s higher studies. And, while it is an important financial goal, such saving should not be prioritised over other goals like saving for retirement.

There has to be a balance between funding short-term and long-term goals. When we speak of long-term goals, families should put retirement as the first priority and then children’s education. For, if children’s education is partly unfunded, there are several options like scholarships or educational loans. But, if your retirement is unfunded, no institution will come forward to fund it. So, parents should not put the child’s education at the mercy of their own retirement planning.

Retirement Fund : What is a Systematic Withdrawal Plan ( VIDEO )

“Some parents also invest in land or property, hoping to sell this when a need arises. However, immovable assets might be illiquid. At the time of need, these might not fetch the amount of money one hopes for. It is risky to depend solely on these.”

“The most important factors to consider are safety of the corpus and the rate of return on your investment. The returns should outperform the rate of increase in the cost of education,”

higher study

“Given that education inflation is much higher than consumer inflation, we assume an inflation of 12 per cent for children’s education. This means there has to be some allocation to a high risk/return asset class like equity, as per the family’s comfort level and risk appetite.”

 

Download our first e-book on Higher education costing in foreign countries.

Download (PDF, 2.74MB)

 

 

HDFC Life IPO Review and Current GMP

HDFC Standard Life Insurance Company Ltd ( HDFC Life ) (Incorporated in 2000) is life insurance provider in India. HDFC Life offers a wide range of individual and group insurance solutions.

The Company is a joint venture between HDFC and Standard Life Aberdeen plc. Standard Life is an Edinburgh based investment company offering a wide range of financial services across the world. Standard Life is a public company established in 1825.

The Company sells Insurance policies through a multi-channel network, which includes direct sales through own branches, Insurance agents, Partner Banks and through other financial institutions. The company has more than 414 branches and 15,406 full-time employees located across India. It has more than 58,147 individual agents.

HDFC Standard Life Insurance raises Rs 2,322 crore from anchor investors.

List of anchor investors.

Download (PDF, 2.03MB)

IPO Dates & Price Band:

  • IPO Open: 07-November-2017
  • IPO Close: 09-November-2017
  • IPO Size: Approx Rs. 7500 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 275 to 290 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 29,98,27,818 Shares

Market Lot:

  • Shares: Apply for 50 Shares (Minimum Lot Size)
  • Amount: Rs. 14500

IPO Allotment & Listing:

  • Basis of Allotment: 14-November-2017
  • Refunds: 15-November-2017
  • Credit to demat accounts: 16-November-2017
  • Listing: 17-November-2017

hdfc lifePromoters:

1.Housing Development Finance Corporation Limited (“HDFC”);

2. Standard Life (Mauritius Holdings) 2006 Limited (“Standard Life Mauritius”); and

3. Standard Life Aberdeen plc (“Standard Life Aberdeen”).

The objects of the issue are:

1.To achieve the benefits of listing the Equity Shares on the Stock Exchanges and

2. To carry out the sale of Offered Shares by the Selling Shareholders.

Top 10 Shareholder

SHARE

Lead Managers:

1.CLSA India Private Limited
2. Credit Suisse Securities (India) Private Limited
3. Edelweiss Capital Limited
4. Haitong Securities India Private Limited
5. HDFC Bank Limited
6. IDFC Bank Limited
7. IIFL Holdings Limited
8. Morgan Stanley India Company Pvt Ltd
9. Nomura Financial Advisory And Securities (India) Pvt Ltd
10. UBS Securities India Private Limited

Registrar to the IPO:

Karvy Computershare Private Limited

Life insurance penetration  ( 2016 )

life insurance penetration 2016Competitive Strengths

Strong parentage and a trusted brand that enhances our appeal to consumers

Strong financial performance defined by consistent and profitable growth.

Growing and profitable multi-channel distribution footprint that provides market access across various consumer segments in India.

HOW CAN YOU SETTLE YOUR INSURANCE CLAIM IF REJECTED?

Focus on customer centricity enabling growth across business cycles.

Leading digital platform that provides a superior experience for customers and distributors.

Independent and experienced leadership team.

mshare

market shareStrategies

Reinforce it’s agile,multi-channel distribution platform to fortify and diversify its revenue mix across business cycles.

Drive innovation in product sales to enhance customer value proposition and to capture niche segments.

Invest in digital platforms to establish leadership in the growing digital space.

Continue to build economies of scale to ensure profitability and cost leadership.

asiaNegative

HDFC Life may be unable to implement its growth strategies and develop and distribute an appropriate product mix for specific customer segments through its multiple distribution channels.

Any termination of, or any adverse change to, its relationships with or performance of its bancassurance partners, including HDFC Bank, could have a material adverse impact on its business, profitability, results of operations and financial condition.

Changes in regulation and compliance requirements could have a material adverse effect on its business, financial condition, results of operations and prospects.

Misconduct by its agents, employees, distribution partners or other third parties is difficult to detect and deter and could harm our brand and its reputation, or lead to regulatory sanctions or litigation against us.

Its Company and certain of its Subsidiaries, Directors, Promoters and Group Companies are involved in certain legal proceedings which, if determined against us, may adversely affect its business and financial condition.

HDFC Life’s results are dependent on the strength of its brand and reputation, as well as the brand and reputation of other HDFC group entities.

Variation in its persistency experience from its estimates, as well as concentrated surrenders, may materially and adversely affect its cash flows, results of operations and financial condition.

If actual claims experience and other parameters are different from the assumptions used in pricing its products and setting reserves for its products, could have a material adverse effect on its business, results of operations and financial condition.

HDFC Life depends on its leadership and key management and its actuarial, information technology, investment management, finance, frontline sales staff, underwriting and other personnel, and its business would suffer if we lose their services and are unable to adequately replace them.

SBI Life insurance IPO and Current GMP

Adverse market fluctuations and economic conditions would have a material adverse effect on its business, financial condition, results of operations and prospects.

Failure to secure new distribution relationships, as well as any termination or disruption of its existing distribution relationships, may have a material adverse effect on its competitiveness and result in a material impact on its financial condition and results of operations.

Higher expenses than expected could have a material adverse effect on its business, financial position and results of operations.

There is a risk that customer data could be lost or misused.

In the event that HDFC and/or Standard Life Mauritius reduce the percentage of their respective shareholding in its Company, or the Name Usage Agreement or the Trademark Agreement is terminated, we may not be permitted to use the “HDFC” and/or “Standard Life” trademarks as part of our brand and name for our business.

Catastrophic events, such as natural disasters, which are often unpredictable, may materially and adversely affect its claims experience, investment portfolio, financial condition and results of operations.

total

Valuation

HDFC Standard Life Insurance Company is among the top three life insurers in India by terms of market share in new business premium one of the most profitable life insurers based on the VNB margins, and among the top five private life insurers in India. The overall total premium recorded a CAGR of 14.5% to Rs.19445 crore between FY2015 and FY2017. The VNB margins improved from 18.5% in FY2015 to 22.0% in FY2017 by improvement in cost-efficiencies, increasing persistency ratios and selling a balanced product mix. Profit after tax registered a CAGR of 6.3% to Rs 886.92 crore in FY2017 from FY2015.

The company is valued at Rs 58260 crore at the upper price band of Rs 290 per share. With embedded value (EV) at Rs 14010 crore end September 2017, the scrip is offered at 4.2 times the EV.

Comparison with Peers:

ICICI Pru. Life: PE 33.40, RoNW : 28.70%

SBI Life PE 69.40,RoNW : 18.60%

HDFC Std.Life: PE:65.91 ,RoNW:25.70%

Grey market premium

Current Grey market premium is Rs.11/-

Conclusion

Strnogly avoid.

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.

 

Khadim India Limited IPO Review

The  Company is one of the leading footwear brands in India, with a two-pronged focus on retail and distribution of footwear. It is the second largest footwear retailer in India in terms of number of exclusive retail stores operating under the ‘Khadim’s’ brand, with the largest presence in East India and one of the top three players in South India, in fiscal 2016. It also had the largest footwear retail franchisee network in India in fiscal 2016. Its core business objective is ‘Fashion for Everyone,’ and it believes that the Company has established an identity as an ‘affordable fashion’ brand, catering to the entire family for all occasions. As at March 31, 2017, it operated 829 ‘Khadim’s’ branded exclusive retail stores across 23 states and one union territory in India, through its retail business vertical. Further, it had a network of 357 distributors in fiscal 2017, in its distribution business vertical.

Khadim India has allocated shares worth Rs 157.5 crore to 13 anchor investors at the upper end of the Rs 745 – 750 price band set for the IPO.

List of Anchor investor

Download (PDF, 655KB)

 

IPO Dates & Price Band:

  • IPO Open: 2-November-2017
  • IPO Close: 6-November-2017
  • IPO Size: Approx Rs. 545 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 745 to 750 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 65,74,093 Shares

Market Lot:

  • Shares: Apply for 20 Shares (Minimum Lot Size)
  • Amount: Rs.15000

Allotment & Listing:

  • Basis of Allotment: 10-November-2017
  • Refunds: 13-November-2017
  • Credit to demat accounts: 13-November-2017
  • Listing: 14-November-2017

Company Promoters:

  • Siddhartha Roy Burman
  • Knightsville Private Limited

Khadim India IPO Registrar:

Link Intime India Private Ltd

 Lead Managers:

  • Axis Bank Limited
  • IDFC Bank Limited

Objects of the Issue:

The Offer comprises a Fresh Issue by the Company and an Offer for Sale by the Selling Shareholders.

The Offer for Sale

The Selling Shareholders will receive the proceeds of the Offer for Sale. The company will not receive any proceeds from this.

The Fresh Issue

The Net Proceeds from the Fresh Issue are proposed to be utilized towards the following objects:

1. Prepayment or scheduled repayment of all or a portion of term loans and working capital facilities availed by the Company; and
2. General corporate purposes.

khadimsindia

Key Strengths

A leading footwear brand, offering affordable fashion across various price segments.

Strong design capabilities to maintain seasonal trends and leading premiumisation through sub-brands.

A two-pronged market strategy that straddles efficiently across retail and distribution models.

Extensive geographical reach and penetration across East and South India.

Asset light model is leading to higher operating leverage.

Experienced Promoters supported by a professionally qualified, experienced and entrepreneurial management team.

KHADDIM2Strategies

Expand its geographical footprint in western India and certain markets in northern India and further penetrate markets in south India

Continue to focus on an asset-light model led growth

Premiumise product offering to increase average selling price and gross margins

Details of Utilisation of Net Proceeds

Pre-payment or scheduled repayment of all or a portion of term loans and working capital facilities availed by its Company.

bankNegative

Khadim is subject to risks associated with expansion into new geographic markets. Any inability to expand into new geographic markets or penetrate existing markets may adversely affect its growth and future prospects.

Any delay or default in payment from its franchisee-operated stores or distributors could adversely impact its profits and affect its cash flows.

Khadim may not be able to obtain sufficient quantities or desired quality of finished products from outsourced vendors in a timely manner or at acceptable prices, which could adversely affect its retail business, financial condition and results of operation.

Khadim rely on its franchisees with respect to its retail business and on its distributors with respect to its distribution business. Any failure to maintain relationships with such third parties could adversely affect its business, results of operations and financial condition.

Khadim’s Directors and Promoters are involved in certain legal proceedings, which, if determined against us could have a material adverse effect on its financial condition, results of operations and its reputation.

Khadim cost of procurement of products from outsourced vendors or cost of manufacture of products using contract manufacturers may increase in the future. Any inability to pass on costs to consumers and distributors, may result in a reduction in its margins.

Khadim’s inability to maintain an optimal level of inventory in its stores may impact its operations adversely.

Failure to successfully procure raw materials or to identify new raw material suppliers could adversely affect us.

If Khadim is unable to maintain and enhance the ‘Khadim’s’ brand, the sales of its products may suffer which would have a material adverse effect on its financial condition and results of operations.

Any inability to increase its market share in premium products may have an adverse effect on its business, financial condition, results of operations and prospects.

Khadim results of operations may be materially adversely affected by its failure to anticipate and respond to changes in fashion trends and consumer preferences in a timely manner.

Khadim depends on third parties for a major portion of its transportation needs. Any disruptions may adversely affect its operations, profitability, reputation and market position.

Khadim’s Promoters will retain a majority shareholding in its Company following the Offer, which will allow them to exercise significant influence over us and may cause us to take actions that are not in the best interest of its other shareholders.

KHADDIM3Valuation 

Net sales increased 16% to Rs 621.25 crore and the operating profit margins were up 80 basis points to 10.6% in FY 2017. Net profit jumped 22% to Rs 30.75 crore. .Net sales (net of discount and taxes) of the retail business rose 14% to Rs 456.49 crore and those of the distribution business by 36% to Rs 134.7 crore.

Net sales stood at Rs 178.43 crore and the OPM at 9.3% in the June 2017 quarter. Net profit stood at Rs 7.10 crore. Net sales (net of discount and taxes) of the retail business stood at Rs 124.9 crore, in line with the growth of existing stores and revenue contributions from 28 new stores and of the distribution business was Rs 48.38 crore, primarily from growth in the distribution base.

At the upper band of Rs 750, P/E works out to 43.8 times EPS of Rs 17.1 (on post-IPO equity) for FY 2017. On a comparable basis, Bata India is trading at a P/E of 57.5 times FY 2017 EPS of Rs 13.5, Liberty Shoes at a P/E of 63.6 times FY 2017 EPS of Rs 3.88 and Relaxo Footwear at a P/E of 51.7 times FY 2017 EPS of Rs 10.24.

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Grey market premium

Currently Grey market premium is Rs.19/-

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.