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LIC IPO : The Most Awaited IPO

2022-04-27T14:27:00.009-07:00

LIC LIMITED IPO DETAILS :

IPO Date: 4th May 2022 – 9th May 2022

Total Shares for subscription: ~22 Crore

IPO Size: ~Rs. 21,000 Cr

Lot Size: 15 shares

Price Band: Rs. 902-949/ share ( Rs.60 discount for policyholders)

Market Capitalization:~Rs. 6 Lakh Cr

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So, I'm sure everyone has been anticipating the launch of this IPO. After All India's Biggest IPO is now Live. You had all invested in LIC's policy to earn a return, but now you will all invest in the company itself. Isn't it Incredible?

So Let's Jump on the Topic and have a look at the Quick Analysis.

About Life Insurance Industry

As of FY21, India's life insurance industry had a total premium of around Rs. 6.2 trillion. According to Swiss Re Group data, India has the world's tenth largest life insurance industry in terms of total premium. In 2019, India's share of the global life insurance market was 2.73 percent.

About LIC of India

LIC is India's largest life insurer, with a market share of 64.1 percent in terms of premiums and a market share of 66.2 percent in terms of New Business Premium. The company provides both participating and non-participating insurance products, such as unit-linked insurance products (ULIPs), saving insurance products, term insurance products, health insurance, and annuity and pension products.

LIC accounts for 60 percent or more of new life insurance premiums and 40 percent or more of retail APE (Annual Premium Equivalent), with 13.5 lakh agents driving 95 percent of that. It also has 72 Banca partnerships. It is the largest asset manager among life insurers, with INR40 trillion (US$527 billion) in AUM. The Government of India, which currently owns 100% of LIC, proposes to sell 3.5 percent of its equity in an offer for sale.

Financials of LIC of India

LIC’s Embedded Value (EV) stood at INR5.4 trillion (US $72bn) for Sep-21 which is up from Rs.956 billion in Mar-21- as it is now allocating 100% profits of non-par products to shareholders. Sep-21 Embedded Value of top 3 listed players was in the range of Rs.290bn - 350bn. Peers like HDFC Life, SBI Life, ICICI PRU Life trade at 2.4x-3.9x Sep’21 Embedded Value and have steady-state Return on Embedded Values between ~16%-19% with higher VNB margins.

As per DRHP, in a circumstance of 10% surplus sharing in Par products, LIC’s FY21 VNB margin could expand to 12.3 Percent, ceteris paribus. This compares to a 25%-26% comparable margin for listed industry peers.

Insurance companies have a separate business model and do not report Financial Statements as others. Do not consider Return On Embedded Value, or P/E ratio type ratios as a basis of analysis.

Let's Understand Some Basic Terminology :

APE: Annual premium equivalent (APE) is a measure used for comparison of life insurance revenue (Income) by normalizing the policy premiums into the equivalent of regular annual payments.

Embedded Value (EV): Embedded value is the summation of all future premiums to be received from existing policies. This can be taken as a fixed component in terms of valuation.

Value of New Business (VNB): This is the summation of future premiums of this year’s policies (using the same persistency and profit assumption). This has to be estimated for the future and added to Embedded Value. It is nothing but the EV in the future for every year.

Persistency: The persistency ratio is the proportion of life insurance policies that received timely premium payments during the year to the total number of net active policies. A longer-term persistency ratio, such as 5 years, is more important in determining whether a policyholder will keep their policy. A persistency ratio of 50% for the fifth year (or 61 months) means that only 50% of policyholders have continued to pay their premiums, while the rest have stopped.

Market share dynamics

Over FY15-till date, its new business premium market share has declined from 69% to 61%

while retail APE market share has fallen from 51% to 38%.

Retail APE Market share FY22 Till Date

LIC Product Mix vs Peers

Participating products (PAR) contribute 92 % of individual APE, which accounts for 71% of total APE; group savings is the major component, accounting for 96% of group APE. Other players, as seen above, have a more balanced mix.

A higher PAR policy mix results in lower VNB margins (value of new business/APE) of 9.5 percent, compared to the industry average of 25-27 percent. In the future, an increasing mix of non-participating (NPAR) businesses may drive growth.

Positives:

Leading insurance provider in India and the world's fifth largest insurer by GWP.
A range of life insurance products to meet the varied insurance needs of individuals.
1.34 million agents, 3463 active Micro insurance agents, 174 alternate channels, and so on.
The largest asset manager in India, with a proven track record of financial performance.
Management team with extensive experience and qualifications.

Risks:

Decrease in the attractiveness of recalibrated par products,
lower perseverance and higher surrender rates
Possible unanticipated intensity in mortality claims as a result of the ongoing pandemic,
Sharp changes in interest rates cause a change in Embedded Value.
Individual agents are unable to be retained or recruited.
Any union unrest, slowdown, wage increases, and so on.

Valuation:

The value of an insurance company is calculated as [EV + P/VNB or DCF of Value of New Business]. The use of P/EV is not the correct way to value an insurance company and should only be used as a reference against other peers.

The embedded value of the future premium, denoted by EV, is valuable to shareholders. We include the present value of New Business, which is nothing more than future EV. This gives us the company's market capitalization. This is then referred to as P/EV by analysts.

Currently listed players like SBI Life, HDFC Life, and ICICI Pru Life trade at an average P/EV multiple of 2.5X.

According to the reported EV (Sept 21) of LIC and IPO valuation, LIC is expected to list at 1.1X Embedded value, a significant discount to its listed peers.

TradEx Opinion:

We believe that LIC's distribution advantage, increasing sales mix of direct and corporate channels, and a gradual shift to high margin Non-Par products are potential drivers of LIC's future growth, which could offset lower-than-industry growth rates.

We recommend Subscribe to policyholders, employees, and retail investors. The total position/application should not exceed 5% of the total portfolio.

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HDFC Bank Q1 Results : Analysis

2021-07-17T11:00:00.001-07:00

Highlights on HDFC Q1 Results of FY 22 :-

Country's largest private sector lender HDFC Bank on July 17 reported a 16.1 percent year-on-year growth in standalone profit at Rs 7,729.64 crore.

On Quarter on Quarter Basis, HDFC bank reported profit 5% less than previous quarter.

Net interest income, grew by 8.6 percent to Rs 17,009 crore.

Loan growth reported :- 14.4 %.

Retail loans got increased by 9.3%

Core net interest margin of 4.1 percent.

Deposits, at Rs 13.45 lakh crore grew, by 13.2 percent YoY.

CASA Deposit got increased by 28% ( YoY ) to reach 45%

Capital adequacy ratio jumps from 18.8% to 19.1% from previous quarter.

Thank you !

Tata Consultancy Services : Q1 Results announced

2021-07-08T19:18:00.005-07:00

TCS announced Q1 Results : Some highlights

Company's Consolidated revenues for the quarter surged 18.5 per cent on-year to Rs. 45,411 crore. [ Revenue QoQ : 3.9% ]

Reported a 28.5 per cent year-on-year growth in its consolidated net profit to Rs. 9,008 crore for the quarter ended June. [ Net profit QoQ : -2.57%]

Consolidated operating margins expanded 190 basis points on a year-on-year basis to 25.5 per cent.

The company’s order book again showed significant strength as it managed order wins worth $8.1 billion in the June quarter, a 17.3 per cent growth on year.

TCS headcount Got increased by 20,409 in Q1.

Recorded IT service Attrition Rate : 8.6% ( lowest in the industry )

Dividend announced : Rs.7 / Share | Reco Date : 16th July 2021

TCS revenue from its largest vertical i.e., Banking, Financial Services and Insurance (BFSI) recorded a Year on Year Growth of 19.3% and Quarter on Quarter Growth of 3.1%.

Shares of TCS ended 0.56 per cent lower at Rs. 3,257 on the National Stock Exchange on 8th July.

This Quarterly Results were below the expectations of the Analysts.

Tata Motors Latest News : Reason for the fall in its Share Price

2021-07-07T09:11:00.001-07:00

Tata Motor's Latest news: Tata Motors’ shares have been in focus in the last two days after the company provided a business update. Here are a few highlights for the same:

Tata Motors shares update: Highlights from JLR’s business in Q1

Jaguar Land Rover informed the press that the shortage of semiconductors would result in wholesale volumes about 50% lower than planned. The company has reported that it will have a shortage of chip supply from suppliers in the second quarter ending September 2021, which will hurt margins and bottomline.
JLR has cautioned that given the supply constraints, the company expects to report a cash outflow of about £1 billion with a negative EBIT margin for the quarter. Total liquidity at the end of the first quarter was over £5.6 billion including a £1.9 billion undrawn committed credit facility (RCF).
Retail sales for the first quarter ending 30 June 2021 were 124,537 vehicles, 68.1% higher than the 74,067 vehicles sold in Q1 last year.
Wholesales were 84,442 units in the quarter (excluding the China JV), up 72.6% year-on-year. This was about 30,000 units lower (c. 27%) than otherwise would have been planned as a result of semiconductor supply constraints and the impacts of Covid-19, although this reduction had been broadly anticipated.
JLR expects the situation to improve in the second half of the financial year. However, the chip supply will be limited throughout the year and beyond compared to normal levels.

Some Details on Tata Motors

Tata Motors shares have had a really strong run over the past one year, up 190%. Hence, a correction on such negative news was imminent.
While the lack of semiconductors has hurt the automobile industry as a whole, the extent to which it is expected to hurt JLR has come as a surprise.
Due to the shortage, there is a risk of delayed launch of the new Range Rover as well. Global brokerage firm Nomura has noted that given negative free cash flow for Tata Motors, the management’s commitment of achieving near-zero net automotive debt in the coming years is also at risk. The brokerage firm has maintained a ‘neutral’ rating with a target price of Rs 353.
Global brokerage firm Jefferies has cut FY22 EBITDA and EPS estimates by 10% and 44%, respectively. However, FY23 earnings are broadly unchanged as semiconductor shortages will ease in time.
While the company could remain under pressure in the near-term, Tata Motors is poised to deliver a strong turnaround by FY23, led by cyclical recovery and improved strategy at both JLR and India.
Despite the gloomy business update by JLR, the outlook on Tata Motors shares remains favourable over the long-term. The average Bloomberg consensus price target implies a 20% upside from the current levels.

GR InfraProject (GRIL) IPO : Detailed Analysis

2021-07-06T10:43:00.008-07:00

GR Infraprojects is all set to raise Rs 963 crore via IPO (initial Public Offering), which opens on 7th July 2021. Here are few facts:

About the company:

GR Infraprojects was commenced on December 22, 1995. It is basically an integrated road Engineering, Procurement, and Construction (EPC) company.
The company has so much of experience in the design and construction of various highways and roads across 15 states in India. As of the end of FY21, G R Infra had an Order Book of Rs 19,025.81 cr.
Apart from EPC projects, GR Infraprojects also initiated projects under Build Operate Transfer (BOT) in the roads Segment, and is also diversified into manufacturing activities of electric poles, road signages, road marking paints, and fabricating metal crash barriers.
GR Infra has three manufacturing facilities at Assam, Uttar Pradesh and Rajasthan. The company also has a fabricating and galvanization unit in Ahmedabad, Gujarat.
The company has also entered into railway projects and in 2018 they have been awarded two railway projects as well.

Peer Comparison of GR Infraprojects :

The listed peers of the company include KNR Constructions Ltd, PNC Infratech, Hindustan construction co, Dilip Buildcon, Ashoka Buildcon and Sadbhav Engineering.
The company has the highest Net profit margin at 11.4%. The company was able to report higher margins due to complete integration of the project from conceptualization to completion.
The company has the second highest Total income-to-order book ratio of 2.8 just behind Hindustan construction co. High order book is a sign of high future earnings.
G R Infra has a debt to equity ratio of 0.4 which is lower than peer average of 0.7. This is a big positive for a construction company. The company has also reported a higher interest coverage ratio in FY20 as compared to peers.
The company has 98% of their order from road projects. This is higher than the majority of its peers who have an average of ~70% road projects.
GR Infra had the third highest RoNW (at 24%) in the previous fiscal. Sadbhav Engineering and Ashoka Buildcon have reported much higher return ratios at 50% and 45% respectively.

Financials Of the Company :

As of March 31, 2021, the company had an Order Book of Rs 19,618 crore comprising 10 HAM projects, 16 EPC projects, and 3 other projects.
The company's revenue from operations has been continuously increasing since 2019. GR Infra's revenue from operations increased from Rs 5,282 crore in FY19 to Rs 7,844 crore in FY21 at a CAGR of 22%.
The growth in revenue can be attributed to their history of timely completion of projects, involving trained and skilled manpower, efficient deployment of equipment and an in-house integrated model.
The company has also registered a strong growth in its EBITDA which rose from Rs 1,326 crore in FY19 to Rs 1,912 crore in FY21 at an annual growth rate of 20%. EBITDA margin has remained in the range of 24-25% over the last three years.
The total profit of the company grew from Rs 716 crore in FY19 to Rs 953 crore in FY21 at a CAGR of 15.3%. The net profit margin has remained stable at 12-13.5% over the last three years.
The RoNW has been in the range of 24-32% over the last three years. While GR Infra has posted strong growth in revenue and net profit over the last three years, the margins have remained under pressure.
Increase in finance cost, depreciation, and tax provisioning have resulted in lower margins, as clarified by the GR Infra’s top management.
The company has not paid any dividend on its equity shares during the last three fiscals. However, the company has said that it will follow a prudent dividend policy going forward.

STRENGTH :

Focus on road projects: About 98% of their order book comprises road projects. They have a deep understanding and experience in road projects across terrains.
Timely execution: GR Infra has developed an established track record of efficient project management and execution experience. They deliver projects before time which results in bonus revenues. Eight of their projects were completed before time which resulted in a bonus of around Rs. 275 cr in the previous year.
In-house integrated model: Having many years of experience, GR Infrs has developed the capability to work on an integrated model. They take care of the projects from conceptualization to completion which results in clients sticking to their services for longer.
Financial discipline: The company intends to continue its practices of strict cost control through:
ownership and maintenance of modern construction equipment and centralizing procurement of major construction equipment and raw materials;
careful selection of projects
cautious expansion into new businesses or new geographical areas.

Growth Expectations :

Diversification: Although the experience with road projects is good, but it leads to concentration risk. To solve this problem, the company is getting into railways, laying optic fibre cables etc.
Further expansion of in-house integration: Developing specialized in-house capabilities would reduce dependence on third parties resulting in lower risks and costs.

Some Key Detail About GR Infra IPO

GR Infra IPO date: 7 July - 9 July 2021

GR Infra IPO price band: Rs 828 - 837 per share

Issue Size: Rs 963 crore (1,15,08,704 equity shares comprises a complete offer for sale by existing selling shareholders including promoter)

Reservation: QIB 50%, Retail - 35%, NII 15%.

Employee Reservation: 2.25 lakh shares. Discount of Rs 42 for employees

Bid lot: 17 shares, and in multiples of 17 shares (Minimum Investment of Rs.14,229)

TradEx Recommendation:

GR Infraprojects has reported a steady growth in topline and bottomline over the last three years. The company has gradually emerged as an integrated road EPC player. It has executed more than 100 road projects (since 2006) across 15 states with one of the fastest growth in order book (10x) over FY14-21.

The company also has a strong balance sheet, with lower Debt/ Equity and higher interest coverage ratio as compared to peers. The company has 98% of their order from higher margin road projects, as compared to peer average of ~70%. The high order book also provides good visibility for the company.

At the higher end of the price band, GR Infraprojects is attractively priced at a P/E ratio of 8.5 times FY21 EPS. This is lower as compared to Hindustan Construction (14.8 times), KNR Constructions (15.2 times) , and Dilip Buidcon (17.4 times).

Given factors such as steady growth in topline and bottomline, stable margins, robust return ratios, healthy order book, lower debt ratios, and attractive valuations, we remain positive on the prospects of this issue. But we recommend you to do your own research as well before investing.

A Detailed Guide on RBI Bonds

2021-06-27T23:29:00.003-07:00

The equity market look very attractive to most of the individuals. Statements like below can force many to position all their money into the equity market.

If you had invested Rs.1 Lakh in Bajaj Finance in 2010, it would became Rs.1.28 Crore in 2021.

If Bajaj Finance is tempting you to require a footing inside the equity, scan this - If you had invested Rs.1 Lakh in Yes Bank in March 2017, it would be Rs 5000 in 2021.

It tells you one factor necessary related to equity class - equity can give you higher returns, but it comes with risk. If you are able to take a risk or you are one who believes in "risk hai to ishq hai" thing, alone then invest in equity. If you select to require a footing in equity, invest alone a definite share of your total investment in it, counting on your risk profile. Diversification is one among the key parameters in finance, and you want to balance your equity investment with various financial instruments that give you with wise guaranteed returns.

When we Speak about Fixed returns investment decisions, most investors opt for Fixed deposits. At present, the matter with Fixed deposits is that the low rate of interest.So is there any other asset class to go with?

One such asset class introduced by the reserve bank of India - Floating Rate Bonds (RBI bonds).

RBI bonds were launched last year on 1 July 2020. Below there are variety of features of these bonds:

Individuals and Hindu Undivided Families can invest in this asset class. If you are an NRI, you are not eligible for this bonds.
You can begin your investment from Rs.1,000 and in multiples of Rs.1,000 thereafter. there is not any maximum limit to purchase these bonds. You will be able to get these RBI bonds of any amount.
The RBI bonds shall be repayable to you at the expiration of seven years from the date of issue.
You cannot trade the bonds inside the secondary market. you cannot use them as collateral for loans from banks and NBFCs.

RBI Bonds: Interest rates - The interest the RBI is giving is attractive than the Fixed deposits rate of interest. The interest Rate will be floating in nature and will reset every six months. At the start of the scheme (1 July 2020), the interest rate offered was 7.15%. On 1 January 2021, the RBI announced no change in the interest rate, and it stayed at 7.15%. The next reset is very much supposed to happen on 1 July 2021.

It is a good option if you are looking to get a regular income. You will get interest on your total investment every six months.

Interest rate calculation - The RBI has decided to fix the interest rate on these RBI bonds to 0.35% above the prevailing NSC rate. The government usually reviews the NSC interest rate every quarter. The government calculates the NSC interest rate using a formula which was suggested by the Shyamala Gopinath Committee. As per the committee, the interest rate on small savings schemes should be 0.25-1% higher than the yields of government bonds of same maturity.

Taxation - The interest you receive from the bonds will be taxed as per your income tax slab. Further, TDS is also applicable to the interest income you earn.

For example, if you invested Rs 1 lakh in the bonds, you will earn Rs 3575 once on 1st January and then the same amount on 1st July. The total amount of Rs 7150 gets added to your taxable income (if both payments are received in the same financial year), and you will be taxed as per your income tax Slab.

Premature withdrawal - Premature is only allowed if your age is above 60 years, subject to a minimum lock-in period depending on your age Slab.

How to buy these bonds?

You can purchase these bonds through any nationalized banks like ICICI Bank, HDFC Bank, Axis Bank, SBI, etc. The bonds will be issued to you in electronic form and will be available in your Bonds Ledger Account.

Comparison between FD and RBI Floating Savings Bond :

Should you buy these bonds?

The first thing you need to understand in such investment options is the lock-in. You should only invest that money in buying these bonds that you don’t need for the next seven years. It is an excellent option for senior citizens who are not happy with the low fixed deposit interest rate (between 5 to 7 percent).

Indian Market : Weekly Wrap Up

2021-06-26T01:33:00.004-07:00

Declining Covid cases In India, favourable macro information and international cues lead index high

Indian equity benchmark terminated in the week higher boosted by the declining Covid-19 cases, accessory macro data and favourable international cues.

The Nifty started off the week on a robust note on Monday, as sentiments remained upbeat with a continue decline in Covid-19 cases (lowest in 3 months). The index continuing its streak on Tuesday after the government launched its free vaccination drive to all the citizens above eighteen years.

After hit a contemporary record high on Tuesday, the index reversed gains on Wednesday mainly due to to profit booking by investors. Moody’s additionally cut India’s GDP growth forecast to 9.6% in 2021, from 13.9% earlier.

The index ended Thursday’s volatile session with modest gains. Earlier, Fed Reserve Chairman Jerome Powell said that the central bank will not raise interest rates too quickly amid rising fears of inflation. This led to a rally in US stocks. On Friday, the index closed higher led by a rally in bank stocks due to improved prospects of loan recovery along with a better outlook of credit growth. Nifty closed the week 1.13% higher.

Top gainers and losers

Nifty Bank Back In Positive Territory After Falling For Two Weeks; Up Over 2%
PSU Bank, IT & Metal top gainers in the week
Maruti, Tata Steel, Infosys, Bajaj Finserv among the top Nifty gainers in the week
Reliance, Kotak Bank, Asian Paints, HUL, Nestle among the top Nifty losers in the week

Here is a quick recap of the market moving developments:

IPO euphoria continues: India Pesticides IPO which opened on Wednesday garnered strong interest from retail, institutional and non-institutional investors and got subscribed by 29 times at the end of Day 3. Shyam Metalics IPO, which was subscribed by a whopping 121 times, listed at a 24% premium on Thursday.
RIL AGM: Reliance Industries concluded its 44th AGM on Thursday. Key highlights from RIL’s AGM included Rs75,0000 crore investments in new energy, strategic partnership with Saudi Aramco expected to be formalized in the current year, 3 times growth target in retail business over 3-5 years, and launch of an affordable 4G smartphone in September. RIL shares ended the week 5% lower, as investors were concerned that the deal with Aramco has not yet been finalized. Further, there were concerns that the company is redeploying capital into the Energy business, rather than focusing on Retail and Jio.
Infosys AGM: Infosys held its 40th Annual General Meeting on June 19th, Saturday. The company aims to achieve revenue growth of 12-14% in the Apr- Mar 22 period. The company has also guided for a margin of 22-24%. The shares closed 5% higher in the week, buoyed by the share buyback announcement.

Check out our Important analysis on Some market developments!

Infosys buyback: India's second-largest IT company received a buyback approval from the board on April 14, 2021, and shareholders' nod on June 19, 2021, at 40th AGM of Company. The buyback is worth Rs 9,200 crore with a maximum price of Rs 1,750 per share. (Coming Soon)

India Pesticide IPO: SWOT Analysis

2021-06-22T12:23:00.002-07:00

[ NOTE : If you don't Know about IPO, Then click here to Make yourself familiar with the word IPO ]

About India Pesticides

India Pesticides was incorporated in 1984 and it is one of the leading agrochemical manufacturers in India.
The company operates in two business verticals: Formulation and Technicals. The company also manufactures active pharmaceutical ingredients (APIs). They have recorded 37% YoY growth in Technicals manufacturing (by volume) between Fiscal 2020 and Fiscal 2021.
IPL is the only company in India that manufactures Technicals like Folpet, Thiocarbamate, and Herbicide (in terms of production capacity). It manufactured 15,003 MT of Technicals in the Apr-Mar 21 period.
The company has a strategic focus on R&D. Its R&D capabilities include two well-equipped in-house laboratories registered with the DSIR.
The Technicals that the company manufacturers are mainly exported, of its total revenue, 56% comes from export.
The company exports its product to 25 different countries including Australia and other countries in North and South America, Asia as well as Europe.
IPL has registrations and licenses for 22 agrochemical technicals and 125 formulations for sale in India, and 27 agrochemical technicals, and 35 formulations for export purposes.

Products

Under Technicals, the company produces Cymoxanil Technical, Captan Technical, Ziram Technical, and Folpet Technical as fungicides. Herbicides produced are Prosulfocarb Technical and Thiocarbamete Family.
Under formulations, the company has a number of products under Acaricide, Fungicides, GRowth Regulator, Insecticides.
The two APIs company produces are Anti-Scabies Drugs and Anti-Fungal Drugs.

Peer Comparison

The Indian agro-chemicals industry is fragmented in nature and IPL faces competition from different domestic and global manufacturers for different products that they manufacture.
The listed peer companies of India Pesticides include Bharat Rasayan, Dhanuka Agrotech, UPL, Rallis India, Sumitomo Chemical India, PI Industries, and Atul India.
As seen in the table below, India Pesticides has a much lower Revenue in absolute terms as compared to larger peers such as UPL, PI Industries and Atul Ltd.
The company has reported a healthy RoNW (Return on Net Worth) of 35% in the previous fiscal.

Financials

India Pesticides has shown a strong growth in topline as well as bottomline. The Revenue from Operations has grown at a 39% CAGR to Rs 649 crore in FY21. Profit after tax has tripled from Rs 43.92 crore in FY19 to Rs 134.53 crore in FY21.
The company earns a major chunk of its revenue from the Technicals vertical (78%). The remaining 21% is through Formulations (22%) in FY21. Technicals are primarily exported. In terms of geographical split, India Pesticides earns 56% of revenue from the export market and 44% of revenue from the domestic market.
India Pesticides has also been able to show very good growth in its Return Ratios and Margins. EBITDA margin has expanded from 21% in FY18 to 29% in FY21.
IPL's Return on Equity (RoE) for Fiscals 2019, 2020 and 2021, was 23.46%, 27.48% and 34.63% respectively. The company has shown good growth in terms of RoE in the last three years. The RoCE has also been in the range of 32- 45% over the last three years.
One of the key concerns is the (Cash Flow from Operations)/EBITDA at 45%, as compared to the industry average of 75- 80%.
India Pesticides has paid a dividend at the rate of 20% for FY19 and FY20 and at 110% for FY 21. The management is confident of following a prudent dividend policy going forward.

About India Pesticides IPO

Issue open: 23rd June - 25th June 2021

Price band: Rs 290 - 296 per share

Issue Size: Rs 800 crore (Fresh Issue of Equity Shares aggregating up to Rs 100 Crore and Offer for sale aggregating up to Rs 700 Crore)

Reservation: QIB 50%, Retail - 35%, NII 15%.

Bid lot: 50 shares, and in multiples of 50 shares

TRADEX Recommendation

India Pesticides has reported a strong growth in topline and bottomline over the last three years, even as the agrochemicals industry witnessed good tailwinds. The tailwinds include India’s prominent rank (4th globally) in agro-chemicals production, and huge rise in demand due to growing population. The ‘China plus one’ strategy, which seeks to reduce dependency on China, is also boosting demand for the company’s products.

As a result, India Pesticides has grown to become one of the fastest growing agro-chemicals companies in terms of volume of technicals manufactured in India.

At the higher end of the price band, India Pesticides IPO is attractively priced at 25 times FY21 earnings. Peers including Rallis India (33 times), PI Industries (79 times), Sumitomo (79 times) are trading at much higher valuations. The company also ranks better than these peers in terms of return ratios.

Given factors such as healthy topline and bottomline growth, robust outlook due to industry tailwinds, strong margins, good return ratios and attractive valuations, we remain positive on the prospects of the issue. But we Advise you to do your own research before making any investment.

WHAT IS IPO AND HOW DO WE INVEST IN IPO

2021-06-22T10:39:00.011-07:00

Remember When you are browsing through the Internet, you see an announcement of an IPO offering by various companies. If you are among the people who are wondering what is IPO or how to invest in IPO? Here, we guide you through the basics of the term and concepts in very Practical Approach.

IPO definition

IPO means Initial Public Offering. It is a process by which a privately held company becomes a publicly-traded company by offering its shares to the public for the first time. A private company that has a handful of shareholders shares the ownership by going public by trading its shares. Through the IPO, the company gets its name listed on the stock exchange.

How Does a Company Offer an IPO?

A company before it becomes public hires an investment bank to handle the IPO. The investment bank and the company work out the financial details of the IPO in the underwriting agreement. Later, along with the underwriting agreement, they file the registration statement with SEC. SEC scrutinizes the disclosed information and if found right, it allows a date to announce the IPO.

Why Does a Company Offer an IPO?

1. Offering an IPO is a money-making exercise. Every company needs money, it may be to expand, to improve their business, to better the infrastructure, to repay loans, etc

2. Trading stocks in the open market mean increased liquidity. It opens door to employee stock ownership plans like stock options and other compensation plans, which attracts the talents in the cream layer

3. A company going public means that the brand has gained enough success to get its name flashed in the stock exchanges. It is a matter of credibility and pride to any company

4. In a demanding market, a public company can always issue more stocks. This will pave the way to acquisitions and mergers as the stocks can be issued as a part of the deal.

Types of IPOs

If you are a new investor, you may find all the jargon around an initial public offering a little baffling. To clear your confusion, there are two major categories of IPOs offered by companies.

Fixed Price Offering
Fixed price offering is pretty straightforward. The company announces the price of the initial public offering in advance. So, when you partake in a fixed price initial public offering, you agree to pay in full.

Book Building Offering
In book building offering, the stock price is offered in a 20 percent band, and interested investors place their bid. The lower level of the price band is called the floor price, and the upper limit, cap price. Investors bid for the number of shares and the price they want to pay. It allows the company to test interest for the initial public offering among investors before the final price is declared.

Should You Invest in an IPO?

Deciding whether to put your money into an IPO of a relatively new company is indeed tricky. Being a skeptic is a positive attitude to have in the stock Market.

Background checks

The Company obviously does not have enough historical data to back your decision, because it is just going public now. The red herring is the data on the IPO details which is provided in the prospectus, you need to scrutinize it. Know about the fund management team and their plans for IPO generated fund utilization.

Who is Underwriting

The process of underwriting is raising investments by issuing new securities. Be cagey of the underwriting of small investment banks. They may be willing to underwrite any company. Usually, an IPO with a success potential is backed by big brokerages that have the ability to endorse a new issue well.

Lock-up Periods

Often IPO takes a deep downtrend after the IPO goes public. The reason behind this fall of the share price is the lock-up period. A lock-up period is a contractual caveat which refers to a period of time the company’s executives and investors are not supposed to sell their shares. After the lock-up period ends, the share price experiences a drop in its price.

Flipping

People who buy stocks of the company going public and sell off on the secondary market in the view to get quick money are called flippers. Flipping initiates the trading activity.

Things you should know before investing

1. If you have bought an IPO for the company, you are exposed to the fortunes of that company. You bear a direct impact on its success and loss

2. It is this asset of your portfolio which has the highest potential to reward the returns. On the flip side, it can sink your investment without a sign. Remember stocks are subjected to the volatility of the markets

3. You should know that a company which offers its shares to the public is not indebted to reimburse the capital to the public investors

4. You should weigh up your potential risks and rewards before investing in an IPO. If you are a novice, read up an account from an expert or a wealth management firm. If still in doubt, talk to your personal financial advisor

How to apply for IPOs

Nowadays, it has become easier to apply for an initial public offering because of the online application process. However, if you are a new investor, you need to learn a few things before applying.

The first important thing is funding. Whether it is a fixed price or a book building IPO, you will have to make a payment in advance, and for that, you must have funding ready. Investors can use their savings or take a loan from a bank or NBFC for the purpose.

However, without a DEMAT account, you can’t invest in stocks. So, the next thing you need is to open a DEMAT account. Select a reputed broker with a track record to have a DEMAT.

You can use the DEMAT account not only for IPOs, but to receive all sorts of investment instruments like gold bonds, corporate bonds, shares, and more.

The online process is an easy way to apply. You can do it from the investor portal on the broker’s website or by downloading the ASBA form from your bank’s net-banking platform.

ASBA stands for Application Supported by Blocked Account (ASBA). It allows banks to block funds in the applicant’s account against your bidding for the IPO.

If you apply through the broker, you need to use UPI enabled payment gateways to make payment. In either case, cheques and demand draft payments are not accepted for bidding.

If You want to apply For the IPO, You need to Open a Demat Account. You Can open a Demat Account through UPSTOX by Clicking here. You all will get to enjoy 3x faster logins and order placements, and brokerage free Stock investing on Equity Delivery Orders.

Conclusion

Whether or not to invest in an initial public offering is a choice of an investor, but it is one way to accentuate the earning potential of your investment. Picking the right IPO offer to pose a bit of a challenge, but if you successfully overcome it, IPOs could be the most vital asset in your portfolio.

5 Very Common Investment Myths Busted

2021-06-18T10:42:00.010-07:00

If you are a potential investor or want to diversify your investments, but aren’t sure if you should, you have stumbled across the right article. The general mindset for investing in a non-government platform is having RISK. A lot of investors try to time the market, invest only when the market is high, try to find the auspicious Time or we can say "Muhurat" to invest and so on. But do all these things matter? In this blog, we will demystify 7 investment myths that concerns every potential investor.

Myth #1: I am too old to start investing!

If you are in the “I never took a chance when I was younger, I don’t want to take a chance anymore” category, then that’s probably not the right way to go about things. Yes, it is advisable that you start investing towards the beginning of your career and earlier, the better. But that doesn’t mean you can’t begin your investment career late. You just have to be tactful about which investment platform you’re choosing and where you are investing. Today, We have a lot of opportunity to invest. The twenties is the time when one begins to understand the concept of savings, investments, and returns. It is the time when, along with a basic understanding of financial planning, you also have savings in hand that you can invest. Among others, Mutual Funds and Stock market are one of the best investment options for people who wish to invest early. You can save money, and grow wealth by investing in mutual funds or stocks from early on.

You can be benefitted from the power of compounding after invest in Stocks or mutual fund
(Money grows if you give enough time)

Compounding is earning returns from existing returns. Because of compounding, with time, your investments grow at a relatively faster pace as compared to the scenario when you invest late . So, the earlier you start to invest, the better mutual fund returns you are going to get at the time when you require the money to fulfill your goal. You can Have 1 Cr. after few years and so you can retire early. Just By investing Rs.5000 a month, you can reach 1Cr. mark after 20 years. Thats called a power of compounding.
so for better life you need to start invest early.

Myth #2: Investing Is an Expensive Affair

This myth probably stems from the fact that some people hire professional financial planners to look over their investment portfolio. But it’s not necessary that you must too. Let’s put this straight, investing is not rocket science! If you garner basic knowledge about the platform and instrument you are investing in, you do not have to hire a third party to look over your portfolio. Sometimes the platform you invest via, can give you free investment advice as well.

Myth #3: I’m Not Rich

“Investing is a rich man’s game”. The above is one of the most common assumptions. If you look at history, some of the most successful investors like, Rakesh Jhunjhunwala and warren Buffet, were not born with a silver spoon. Its imperative to remember that your portfolio grows with every penny. You can start investing with a small capital and grow your financial portfolio from there. The power of compounding helps in this regard. All you need to do is, be smart and grab the right opportunities.

Myth #4: Go Safe, or Go Home

If you still feel that only government backed instruments are the way to go, then there’s a lot for you to read up! Today, there is a plethora of investment opportunities which are safe and give you decent returns. Granted that instruments like fixed deposits and recurring deposits are extremely low risk, but what about your returns? The current FD rate is 6-7% per annum, Which can't even beat the inflation rate. However, there are instruments through which you can receive a return of 15% (post tax) and which are relatively safe as well.

Myth #5: Stock Market is a gambling and purely based on luck.

There is a myth in the market that the stock market is just like gambling. People who invest in the financial markets are just speculators and are lucky enough for their trade. Although there are a few similar features to investing/trading and gambling, they are very distinct.
The variance in risk and return is the point of distinction between gambling and trading. In stock markets, yield may be greater than risk, while the risk is greater than yield in gambling. Stock markets encourage us to be both a buyer and a seller, while you can only be a buyer in gambling. Given the above people, lose money mainly in stock markets because they put money into stocks without knowledge or analytical skills. If you treat stock trading like a gambler, so it is certainly gambling for you.
In the stock market, you have, an edge called statistical advantage, the key to success is doing continuous research, and you make decisions that are more informed whereas in gambling you more depends on the luck factor. Trading will be similar to gambling when you just take random stocks and make transactions.
When you invest in something to generate profits, it becomes business. In businesses or trading, reward to risk is high, people lose money only when they fail to understand the risk to reward ratio before arriving at any decision. In gambling most of the time it is the dealer (bookmakers and casinos), who generate profit you speculate and the odds are never in your favor.
Gambling is psychological and related to the lottery where you are ready to lose a small amount of money in anticipation that you will get a large return. In trading, you can predict or define your range of rate of return. Not only do gamblers trade with thoughts in dreams, but also with a risky lack of market analysis and risk management. Their purpose is to trade, not to study charts, and monitor risk.
Traders tend to focus on profound research and logical thought. In games such as poker and blackjack, some elements make it more like trading, if you are smart enough and apply analytical skills there are chances that you can bring yourself in a position that can increase the probability of winning and bring down the odds in your support.

At some point in time, traders might have gotten lucky or unlucky based on different circumstances but in long run, it is all about making informed decisions based on certain strategies, skills, risk tolerance, and other parameters, etc. Trading, however, if done skillfully and artfully, can put you in the position of the house, and Is no more gambling.
The trading strategies should not be complex rather well tested and in limits with a disciplined approach. A trader predicts the market trend based on past trades and accordingly plan their strategy for every trade using technical and mathematical analysis. A must requirement for stock trading is logic and reasoning.

Investors judge previous trades and then prepare their approach, i.e. where to spend, how much to buy, and how much to spend. The best traders have their exit plans in place before entering into the market. Trading in futures and options should be used as a risk management tool for hedging purposes. For example, you are a farmer and believe that the prices of your goods may come down or go up out of any negative situation hence took a position in commodity futures to offset risk on the current product.
The key to success in diversification, monitoring, and follow the trends and respond quickly. Trading is a long-term game, but its short-term excitement appeals to many people. A winning trade provides them with the dopamine rush required, whereas a losing trade induces great pain.
An advantage in trading is when you place a trade and stock doesn’t move in the direction you want the stock to move you can sell it off any time and protect your slice of initial investment back whereas in the same case in gambling you can lose all if you chose a wrong bet.

A successful trader has consistency, self-control, and emotional well-being. Stock market trading is very volatile and depends on many factors hence volatility factor makes it very difficult to predict. In gambling, one wrong move can kill your financial wealth, emotional stability, and sometimes your relations too.

It can be summarized as the following:

In Trading, Reward>>Risk

In Gambling, Risk >>Reward

KEEP INVESTING !

Share Market For Beginners

2021-05-30T03:25:00.026-07:00

A DETAIL ABOUT STOCK MARKET

First let us understand that investing in share market means having a part ownership in a company. So if a company has issued 100 shares and you own/purchased 1 share then you own 1% stake or ownership in the company. The big question is how to invest in shares and how to invest in the share market? So lets move in this journey where we grasp what is stock market, how to invest in share market and how to buy shares in India. Also lets understand some basic concept and terminology related to stock market and let us also look at equity markets and how to buy shares in Indian equity market.

Share Market Basics

Before starting to invest in stocks, it is important to learn about what the share market is and how it works. It is where shares of different companies are traded. In India, there are two primary exchanges; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Lets understand how, Say you want to invest in Stocks and you opened a demat account (say in Upstox). And you want to purchase a Share of HDFC Bank, then you will place an order with upstox and upstox will Reach out to Exchanges (NSE or BSE) and then Exchanges will ask another Upstox user who wants to sell the same share. So, this is how Buying/Selling of Shares is done.
Investment is a key to your safe and secured future. However, to overcome the impact of inflation, investments in plain old financial instruments does not seem to be adequate. To get something extra out of your investments, Share market offers the lucrative opportunity of purchase and trade of securities such as stocks and options. TradEx empowers every eager investor to understand the working of the share market by providing information on stock market basics, how to trade, types of financial instruments, and successful trading strategies that offer better returns for you to become someone more than a regular investor.

What is the Difference Between Primary Markets and Secondary Markets?

When a company comes out with an initial public offer (IPO) it is called the primary market. The normal purpose of an IPO is to list the stock in the share market. Once the share gets listed it starts trading in the secondary market. Buying and selling shares is largely like buying and selling any other commodity.

How are Shares Priced in the Market and Who Determines the Price?

The market determines the price of the share. Normally, share prices go up when the company is growing very fast or it is earning very good profits or it gets new orders. As demand for the stock picks up more investors want to buy the stock at higher prices and that is how the price goes up. Price of share is determined by demand and supply.

What are Stock Indices?

Thousands of companies list their shares on the Indian share markets. From these, a few similar stocks are grouped together to form an index. The classification may be on the basis of company size, industry, market capitalization, or other categories. The BSE Sensex includes 30 stocks and the NSE comprises 50 stocks. Others include sector indices like the Bankex, market cap indices like the BSE Midcap or the BSE Small cap, and others.

What is Offline Trading and What is Online Trading?

How to purchase shares offline and how to purchase shares online? Online trading is all about buying and selling shares on the internet sitting in the comfort of your office or your home. You just need to log into your trading account and you can buy and sell shares. Offline trading is trading by visiting your broker’s office or by telephoning your broker.

What is the Role of a Broker in the Share Market?

The broker helps you execute your buy and sell trades. Brokers typically help buyers find sellers and sellers find buyers. Most brokers will also advise you on what stocks to buy, what stocks to sell and how to invest money in share markets for beginners. They will also assist you in how to trade in stock market. For that service, the broker is paid brokerage.

Can Anybody Buy and Sell Shares in the Share Market?

Any person who is competent to enter into a contract can buy and sell shares in the market. You need to open a trading account with a broker and you can buy and sell shares in the stock market after the trading account is opened.

Is the Trading Account Same as the Demat Account?

There is an important difference between the two. Trading account is where you execute your buy and sell trades. The demat account is where your shares are held in custody. When you buy shares in your trading account, your bank account gets debited and your demat account get credited. The reverse is true when you sell shares.

What is Meant by Trading and Investment?

The fundamental difference is that trading refers to short term buying and selling of shares whereas investment refers to long term buying of shares. A trader normally tries to churn the money rapidly whereas the investor tries to buy a good stock in the sharemarket and waits for the stock price to appreciate.

What is Rolling Settlements?

Every order that is executed on the share market must be settled. Buyers receive their shares and sellers receive the sale proceeds. The settlement is the procedure wherein the buyers procure their shares and sellers receive their monies. The rolling settlement is when all trades have to be settled at the end of the day. In other words, the buyer must pay for his purchase and seller delivers the sold shares in one day on the share market. Indian share markets adopt the T+2 settlements, which means the transactions are completed on Day One and the settlement of these trades must be completed within two working days from Day One.

What is SEBI?

SEBI refers to Securities and Exchange Board of India. Because the bourses have inherent risks, a market regulator is required. The SEBI is provided with this power and has the responsibility of developing as well as regulating the markets. The basic objectives include protecting investor interest, developing the share market, and regulating it’s working.

Are the Equity Market and the Derivative Market One and the Same?

Both equity market and derivative market are part of the overall stock market. The difference lies in the products traded. The equity market deals in shares and stocks whereas the derivative market deals in futures and options (F&O). The F&O market is based on an underlying asset like equity shares.

What is fundamental and technical analysis?

Fundamental analysis is about understanding the business of the company, its growth prospects, its profitability, its debt etc.Technical analysis focuses more on charts and patterns and tries to find out past patterns to apply for the future. Fundamentals are used more by investors while technicals are used more by traders. WILL EXPLAIN SEPERATELY ABOUT THESE.

How to Invest with Little Money in India in the Share Market?

There is no minimum investment required as you can even buy 1 share of a company. So if you buy a stock with a market price of Rs.100/- and you just buy 1 share then you just need to invest Rs.100. Of course, brokerage and statutory charges will be extra.

Why Do We Have to Pay Statutory Charges to the Broker?

Statutory charges like GST, stamp duty and STT are imposed by either the central or the state government. The broker does not get these payments. The broker just collects these on your behalf and deposits it with the government.