Debt Financing vs Equity Financing - Which One is Best? cover

Debt Financing vs Equity Financing – Which One is Better?

Difference Between Debt Financing and Equity Financing: Every company reaches a point where they have to raise funds for their growth needs or to survive, preferably the former. This need for capital is primarily raised through two financing options i.e. debt financing vs equity financing.

In this article, we take a look at what these two are and which one could be optimal. Keep Reading to find out!

What is Equity Financing?

Equity Financing refers to raising capital by selling off the promoters’ stake i.e. part of the ownership within the company in exchange for funds. 

One of the biggest advantages of equity financing is that the company receives funds without the obligation to pay back the capital.

These investments could be raised from the public through the markets by opting for IPO’s. Or in other cases through venture capitalists, angel investors, private equity funds, etc.

Debt Financing vs Equity Financing

In addition to the funds, the promoter could also benefit from the connections, experience, and connections these new investors bring with them. This is because they too have an interest and benefit if the business succeeds. In the case of IPO’s the company could enjoy the listing benefits.  

However, there is a tradeoff. In exchange for the funds, the new shareholders are given a stake which means that they now have a say within the company and can vote on important matters.

This could affect the decisions taken by the management as they now also have to take into consideration the interests of the new shareholders.

The risks could also extend to the promoters even being replaced in the management if they do not retain significant ownership.

What is Debt Financing?

Debt financing refers to borrowing money for a period with the intention of repaying the amount with interest. One of the most common ways of debt financing is be securing loans from banks.

However, debt financing also includes the company raising funds by selling off bonds, debentures, etc. to lenders. 

A Debt related quote on a brick wall | Debt Financing vs Equity Financing

In the case of debt financing, the amount is to be paid back at a fixed date and at a fixed interest.

One of the biggest advantages of debt financing is that the company can receive funds without the promoters letting go of any ownership. This allows them to maintain control over their business.

The lender has no control over the business and no say in the decision-making process. Other advantages include tax benefits as loans at times also include write-offs and deductions. 

The challenge however is that the loan has to be paid back. Even if the company goes bankrupt it is the lenders who are paid off first. This could be a herculean task if the company is not yet profitable or runs into a rough patch. The funds could turn around and affect the company’s ability to grow too.

Don’t believe it? Ask Anil Ambani. The ex-tycoon is still battling cases to get out of the debt spiral even after most of his companies had to shut down or be sold off due to too high debt.

Some Examples

Too much financial jargon? We can understand the two sources of capital through an example:

Take for example Ineedfund Ltd. is looking to raise capital worth Rs. 50 lakhs for their growth requirement. For equity financing, the promoters would have to let go of a 20% stake in the company in order to raise the funds.

On the other hand, the company has been offered a loan of Rs. 50 lakh from banks which has to be paid back in installments over 4 years at an interest rate of 5%. 

Here the management or the promoters have two options. The first is to let go of some stake that could affect their decision-making in the future. But here they are under no obligation to pay back the amount. The promoters can be tension-free and not worry about increasing their expenses. 

On the other hand, they also can take up the loan from the banks. Here the promoters can keep their stake and run the company as they feel is right without answering to new shareholders. On the other hand, they have to constantly make sure that they make the loan repayments along with interest on time.

The right decision here depends on a number of factors that we will discuss now.

Quick Read

Is Debt always bad for a company?

Is Debt Cheaper Than Equity?

Debt Financing vs Equity Financing illustration on a weighing machine

Debt is considered to be cheaper than equity as includes additional risk taken over by the new shareholders. In the case of the company going bankrupt, the company pays off its creditors while winding off first.

The shareholders are in a position where they may lose 100% of the capital they invested. Hence due to the increased risk is taken up by the shareholders, they often expect and demand higher returns. Their shares are also further subject to volatility in the markets. 

Is Debt Cheap Then?

A monkey thinking about something | Debt Financing vs Equity Financing

Although the cost of limited debt may be lower than equity, too much debt can cause serious trouble for the company. This is because debt comes with interest that has to be paid. Increased debt directly results in higher interest payments. 

Any slowdown in the business or other factors could hamper the business’s ability to pay interest putting the company into the defaulters’ category. This increases the risk for the creditors and increased risk will once again result in debt becoming more expensive.

This is because taking up loans now will become more expensive as due to the higher risk a higher interest rate will be charged. In the case of bond and debenture holders, this situation will also result in them demanding higher returns. 

These circumstances could further also increase the risk for the existing equity shareholders. If a company defaults the effects of this news will be carried onto the share price. This leads to the equity shareholders looking to get compensated for the added risk.

So Debt Financing vs Equity Financing – Which is the Better option Then? 

To find the answer to this question one must look at the company’s Weighted Average Cost of Capital (WACC). The WACC calculated the cost of the capital and the calculation uses appropriate weights for each category of the capital.

It includes both debt and equity in its calculation. It is calculated as follows. 

Formula for calculating WACC | Debt Financing vs Equity Financing

(Source: Fool.com)

WACC vs Leverage graph | Debt Financing vs Equity Financing

(Source: CFI)

What one should look for here is to ensure that the WACC is always balanced. If the WACC is leaning more towards point A it shows that the company has opted for too much equity with little debt. The end result however is a high cost of capital.

If the WACC is leaning more towards point B it shows that the company has opted for too much debt with little equity. Once again the end result here as well is a high cost of capital.

As you can see in the graph the most optimal point is C. This point represents that the company has managed a good balance between equity and debt. This shows the healthiest cost of capital for the company.

If the company is already leaning towards point A, it should try to balance its cost by financing its needs through debt. On the other hand, if the WACC of the company is already leaning towards point B it should try balancing it out using equity. 

Is Balancing Debt and Equity an Absolute Rule?

Absolutely not. Raising funds depends on a number of factors. They may include the stage that a company is in. At times if the company is going through a rough patch it may be hard to even get investors interested.

The company will be forced to opt for the debt at higher rates. Or the company, unfortunately, may not even qualify for debt as it also requires collateral.

The willingness of the promoters to let go of their stake also plays an important role. The interest rates in the economy also keep fluctuating and accordingly make it favorable or unfavorable to acquire debt.

In addition, it is also important to note that raising funds through equity financing can also be an expensive affair. As floatation costs for IPO’s are expensive too.

Hence a company will also need sufficient funds to even raise funds through an IPO.

Conclusion

At the end of the day, it is up to the company to choose the most optimal source of funds. These could be debt financing vs equity financing depending on the situation.

It is also important for investors to be wary of too much debt financing or only equity financing. This can be looked into by observing the company’s debt-equity ratio. An optimal debt-equity ratio ranges from 1 to 1.5 but isn’t the only factor to look into while investing.

That’s all for this post. Let us know what you think of companies being extremely wary of debt in the recent past in the comments below. Happy Investing!

Riches to Rags indian riches to rags list

Riches to Rags: 7 Wealthy Indians who lost their Fortune!

List of Wealthy Indians who went from Riches to Rags: Although it shouldn’t come as a surprise, we regularly see Billionaires who also can be horrible at managing their wealth. The answers as to why this happens are always in plain sight as most of these billionaires can be caught flaunting their wealth regularly. They can range from greed, obsession, etc.

According to Forbes, India has 140 Billionaires as of 2021. Compared to the previous year 2020, the count of billionaires has increased (102 in 2020). However, as new billionaires are added, obviously not all billionaires are able to keep their growth trajectory and status. Nevertheless, going from Billions to rags is a totally different story.

Today we take a look at Seven Riches to Rags Indian billionaires who somehow managed to squander away their fortunes which otherwise would have taken lifetimes.

List of 7 Indians who went from Riches to Rags

1. Anil Ambani

Anil ambani Riches to Rags listAnil Ambani is the chairman of the Reliance Group. He was born into luxury, unlike his father who created his own wealth. After his fathers’ death and a property tussle with his brother Mukesh, Anil came out on top. In the year 2008, Anil was named the Sixth richest in the world. The years that followed resulted in the one-time richest Indian somehow losing all his wealth.

He is currently fighting off multiple cases for dues owed. Anil currently claims that he is worth nothing and was recently avoided jail with the help of bail provided by his brother unlike other stories on this list.

2. Ramesh Chandra

Ramesh ChandraAn IIT alumni Ramesh Chandra set up Unitech a real estate company in 1971. Thanks to the real estate boom Unitech was now the second-largest real estate company worth $32 Billion.  He along with his sons had a net worth of 11 Billion in 2007  that was until the Recession of 2008 hit. It was due to the recession that the company began to stagnate.

Further, it was here when Chandra made another grave error of entering the telecom sector. Although Unitech was well received by the consumers’ news soon broke out of its involvement in the 2G scam which involved bribing government officials for spectrum licenses. The failing real estate its involvement in the scam led to his sons Sanjay and Ajay Chandra being arrested. 

3. Subrata Roy

Subrata RoySubrata Roy at the helm of Sahara was a larger than life figure. He even named among the top 10 most powerful people in India by India Today. Roy was instrumental in building one of the biggest business empires and India’s Second largest employer.

All his fame eroded when news broke of the Sahara Chit Fund Scam amounting to Rs. 24,000 crores. Subrata Roy convicted and lodged in Tihar Jail for 2 years. He was released on parole in 2017.

4. Ranbaxy Singh Brothers

Ranbaxy Singh Brothers

Ranbaxy Singh Brothers are the next name in our list of Riches to rags billionaires. Brothers Malvinder and Shivinder inherited a 33.5% stake in Ranbaxy a pharma company founded by their grandfather. They decided to sell their inheritance in 2008 for $2 Billion. Over the years that followed the brother made a series of bad investment decisions that eroded their wealth.

Their worst investment included a Rs. 3000 crore loan to spiritual guru Gurinder Singh dhillon. The duo today owe a combined due of 500 million. They are currently being sued for siphoning off billions from their financial company-Religare and healthcare company-Fortis.

5. Nirav Modi

Nirav ModiNirav Modi is a luxury diamond jeweler who was also featured on Forbes list billionaires in 2017 with a fortune of $1.8 billion. The Modi brand was one of the most famous in the world with his designs even being auctioned off at Sotheby’s.

In 2018 the news of a scam broke out when it was revealed that Modi had scammed PNB of 14,000 crores over the course of 7 years. Nirav Modi fled India after the news broke out and took refuge in London. His extradition proceedings are currently underway.

ALSO READ

Nirav Modi Scam – What Actually Happened in PNB Fraud?

6. Vijay Mallya

Vijay Mallya

Vijay Mallya, a former billionaire popularly known as the King of Good Times. He inherited his fathers’ liquor business at the age of 28 and went on to transform it into a multibillion-dollar business. Trouble started brewing for Mallya when he decided to venture into the airline sector with Kingfisher Airlines. Although the Airline took off well it soon faced trouble after the 2008 Recession.

In a desperate need for funds, Mallya duped banks for loans by placing weak collaterals. Once it was evident that Kingfisher had sunk despite his efforts, the news of the Rs. 9,000 crore scam broke out. Mallya fled the country and is currently seeking refuge in the UK. Proceedings to extradite him are underway.

ALSO READ

Vijay Mallya Scam Demystified | Vijay Mallya Case Study

7. Ramalinga Raju

Ramalinga Raju

Ramalinga Raju founded Satyam Computers Services Ltd in 1987. Raju went on to build it into the fourth largest IT software exporter in the country with the firm worth $2billion in 2008. In order to siphon off funds from the company, Raju began manipulating the financial records to give the impression that the company was growing well. In reality, funds were simply being taken out and being invested in real estate.

This was done in hopes of making a profit on the sales of property at higher prices but the recession of 2008 hit the real estate markets hard tarnishing Raju’s plan forcing him to come clean. Raju along with his brothers and 7 other was sentenced to prison.

Closing Thoughts

“It doesn’t matter how much money you can earn, what matters is how much you can keep.”

Today, we looked at the Riches to Rags stories of the popular businessman in India. However, business people are not the only ones who go from rich to poor. You might already know the names of many celebrities or sports stars who went through a similar journey. Our advisive will be to know their journey and learn from them.

That’s all for this post on the list of Popular Wealthy Indians who went from Riches to Rags. In any case, if we missed any popular name, feel free to comment below. Have a great day and take care!

10 Indian Fintech Startups to Watch Out For in 2021 cover

Fintech Watchlist: 10 Indian Fintech Startups to Watch Out For in 2021!

List of 10 Indian Fintech Startups to Watch Out: The technological advancements of the last decade have ensured that one would find it hard to survive without a phone today. And one of the biggest game-changers in the modern world has been the Fintech industry. In this article, we take a look at the top Indian Fintech startups to watch out for in 2021.

Indian FinTech Startups to Watch Out For in 2021

According to Investopedia, Fintech is used to describe new tech that seeks to improve and automate the delivery and use of financial services. Almost every smartphone user today will definitely have some app that makes the financial aspects of his life easier. But we’re always on the lookout for the next Paytm. So here’s a list of some of the top Indian Fintech startups to watch out for this year. 

1. MoneyTap

MoneyTap Logo | Indian Fintech Startups to Watch Out

Established in 2015, MoneyTap is India’s first app-based credit line. The company was founded by Bala Parthasarathy, Kunal Verma, and Anuj Kacker.

Applying and actually receiving loans in India could be a horrible experience thanks to the multiple roadblocks placed in the process. MoneyTap addresses this problem.  

The startup uses its app to provide quick and hassle-free credit of up to Rs. 5 Lakh at interest rates starting 13% per annum. The app mainly caters to the salaried middle class earning Rs. 25,000-50,000 per month. 

As long as one qualifies the basic limit set all he needs is a smartphone and his PAN card. The app then uses its inbuilt AI to assess the creditworthiness of the individual. This process takes only a few minutes.

The company does this in partnership with banks and also offers credit cards, personal loans, consumer loans, and other EMI financing options.

MoneyTap has raised  $40.3 million according to CrunchBase and is currently present in over 70 cities across the country and has already entered the SouthEast Asian and Middle-Eastern markets. They are currently planning to further expand within the country to enter Tier 2 and Tier 3 cities. 

2. PolicyBazaar

PolicyBazaar Logo | Indian Fintech Startups to Watch Out

PolicyBazaar was founded in 2008, by  Yashish Dahiya, Alok Bansal, and Avaneesh Nirjar. The startup started out as a platform for users looking for insurance products which also allows them to compare and select the best.

The startup then expanded into an insurance marketplace allowing its users to purchase insurance policies online. Today Policybazaar.com is now Indias largest insurance aggregator with a 90% market share in third-party online sales and one of the world’s top fintech players.

The company is backed by SoftBank’s Vision Fund, Tiger Global Management, and Tencent Holdings and has raised over $766.6 million in funding according to CrunchBase, valuing it at $3.5 billion.

3. ZestMoney 

Zest Logo | Indian Fintech Startups to Watch Out

ZestMoney was founded in 2015 by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman. The startup aims at providing users with a lack of credit history access to credit cards and other financing options. The company uses its digital platform, AI technology and to make this possible. 

Their contributions have also been recognized as the company was named the 2020 Technology Leader of the World Economic Forum. The startup has successfully raised $56 million.

4. NiYo

Niyo Logo | Indian Fintech Startups to Watch Out

Founded in 2015 by Vinay Bagri and Virender Bisht, Niyo is a Neo Bank. A Neo bank is a 100% digital bank that operates only through online platforms and apps without having any physical branches like traditional banks. Niyo claims to be India’s first Neo Bank. Know about Neo banks and their future in India on our blog.

Currently the largest Neo banking platform in the country they offer co-branded prepaid credit cards, saving accounts with debit cards in partnership with banks. These include the IDFC First Bank, ICICI Bank, Yes Bank among others. 

The company has grown to employ over 800 personnel and has raised $49 million in funding so far. 

5. RazorPay

Razorpay Logo | Indian Fintech Startups to Watch Out

Razorpay is a mobile payments solutions startup founded in 2013 by Harshil Mathur and Shashank Kumar. The company provides its users with a platform to receive, process, and disburse payments.

Razorpay also provides access to payment modes like a credit card, debit card, net banking, UPI, and digital wallets like JioMoney, Mobikwik, Airtel Money, FreeCharge, Ola Money, and PayZapp.

RazorPay has managed to achieve a stellar 35% monthly growth rate and expects to increase its business partners to 15 lakhs this year.

ALSO READ

Upcoming IPOs in 2021: 8 Indian Startup IPOs You Should Watch Out For!

6. PineLabs

Pine Labs Logo | Indian Fintech Startups to Watch Out

Pine Labs was founded in 1998 by Lokvir Kapoor, Rajul Garg, and Tarun Upaday. The company offers point-of-sale machines and solutions to merchants.

Today the companies cloud-based technology powers over 350,000 point-of-sale machines in more than 3,700 cities all over the country.

The company has also enabled Near Field Communication (NFC) through its app. This allows users to make secure transactions by transforming their phones into a card machine also allowing Tap n Pay cards. 

The company has raised over $207 million and is currently a unicorn.

7. Lendingkart

LendingKart Logo | Indian Fintech Startups to Watch Out

LendingKart was founded in 2014 by Harshvardhan Lunia and Mukul Sachan. It is an online financing company that provides working capital loans and company loans to small and medium-sized businesses throughout India.

The company has focussed on making the process quick and flexible with minimal documentation without the requirement of any collateral. The company has so far raised $257.5 million in funding.

8. Khatabook

KhataBook Logo | Indian Fintech Startups to Watch Out

Khatabook was founded in 2018 by Ashish Sonone, Dhanesh Kumar, Jaideep Poonia, Ravish Naresh, Vaibhav Kalpe. Khatabook’s literal translation in Hindi stands for accounts book.

The app provided allows businesses to maintain accounts digitally. The startup has reached out to 8 million merchants so far and has raised $111.5 million in funding.

9. CRED

CRED Logo | Indian Fintech Startups to Watch Out

Founded in 2018 by Kunal Shah, CRED allows its users to make credit card payments through its app. In return, the company offers rewards to its users.

The company has also introduced short-term credit facilities. Although the company was founded in 2018 it is already a unicorn.

CRED has raised $471.2 million in funding and is currently the official partner of the Indian Premier League.   

10. Cashfree

Cashfree Logo | Indian Fintech Startups to Watch Out

Founded in 2015 by Akash Sinha and Reeju Datta, as a payment gateway. Cashfree specifically focuses on bulk payout solutions for businesses in India.

The company helps over 50,000 businesses in the country to make and collect payments. The company processes transactions worth $12 billion. In addition to this, the company has maintained profitability for over 4 years.

Their customers include Cred, BigBasket, Zomato, HDFC Ergo, Ixigo, Acko, Zoomcar, and Delhivery among others. The company has raised over $40.9 million in funding so far.

In Closing

How many of these apps mentioned above have you used so far? Let us know what you think of this list of Indian Fintech startups to watch out for and the prospects of the Fintech industry in India in the comments below. That’s all for this post. Happy Reading!

Anil Ambani Story - Journey from $42 Billion to Poverty cover

Anil Ambani Story – How Anil Ambani Went from Riches to Rags?

The Anil Ambani Story – Riches to Rags Journey: Do you think that it’s possible to lose wealth worth $42 billion? Yet somehow Anil Ambani who once was once one of the richest men in the world has managed to do just that. Today we find out how Anil Ambani managed to become arguably the greatest destroyer of wealth in the last 100 years and become the prime example of riches to rags. 

Anil Ambani was once the sixth richest person in the world after inheriting his wealth and the chairman of the Reliance Anil Dhirubhai Ambani Group ( Reliance ADAG). Some of the major companies that constituted the group included Reliance Communications, Reliance Capital, Reliance Power, Reliance Infrastructure, Reliance Naval, etc.  The wealth of the Ambani family started with his father Dhirubhai Ambani.

The tycoon started out as a gas station attendant in Yemen and is the perfect example of a Rags to Riches story. He went on to become the richest man India had ever seen and is the reason behind both Anil and Mukesh’s initial success. Today, we cover the Anil Ambani Story. Let’s get started.  

Anil Ambani Story – The feud between brothers

Sadly Dhirubhai passed away after suffering from a stroke in 2002. This led to complications in the Ambani family dynamics as he died without a will. The brothers at first seemed to cooperate. Anil even stated, “two bodies, one mind”. The Reliance conglomerate which was then an Rs.28,000 crore business was headed by Mukesh as its chairman and Anil as Managing Director. It however didn’t take much time for the news to spill out that there were strains in the relationship between the two brothers. Mukesh viewed himself as the undisputed leader of the conglomerate being the eldest scion whereas Anil considered himself to be equal.

anil ambani story rise

The quarrel escalated to a point where each was taking decisions for the company without consulting the other. Anil went on to announce a power project and Mukesh restructured the entities that managed the shares of the family in the company. Both these decisions were taken without the notice to the other. Two years after their father’s death the board under Mukesh passed a resolution. It indicated that Anil would henceforth be “under the overall authority of the chairman” which was held by Mukesh.

Anil saw this public humiliation as the last straw which led to an open feud within the company. Anil would refuse to sign financial statements. The directors from a subsidiary run by Anil turned in their resignation as an act of solidarity. It eventually reached a stage where the Finance Minister of the country pleaded with the brothers to make amends. 

anil and mukesh ambani

Kokilaben at this point had seen enough and decided to intervene. She realized there was only one way out that included splitting the company between the brothers. Anil received the telecom, power generation, financial service, and infrastructure business. This pegged Anil’s net worth at $4.5 billion. Mukesh, on the other hand, received oil and gas, petrochemical, refining, and manufacturing business. Mukesh was now worth $4.9 billion.

The split also included a non-compete clause between the two brothers in order to maintain the truce. The clause forbade the brothers from entering each other’s industries.

ALSO READ

Mukesh Ambani vs Anil Ambani: What went Right/Wrong?

Anil Ambani Story – The Rise

The years that followed were favorable towards Anil Ambani. By 2007 he was worth $45 billion and was conferred with many business awards. This increase in wealth was thanks to him receiving Reliance’s crown jewel in the split i.e. Reliance Communications. His wealth was also evident in his lifestyle. It was under Anil that the country saw India’s largest IPO of Reliance Power in 2008 which was subscribed in just 60 seconds. This was the fastest in the Indian Capital market history.

anil ambani rise

Anil’s Reliance Infrastructure also built Mumbai’s first metro line. Anil also invested a portion of his enormous wealth in Steven Spielbergs DreamWork Pictures. The joint venture is known to have produced films like Lincoln which won an Academy Award and The Fifth Estate, a film about Wikileaks’ Julian Assange. Thanks to this partnership we soon saw the legendary director visiting BTown. At times the Mumbai elites were invited to his home for a screening of upcoming releases. Mukesh however was not seen among the guests. 

Anil Ambani Story – The Downfall

Anil’s downfall began during the financial crisis of 2008. Reliance Power in its IPO had raised Rs. 11,563 crores. This was supposed to be used to fulfill Anil’s ambitious 13 projects of gas, coal, and hydropower. These projects required the availability of gas at reasonable rates. The 2008 environment did not enable this dream. Authorities now mandated lower electricity rates. This now meant that around Rs.1.2 lakh crores were stuck in these projects.

Mukesh however saw an opportunity here. He offered a supply of natural gas provided that the non-compete clause was annulled. Anil agreed and this allowed him to make his failing power plants viable. This however allowed Mukesh to enter industries Anil existed in, including the communication sector. 

— Reliance Communication

Reliance Communication the crown jewel made up 66% of Anil Ambani’s wealth. RCom however had a technological limitation. When it was set up in 2002 it chose CDMA ( Code Division Multiple Access). Other network providers like Airtel and Hutch provided GSM(Global System for Mobile communications). Anil had dreamt of creating wonders with the CDMA technology but it was unfortunately limited to only 2G and 3G. This meant that when 4G arrived he would have to once again build the mobile network from scratch. In the midst of this Anil acquired GLT Infra in his plans to expand 3G and set up a sister company for an undersea cable network. 

Mukesh on the other hand began pouring money he earned from his oil and petrochemical business into his upcoming mobile network. This was a huge bet as investors saw him pour money for over 5 years. 

anil ambani story downfall

Eventually, Mukesh launched Jio with 4G. The poor management of the company, its inability to provide 4G, and the price war that followed led to RCom’s downfall. In order to keep the capital-intensive company’s hopes alive, Anil had only one option i.e. take on debt. By 2016 the company was debt-ridden.

In 2017 Anil realized that his company was out of the market and he couldn’t afford a 4G makeover. He decided to sell the wireless business to Aircel. The infrastructure i.e. the cell towers would be sold to a Canadian company called Brookfield Group. Unfortunately both the deals fell through. Aircel itself went bankrupt and the failure t execute this deal led to the fallout of the Brookfield deal. If Anil had seen the red flags hoisted by the CDMA technology he would’ve been able to sell off the business quicker in order to avoid losses. 

The biggest challenge here however was posed by Jio. This however was the biggest and one of the riskiest bets placed by Mukesh. Its entry with 4G immediately saw RCom lose 8 crore customers. RCom shut its wireless operation in 2017. In 2019 RCom’s undersea cable company filed for bankruptcy in the US. 

— Failure of Defense Companies

Another decision that worked against Anil was his move to venture into the Defense sector. He had two companies in the business – Reliance Defence Ltd. and Reliance Naval & Engineering Ltd. He bought Pipavav Defense which already had a debt of around Rs. 7000 crores. The company was hard o turnaround and eventually was admitted to insolvency proceedings of NCLT. Reliance Defense Ltd on the other hand was embroiled in accusations of a scam. The Indian National Congress accused PM Narendra Modi of favoring Anil’s company over HAL in a fighter aircraft (Dassault Rafale) deal worth Rs. 58,000 crores. Allegations were made that Reliance Defence went onto become the biggest beneficiary in the deal.

To add to the controversy one of Anil’s businesses partly financed a French Film in which the former French President Hollande’s then-partner had acted in, around the same time the deal was finalized. 

— Other Anil Dhirubhai Ambani Group  Companies

Reliance Capital, Reliance Infrastructure, Reliance Power, and Reliance Home Finance too were performing poorly. The economic slowdown of 2008 had affected Reliance Capital gravely. It eventually exited the mutual fund business by selling its entire stake in Reliance Nippon Life Asset Management Ltd. (RNAM). The proceeds of Rs. 6000 crore received was used to reduce Reliance Capital’s outstanding debt by 33%. At the same time Reliance, Infra and Power were defaulting on loans. Reliance Home Finance had defaulted on bond repayments. 

— Effects on Lenders

The default on loans from Reliance had adverse effects in an already ailing economy. One example is that of Yes Bank which had significant exposure to Anil Ambani’s companies. Another such example has been that of Franklin Templeton. Franklin Templeton had secured Non-Convertible Debentures in 3 of ADAG companies. They eventually did not sell the pledged securities and would 6 debt funds affecting 300,000 investors. 

anil ambani vs mukesh ambani

Anil Ambani Story – Lawsuits

— Anil Ambani v/s Ericsson

In 2019 Anil faced a lawsuit for non-payment of personally guaranteed debt that Reliance owed to Ericsson. In an attempt to diffuse the situation Anil Ambani offered to settle the matter outside court. But Anil has not been able to come up with the amount owed to the creditors even after signing the settlement. The court gave him a month to come up with Rs. 5.5 crore. At the time Anil and Mukesh entered into a deal where RCom would be sold to JIo, but this too was scrapped as the Telecom department asked Jio to take responsibility for RCom’s dues. Eventually, Mukesh agreed to bail out Anil by paying $77 million 

It was reported by Bloomberg that Mukesh had made Anil ‘beg’ as the deadline neared before helping him out. The deal however did not come free of cost as Anil had to still surrender a pair of 99-year-old leases on office buildings in Mumbai.

anil ambani story Anil Ambani v/s Ericsson

— Anil Ambani v/s Chinese Banks

Anil Ambani has also defaulted on loans taken from three Chinese Banks – Industrial and Commercial Bank of China Ltd Mumbai Branch, China Development Bank, and Exim Bank of China. He is said to owe them $ 700 million after accounting for interest. On being asked to pay $ 100 million into court in the UK Anil stated “The current value of my shareholdings is down to approximately $82.4 million (approximately Rs 589 crore) and my net worth is zero after taking into account my liabilities. In summary, I do not hold any meaningful assets which can be liquidated.”. The banks found this hard to believe as Anil was still surrounded by his son, mother, and elder brother who are billionaires. 

Closing Thoughts 

Although both the brothers started out with similar capital, Mukesh Ambani is currently worth over $80 billion and is arguable the most powerful man in India apart from PM Narendra Modi. Anil on the other hand has not only managed to achieve negative growth but claims to be in deficit. Observers have stated that although external factors were involved reckless growth plans and unchecked ambition too had a role to play.

Anil Ambani is currently still battling courts over the settlement of his dues. Apart from this he still maintains his fitness standards and it is rumored that he has come out more religious out of this whole ordeal and finds material success hollow when compared to spiritual fulfillment.  

Gautam Adani's Success Story cover

Gautam Adani’s Success Story – India’s 2nd Richest Man Biography!

A Walkthrough Gautam Adani’s Success Story: Investors today feel that they are missing out on something big if they have not included the stocks of the Adani group in their portfolio. But today we look at the man behind one of the biggest wealth creators in the country i.e. Gautam Adani’s success story to become the second richest man in India.

Early Life of Gautam Adani

Gautam Adani in Portrait | Gautam Adani's Success Story

We have gone through many success stories in the past. But what makes Adani’s journey truly extraordinary are his humble middle-class beginnings.

Gautam Adani was born into a Gujarati-Jain family on 24 June 1962. Adani had 7 siblings while his father was a textile merchant. His family faced several challenges as they struggled financially.

Adani was set to follow in the same footsteps and spend most of his childhood accordingly. He enrolled for B.Com at Gujarat University.

While being bombarded with mundane accounts and economics he realized that academics were not for him. To everyone’s surprise, he decided to drop out and work on things that really mattered to him. 

Adani recalls “I was in college for two years but I didn’t attend too much. Then I decided to drop out. I was having too many nightmares about failing in the exams”.  

The 20-year-old millionaire

As a teen who just dropped out of college Adani moved to Mumbai with just Rs. 100 in his pocket. As luck favored him he secured a job with diamond brokers at Mumbai’s jewelry market Zaveri Bazaar.

But Adani did not just simply work there, he used the 2-3 year period to learn the ins and outs of the business. He used this to set up his own diamond brokerage – his first business. Adani was already a millionaire by the age of 20.

It was just then that Adani seized his next opportunity. His elder brother Mahasukh Adani had acquired a plastic factory and called Gautam Adani to Gujarat to help run it.

Adani moved back to Gujarat to manage the business. It was here that Adani began slowly entering the big leagues of Import and export in 1985. Adani decided to import polyvinyl chloride or PVC to India.

By 1988 Adani founded Adani Exports Ltd. which is today the holding company for the Adani Conglomerate.

ALSO READ

Anand Mahindra’s Success Story: An Inspiring Journey of Mahindra’s Boss!

Gautam Adani’s Success Story: Road to becoming a Billionaire 

1991 marks the year of liberalization for the Indian economy. Till then Adani focused his company’s resources on the power and agriculture business. But with the Indian economy opening up to the rest of the world he felt that it was the right time to diversify.

The company began to grow in leaps and bounds as Adani had now also entered the textiles and metals. 

Gautam Adani at one of his Port | Gautam Adani's Success Story

In 1993 Adani entered into Ports and SEZ, the business the conglomerate is well known for today. He did this by securing a contract from the Government of Gujarat to operate the Mundra Port.

Adani turned the port into India’s largest privately operated port. By 1995 the Mundra port was dealing in over 200 million tonnes of load every year. 

His business acumen was clearly visible here as is said to have convinced railway minister Nitish Kumar a few years down the line to integrate ports to railways. This now allowed Adani to run his own rail tracks from the port to the nearest railhead.

He also went onto build a 2 KM airstrip in his port. This made the Mundra port the only one with its own airstrip in India. This would further aid the transportation of high-value but low-volume goods like pharmaceuticals and diamonds. 

In 1996, he set up Adani Power Ltd. and by 2006, Adani had also entered the power generation business. 

Surviving Kidnappings and Prospering COVID

One of the darkest moments of Adani’s life was when he was kidnapped at gunpoint and held for ransom two decades ago. In 2008, Adani once again found himself in the midst of the 26/11 terror attacks at the Taj. Adani managed to survive both and went onto thrive in the business world. 

Adani further diversified his business into oil and gas exploration and logistics. The Adani group also became the largest private power producer in the country.

Adani was quick to identify industries with rapid growth coupled with the support of the government. This also led the company to foray into green energy, one of the biggest wealth creators in the last year.

Despite taking on $17 billion worth of debt, the company has still been able to raise funds from foreign banks for Adani green. 

Amidst COVID, Adani’s fortunes have grown multifold. This is thanks to the surge in share prices of his ports, gas, and mining companies. Again, the Adani green topping the wealth creators in the Adani Group.

The shares of Adani green have grown over 7 times after it received a $6 billion solar-power deal. 

Quick Read

Stop Adani: What is SBI’s $1Billion Loan to Adani Controversy?

Closing Thoughts

Gautam Adani with his family members

The Adani family today is one of the wealthiest families in the country. All thanks to the ability to take risks and the business acumen of one man. What makes this even more inspirational is that Adani too started out in the same position as many are in the country.

That’s all for this post. Let us know what do you think of Gautam Adani’s Success Story and who you would like us to cover next. Happy Reading!

Dividend dates explained - must know dates for investors

Dividend Dates Explained – Must Know Dates for Dividend Investors!

Dividend Dates Explained for Beginners – Understanding Key Dividend Dates: There are lots of investors in the stock market who buy shares just to receive dividends. A regular, consistent, and increasing dividend per year is what these investors are looking for. In general, these investors invest for the long term and make regular money from dividends.

However, if you’re planning to make money from dividends or simply even to receive dividends by holding a few shares, there are few key dates that you should understand. For example, when exactly will you receive the dividends? In this on Dividend Dates Explained, we’ll discuss all the key dates related to dividends that a dividend investor should know. Let’s get started.

What are Dividends?

Before digging deeper into the dividend dates, let us first brush up on the basics so that everyone is on the same page.

Dividends are basically a portion of the company’s earnings distributed among the shareholders. Here, how much dividends are to be distributed is decided by the company and the key person on the board of directors.

Dividends are not mandatory for companies. Loss-making companies obviously are not making earnings and hence they won’t be able to share dividends. Further, growing companies might also even reinvest all their earnings in their growth and do not give any dividends to their shareholders. However, stable and mature companies generally give decent dividends to their shareholders.

For example, here is the list of recent dividends shared by few of the top companies in India:

COMPANY NAMEDiv TypeDiv (%)Ex-Dividend
InfosysFinal30031-05-2021
CRISILInterim70005-05-2021
Stovec IndFinal22003-05-2021
Angel BrokingInterim7529-04-2021
HCL TechInterim30029-04-2021
HCL TechSpecial50029-04-2021
NestleFinal65029-04-2021
NestleInterim25029-04-2021
Easy TripInterim10027-04-2021
CastrolFinal6022-04-2021
Muthoot FinanceInterim20022-04-2021
ABB IndiaFinal25019-04-2021
BritanniaInterim620008-04-2021
ACCFinal14030-03-2021
ColgateInterim200030-03-2021

Also read: 10 Best Dividend Stocks in India That Will Make Your Portfolio Rich.

Now, the timing of buying and holding the share is the most important factor for receiving dividends. You don’t want to buy these stocks if you won’t be getting any dividends, right? For example, if you buy these stocks after a certain time, the previous seller might get the dividend as he was holding the stock when the company announced dividends.

Therefore, it is very important that you know the dates during the Dividend Announcements) by the company. It’s during these announcements when the company explains how much dividends they will give to the shareholders and the dates when the stockholders will receive their dividends.

Dividend Dates Explained: Must Know Dates for Investors

There are four important Dividend dates that every investor should know. They are:

  1. Dividend Declaration Date
  2. Record Date
  3. Ex-Dividend Date
  4. Payment Date

Among all four, the Ex-Dividend day is of uttermost importance. You will understand the importance of this date as you read this article further on the dividend dates explained. For now, let’s understand all these dates first:

1. Dividend Declaration Date

This is the date on which the company declares the dividends to the shareholders. The conference includes the date of dividend distribution, the size of the dividend, how much dividends the shareholders will receive for each holding share, and the record date.

2. Record Date

On the dividend declaration day, the company announces the Record Date. The record date is the date on which your name should be present on the company’s list of shareholders i.e. record book, to get the dividend.

Shareholders who are not registered until this date on the company’s record book will not receive the dividend. According to the company, you are only eligible to get the dividends, if your name is on their book till this record date.

3. Ex-Dividend Date

The Ex-dividend date is usually two days before the record date. In order to be able to get the dividend, you will have to purchase the stock before the ex-dividend date. If you buy the stock on or after the Ex-dividend date, you won’t get the dividend, instead, the previous seller will get the dividend.

After the company sets the date of record, the ex-dividend date is also set on the stock exchange. These two days before the record date is generally used by the stock exchange to give the name of the shareholders to the company. The investors who buy the stock on or after the ex-dividend date won’t be listed in the record book of the company. Therefore, if you purchase a stock on or after the ex-dividend date, you won’t receive a dividend until the next dividend is declared for the next time period.

4. Dividend Payment Date

This is the date set by the company on which the dividends are paid to the shareholders.

Only those shareholders who bought the stock before the Ex-dividend date are entitled to get this dividend. That’s why, as we already mentioned earlier, the Ex-dividend date is the most important date among all.

Here is a quick summary of the dividend dates explained above:

DatesPurpose
Declaration DateOn this date, the dividend is announced by the company
Ex-Dividend DateThe date before which you must own the stock to be entitled to the dividend.
Record DateThe date by which you must be on the company's record books as a shareholder to receive the dividend.
Payment DateThe date the dividend is paid to shareholders.

Example of Divided Dates Explanation

Now, let me give you an example of the company’s dividend announcement so that you get a good knowledge of the above dividend dates explained. ITC Interim Dividend Announcement:

“The Board of directors of ITC Ltd at its meeting held today has declared an Interim Dividend of Rs. 5.00 per Ordinary Share of Re. 1/- each for the financial year ending on 31st March 2021; such Dividends will be paid on Wednesday, 10th March 2021 to those Members entitled thereto. The board also fixed Tuesday, 23rd February 2021 as the Record Date for the purpose of determining entitlement of the Members for such Interim Dividend.”

In the above announcement, the company announced few important points

  • Dividend =  ₹5.00 per share
  • Record Date: 23rd February 2021
  • Payment Date = 10th March 2021

The expected Ex-dividend date should be 21st February 2021 i.e. those investors who buy (or are holding) the stock of ITC before this date will be entitled to receive the dividend.

Further, if you want to know the dates of the upcoming dividends payment date, you can get it from the money control website using this link.

That’s all for this post on Dividend dates explained. I hope it was helpful to the readers. If you have any doubts or need any further help on the topic ‘dividend dates explained’ feel free to comment below. I will be happy to help you out. Have a great day and happy investing.

zomato ipo filing details

Zomato IPO Filed: Ready for it? Here are Details to Know!!

Zomato IPO Filing Details: If you’ve not heard of the Zomato IPO you’ve been missing out. Zomato an Indian food delivery and restaurant aggregator platform, has filed its DRHP with the market regulator SEBI proposing an IPO with hopes of raising Rs. 8,250 crores ($1.1 billion).

In this article, we cover important details about Zomato IPO, company details, their goals, and plans for the initial public offering. Keep Reading!

Who is Zomato?

zomato logo

Zomato was founded by Deepinder Goyal and Pankaj Chaddah initially with the name Foodiebay in 2008 as a platform to review restaurants, find menus and receive their fine details at one place. The company was renamed Zomato in 2010.

Following their rapid expansion within the country and several acquisitions in different markets worldwide, they also provided new features like delivery. There was no looking back as currently, the company holds a 45% market share in the Indian food tech industry.

Why is Zomato applying for an IPO now?

The pandemic brought many sectors to a standstill. This impacted Zomato too affecting them during the initial lockdown last year. However, what followed was a swift recovery and a boom in their business.

Zomato now seems to be focussing on utilizing this period to further build their war chest for the extremely competitive food tech industry. Their main competitors include Swiggy – another food-delivery platform that stands toe to toe with Zomato when it comes to its market share. 

This was also noticed in the US and UK markets too as companies like Doordash and Deliveroo also have come up with IPO’s in an attempt to seize better valuations and successful IPO’s. 

Purpose of the Zomato IPO?

Now the question remains as to what will the company do with over a billion dollars. The IPO also includes an offer for sale from one of its early investors Info Edge for Rs 750 crore. The rest of the funds will be through a fresh issue of equity shares. It intends to use 75% of these proceeds i.e. Rs 5,625 crore to fund its organic and inorganic growth initiatives for the next 5 years. 

The organic initiatives include user acquisition and improving their platform and delivery infrastructure. Its inorganic growth initiatives include funding its strategic initiatives and acquisition costs.

The company has benefitted greatly from the strategic acquisitions in the past which it also used to enter new markets globally. 

Quick Read

Upcoming IPOs in 2021: 8 Indian Startup IPOs You Should Watch Out For!

Zomato Financial Details to Know

— How does Zomato make money?

Zomato’s food delivery business model is relatively simple to understand. The company pays gig workers for delivery from the various restaurants part of their app. They also charge a commission along with every order delivered. Their app also provides a subscription model for users interested in premium services.

As of December 2020, Zomato had 162,000 active delivery drivers and 350,000 active restaurant listings on its platform. As of December 2020, Zomato had over 1.4 million premium customer subscribers.

The company currently operates in 23 markets around the world but most of its revenue is still generated across India. The company also mentions in its DRHP that it “We have taken a conscious strategic call to focus only on the Indian market going forward”.

— Profitability of Zomato: How profitable is Zomato?

Unfortunately, Zomato is not profitable. This however must not be mistaken for lack of growth as Zomato has come to hold 45% of the Indian food-tech industry which is expected to grow to $11 billion over the next five years.

According to its DRHP, the company’s revenues have grown from Rs. 466 crore in FY 17-18 to Rs. 2,604 crores ( 5.5 times) in fiscal 19- 20. The company however still posted a net loss of $320 million.

With its growing revenues, the company has been increasingly taking losses. Their losses for the year 19-20 were double the losses incurred the year before and 22 times the losses 2 years prior. 

Zomato Revenue Growth in last 4 FY

— Zomato Performance during Pandemic

Zomato too just like companies in other industries was impacted during the initial lockdown. This was because customers feared ordering from restaurants during the initial Covid panic. 

But all this turned around in the months that followed. Zomato adapted by cutting its costs between April and December. This was done by reducing discounts and offers, in addition, they also increased their commission. This was met by consumers also responding by taking precautions to order instead of dining out. Zomato recorded the highest gross order value in its history in the third quarter of FY21.

To put it numerically per unit, Zomato was earlier losing Rs 30.5 per delivery as of April 2020 and currently earns Rs 22.9 per delivery. This actually meant they were finally making money per order instead of burning cash.

For the 9 months, that followed the initial lockdown Zomato’s revenue from operation stood at Rs. 1,301 crore. This growth however came at a cost as their expenses increased from INR 3,608 Cr to INR 5,006 Cr and their losses for the year increased by 2.3 times from Rs. 1,013 Cr. to Rs. INR 2,363 Cr.

Zomato also managed to double its monthly transacting users to over 10.7 million people.

Who Owns Zomato: Zomato’s Shareholding Pattern

Zomato's Shareholding Breakup | Zomato IPO

Zomato’s latest shareholding pattern shows Info Edge as the largest shareholder with an 18.7% stake in the company. Zomato’s CEO Deepinder Goyal holds 5.6% shares in the company.

Other holders with significant stakes include Uber B.V., Alipay Singapore Holding Pte. Ltd, and Antfin Singapore Holding Pte. Ltd holding 9.2%, 8.4%, and 8.3% respectively. Uber received this stake as a result of Zomato’s acquisition of Uber’s Indian food delivery arm. The company includes investments from China as Alipay and Antfin are Chinese investors. 

Zomato had raised $660 million at a $3.9 billion valuation. This included 10 new investors Tiger Global, Kora, Luxor, Fidelity (FMR), D1 Capital, Baillie Gifford, Mirae, and Steadview. Just a few months later their valuation increased as they once again raised $250 million a couple of months ago at a $5.4 Billion valuation. 

In addition to this, the company also plans to take a pre IPO placement amounting to  Rs 1,500 crore.

When is the Zomato IPO?

The SEBI generally takes 2 weeks to review the DRHP. The IPO will likely be held post this period provided the market conditions are favorable. 

Closing Thoughts 

The Zomato IPO will be one of the most exciting IPO’s that will come up this year. Investors now have to choose to participate based on Zomato’s explosive growth or stand this one out due to their profitability.

Their close competitor, Swiggy, too is in plans to build a war chest to compete with Zomato but has preferred not to take the IPO route. Swiggy has also decided to further increase its footprint by also entering delivery for groceries. It will be interesting to find out how Zomato counters this.

Missing out on this IPO may create an innate feeling of FOMO. But Indian investors will still have an exciting year ahead as Zomato will only be the first in a series of public listings, including startups like Policybazaar, Nykaa, and Delhivery. You can apply for an IPO with Zerodha account. Happy Investing! 

Fundamental vs Technical Analysis of Stocks – Which one is Better?

Understanding Fundamental vs Technical Analysis of Stocks: There are two common approaches to pick stocks and money from the share market. The first is fundamental analysis and the second is technical analysis. However, fundamental analysis and technical analysis follow a completely different route in their strategies.

In this article, we’ll discuss the difference between Fundamental vs Technical Analysis of Stocks to find out which one is better and which one you should learn. Let’s get started.

Fundamental vs Technical Analysis of Stocks

Both fundamental analysis and technical analysis can be used to determine if an investment in stock is attractive or not and to further forecast the future trends of stocks. For example, if you are evaluating stocks and want to determine which one you should enter, then you can use either fundamental vs technical analysis of stocks.

Fundamental analysis checks how healthy the company is compared to its competitors and economy. It studies everything related to the company like its financial statements (Balance sheet, profit loss statement, etc), Financial Ratios, Management, Competitors, Products, Business models, industry etc. (Also read: How to do Fundamental Analysis on Stocks?)

On the other hand, Technical analysis does not care about the financials or the fundamentals of the stocks. It evaluates the company based on Price action, Past trends, Share price & Volumes. Technical analysts use stock price charts to identify future trends and patterns.

Fundamental vs Technical Analysis of Stocks cover

What is the Intrinsic Value of a Company?

“The intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.” – Investopedia

In short, the Intrinsic value is the True Value of a company.

Fundamental analysts believe that the current stock price of a company may or may not be the same as its intrinsic value. They evaluate companies to find which one is trading below its true intrinsic value using different studies like financial statements analysis, stock valuation, economic analysis, etc.

Once they find a company that is trading below its intrinsic value (also considered as undervalued stock), Value Investors buy and hold this stock until it reaches its true value. A stock trading below its intrinsic value is considered a good value investment opportunity.

Quick Note: If you want to learn fundamental analysis from scratch, I would highly recommend you to read this best selling book- ‘The Intelligent Investor’ by Benjamin Graham. Warren Buffett considers it as the best book ever written on investing.

On the other hand, Technical analysts believe that there is no use to analyze companies intrinsic value as the stock price already reflects all relevant pieces of information. They do not care about the financials of a stock. They predict the future performance of a stock based on its past stock price trends.

Fundamental vs Technical Analysis of Stocks: Basic Comparisons

Now that we have little understanding of both fundamental vs technical analysis of stocks, let us discuss both these methodologies in detail. Here, we will compare fundamental vs technical analysis of stocks based on different criteria.

1. Basic Principle

Fundamental analysis analyses all the factors that can affect the stock price of a company in the future like financials, management, industry, etc. It evaluates the intrinsic value of the company to find whether the stock is under-priced or over-priced.

Technical analysis reads the past charts, patterns, and trends of the stocks to predict their future price movement.

2. Time Frame

  • The fundamental analysis approach is used for long-term investments.
  • The technical analysis approach is used for short-term investments.

3. Data Sources

  • Fundamental analysis gathers data from financial statements, annual reports, and other key announcements of the company along with other economic news sources.
  • Technical analysis gathers data from the stock charts.

Also read: You can perform the complete fundamental analysis of stocks using Trade Brains Portal. Here, we have the fundamental data of +4,000 public companies in India.

4. Indicators

Fundamental analysis studies assets, liabilities, earnings, expenses, etc. It also uses various fundamental indicators like PE ratio, PB ratio, Debt/Equity ratio, ROE, etc

Technical analysis uses charts like candlesticks, price data, etc. Various technical indicators that are commonly used are MACD, Simple Moving Average, EMA, RSI, Bollinger Bands, etc.

5. Methodology Used

Fundamental analysis studies the financial data like Balance sheet, Profit and Loss statements, and Cash flow statements. It also examines other factors while evaluating stocks like competitors, company’s management, industry, economy, etc. Fundamental analysis focuses on both qualitative and quantitative analysis to evaluate the past performance and future potential.

Technical analysis studies the market movement and public psychology. It is mostly the analysis of the past price movements of the stock. Technical analysis focuses on the performance chart and the trends of the stock.

6. Strategy

  • Fundamental analysis is used to find the intrinsic value of the company to evaluate whether the stock is overpriced or underpriced and forecast the growth potential of the company.
  • Technical analysis is used to find the right entry and exit time from the stock.

Pros and Cons of Fundamental Analysis

Pros of Fundamental Analysis

Here are a few of the best advantages of fundamental analysis:

  • Fundamental analysis helps to invest for the long-term and their returns are quite huge. Power of compounding is applied to the long-term investments resulting in good returns to the investors.
  • They invest in financially sound companies which is always a good approach.

Cons of Fundamental Analysis

Here are a few of the common disadvantages of fundamental analysis:

  • Fundamental analysis is quite laborious and its methodology is lengthy & complex.
  • There is no clear time frame for long-term investment.
  • As the future potential of the company is considered in the fundamental analysis, various assumptions are made in this approach.
  • As the entry & exit time is not specified in fundamental analysis, you might buy a good stock at a bad time.

Pros and Cons of Technical Analysis

Pros of Technical Analysis

Here are a few of the best advantages of Technical Analysis:

  • Technical analysis is fast and the outcomes can be seen quite early.
  • This approach is comparatively less laborious.
  • Entry and exit time for the stock can be specified.
  • Technical indicators readily give buy or sell indications.

Cons of Technical Analysis

Here are a few of the common disadvantages of the technical analysis approach:

  • As there are a number of technical indicators, it’s tough to select a good indicator.
  • Technical indicators do not study the fundamentals. Hence, you might be investing in a financially unhealthy company.
  • Technical analysis skill requires a lot of accuracy, reliability, and discipline.

Can Fundamental and Technical analysis be used together?

Yes, fundamental analysis and technical analysis can be used together.

Many investors/traders use both approaches. It makes sense to enter a fundamentally strong company at a right time. While fundamental analysis helps to find a healthy company to invest in, technical analysis tells you the right time to enter or exit that stock.

In short, you can use both fundamental and technical analysis of stock together.

Closing Thoughts

Fundamental vs Technical analysis of stocks, both are effective yet quite different methodologies to make money from the stock market. It is really tough to say which one is the better way of making money in stocks. Although a number of books have been written on both fundamental and technical analysis, however this debate on the better way of investing is still going on.

My suggestion is to do your own study and make your investing strategy based on your knowledge, preference, and time. Do comment below which investment strategy you prefer – Fundamental analysis or Technical analysis. Have a great day!!

Kotak Securities Trade FREE Plan Review- Is FREE Intraday Trading Legit

Kotak Securities Trade FREE Plan Review: Zero Brokerage Day Trading?

Kotak Securities Trade FREE Plan Review 2021: While looking for the best demat and trading account to trade in Indian stocks, two of the key criteria that you should check are the brokerage charges and broker’s reputation.

Kotak Securities, being a part of the Kotak group is one such broker. Traditionally a full-service broker, Kotak Securities entered the discount brokerage model in November 2020 with its Trade FREE Plan. Here, they announced zero brokerage for intraday training across segments, a first of its kind plan in India. It is also known as Free Intraday Trading (FIT) plan.

In this post, we’ll look into the Kotak Securities Trade FREE Plan Review and discuss whether FREE Intraday trading plan is actually legit for the traders and investors. Further, we’ll also look into some of the pros and cons of Kotak Securities Trade FREE Plan. Let’s get started.

Quick Link to Open FREE Demat Account With Kotak Securities Trade FREE Plan.

Quick Kotak Securities Trade FREE Plan Review

Before we start the detailed review, let us give you a quick review of the Kotak Securities Trade FREE Plan highlighting the Key Features for the reader.

Kotak Securities Limited (KSL) is a part of Kotak Mahindra Bank Ltd. In its TRADE FREE PLAN, KSL is offering zero brokerage on intraday trades and Rs. 20 per order for all other future & options (F&O) trades including equity, commodity, and currency. Here are a few of the key points on Kotak Securities Trade FREE Plan to note:

—  Zero Brokerage on Intraday Trades
— All other F&O Trades at Rs 20 per order
—  FREE Demat Account (Rs 499 Opening Charges Waived Currently)
— Full Broker Services at Discount brokerage rate offering a wide range of investment options and research reports.

About Kotak Securities Limited

Kotak securities logo

Kotak Securities Limited (KSL) is a part of Kotak Group with a legacy of over +20 Million Customers. Looking into the parent Kotak Group, they offer a wide range of financial services in the fields of  commercial banking, stockbroking, mutual funds, life & general insurance, and investment banking. Kotak Group caters to the diverse financial needs of individuals and the corporate sector.

While discussing its Kotak Securities segment, it is one of the largest broking houses in India with a wide offline and online presence. Currently, it is the Seventh largest stockbroker in India in terms of total clients on NSE.

Kotak Securities operate in five main areas of business: Stock Broking (retail and institutional), Depository Services, Portfolio Management Services, Distribution of Mutual Funds, Distribution of Kotak Mahindra Old Mutual Life Insurance Ltd products. Being a full-service broker, they also provide in-depth market research reports to their clients.

Kotak Securities Trade FREE Plan Review

After the entrance of the discount brokers in the stockbroking industry, the traditional full-service brokers started getting a lot of competition from the new disruptors like Zerodha and Upstox. They started offering cheaper brokerage charges with technically advanced technology platforms which attracted a lot of customers.

To fight back with the disrupting discount brokerage, Kotak securities launched its TRADE FREE PLAN in November 2020. Here are key facts about Kotak Securities Trade FREE Plan:

  1. The plan is also known as FIT (Free Intraday Trading).
  2. It offers ZERO Brokerage on Intraday Trades
  3. For all other F&O trades, the brokerage is charged at Rs.20 per order
  4. MIS & Super Multiple (Cover Order) at also charged at just Rs.20 per order
  5. Trade FREE Plan offers Margin Trading Facility
  6. Investors can also use Stocks as Margin (Instead of Cash Margin) in this plan
  7. Finally, Customer Satisfaction Guarantee is offered by Kotak Securities Trade FREE Plan

Quick Note: Under the Customer Satisfaction Guarantee,  if the customer is not satisfied with the services, they can ask for refund of fees and brokerage within one month of account opening.

Another exclusive feature of this new Kotak Securities TRADE FREE Plan is that here customers can open their broking account in just 60 minutes and start trading the same day.

Overall, through the newly offered TRADE FREE Plan, Kotak securities is migrating from the trading broker model to the discount brokerage model.

Quick Link to Open FREE Demat Account With Kotak Securities Trade FREE Plan.

 

Brokerage and Other Charges of Kotak Securities Trade FREE Plan:

Brokerage Charges of Kotak Securities Trade FREE Plan

SegmentBrokerage
Intraday (All Segments)FREE
Delivery (Equity, Commodity)0.25% of Transaction
Margin Intraday Square off (MIS) & Super MultipleRs 20 per executed order
  • FREE :  Intraday Trades — All Segments:  Zero brokerage for intraday trades across Cash, Futures & Options, Currency & Commodity
  • Rs 20 Per Order : All other F&O, MIS & Super Multiple (Cover Order) — Flat fee of Rs 20 per executed order
  • 0.25% of Transaction: Equity & Commodity Delivery — Equity & Commodity Delivery at just 0.25% of transaction value. This brokerage is subject to a minimum brokerage of  Rs 20 per executed order.

Account Opening Charges and AMC

  • Account Opening Charges: NIL (Rs 499 Waived Off)
  • Annual Maintenence Charges: Rs 50 per month

Quick Link to Open FREE Demat Account With Kotak Securities Trade FREE Plan.

Is Intraday Trading actually FREE under the Trade FREE Plan?

In the Trade FREE Plan, No brokerage is charged for intraday trades for which you provide at least the exchange-prescribed margins. However, in order to adhere to statutory requirements, a nominal brokerage of only 1 paisa per scrip/underlying is charged. Further, the catch is that higher exposure intraday trades using Super Multiple will incur a flat brokerage of Rs 20 per executed order.

Trading Platforms by Kotak Securities

Kotal Securities limited offers multiple trading platforms so that the customers can choose the one that suits their requirements the best. Here are the trading platforms offered by Kotak Securities:

  •  Kotak Stock Trader: It is a is a widely used mobile trading app for trading in the Indian stock market. The app allows you to trade Equities, Futures & Options (F&O), Currency F&O, and Commodity, track your portfolio, get live streaming market updates and stock quotes, keep a watch on our research calls, and much more. Here’s a link to Kotak Stock Trader App on Google playstore.
  • TradeSmart Terminal: This terminal comes loaded with advanced trading features like Powerful watchlists, Integrated market depth in order form, Comprehensive fundamental and technical market data, Advanced charting (integrated with Chart IQ), 15-minute built-up screen (for derivatives), Sentiment and price heatmap, Option chain, Future rollover data and more.
  • Keat Pro X: This is Kotak’s high-speed online stock trading software to make the trading experience vivid and alive. A few of the key features of Keat Pro X are Live-streaming of stock market data, High-speed stock market trading, Up-to-date account information, Well-researched stock recommendations and more.
  • .com: This new trading website by Kotak securities is designed for simplicity, high-speed and performance. It comes with an intuitive interface and is loaded with new features to enhance the client’s trading experience.

PROS and CONS Of Kotak Securities Trade FREE Plan

Pros of Kotak Securities Trade FREE Plan

Here are a few of the top advantages of Kotak Securities Trade FREE Plan:

  • Zero Brokerage on Intraday Trading
  • Flat brokerage of Rs 20/per order of F&O Trades
  • Use of Stocks as Margin (Instead of Cash Margin)
  • Full Broker Services at Discount brokerage rate offering a wide range of investment options and research reports.
  • Multiple trading platforms to fulfill almost all customer requirements.
  • In-depth market Market Research Reports

Cons of Kotak Securities Trade FREE Plan

Here are a few of the top disadvantages of Kotak Securities Trade FREE Plan:

  • Higher Brokerage Charge on Delivery trades compared to discount brokers
  • Higher AMC compared to other leading brokers

Closing Thoughts

Kotak Securities is a brand of the leading private bank in India “Kotak Mahindra Bank”. The Trade FREE Plan is an added benefit for the traders and investors who want to open their demat account with a reputed bank along with enjoying lower brokerage charges.

Moreover, Kotak Securities stockbroking, being a full-service broker also offers add-ons like Research Reports, Advisory, multiple investment options, etc which can be beneficial for the investors. Overall, if you want to enjoy full-service broker services along with lower brokerage charges, then you should definitely go with Kotak Securities Trade FREE Plan.

That’s all for this post on Kotak Securities Trade FREE Plan Review. Do let me know what you think about this brokerage plan by commenting below. Have a great day. Happy Investing.