India Pesticides IPO Review 2021 - IPO Date, Offer Price & Details! cover

India Pesticides IPO Review 2021 – IPO Date, Offer Price & Details!

India Pesticides IPO Review 2021: India Pesticides Ltd. (IPL) IPO opens on 14th June and closes on 17th June 2021. In this article, we cover the IPL IPO review and look into important IPO information to find out the possible prospects of the company.

India Pesticides IPO Review- About the Company

IPL Logo

Founded in 1984, India Pesticides Limited (IPL) is one of the fastest-growing and leading agrochemical manufacturers.

Since its inception, the company has come a long way to manufacture herbicide and fungicide technicals and formulations. In addition, the company also manufactures active pharmaceutical ingredients (“APIs”).

When it comes to technicals IPL is the only Indian manufacturer and one of the top global manufacturers for technicals like  Captan, Folpet, Thiocarbamate Herbicide.

The company has obtained registration for 22 agrochemical technicals and 124 formulations for sale in India. For exports, it has a license for 27 agrochemical technicals and 34 formulations 

India Pesticides Limited Total Assets over the years | India Pesticides IPO Review

IPL has 2 manufacturing plants located at Dewa Road, Lucknow, and Sandila, Hardoi in Uttar Pradesh. These give the company an installed capacity of 19,500 MT for agrochemicals and 6500 MT for formulations.

Last Fiscal year the company manufactured 15,003 MT of Technicals touching 75% of its plant’s operating capacity. The Growth that the company has shown considering the pandemic is impressive 

In addition to its manufacturing capabilities, the company has also had 2 well-equipped in-house laboratories. These are registered with the DSIR and enhance the firm’s R&D.  

India Pesticides' Profit after tax | India Pesticides IPO Review 

The market for its agrochemical formulations is mainly domestic being sold to crop protection manufacturers like Syngenta Asia Pte Ltd, UPL Ltd, ASCENZA AGRO, S.A., Conquest Crop Protection Pty Ltd, Sharda Cropchem Limited, and Stotras Pty Ltd. Its technicals however have both a domestic and global demand.

The company exports them to 20+ countries. These span across Asia, Europe, Africa, and even includes Australia. Its technical exports accounted for 56.71% of the revenue for fiscal 2021.

The IPO is attractive for investors looking for dividend stocks. This is because the company has maintained a good record for dividends for the last 3 years. 

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India Pesticides Limited’s (IPL) Competitors

Following are some of its domestic listed competitors.

Its global competition includes 

  • China National Corporation Ltd
  • Sumitomo Chemicals Co. Ltd
  • BASF SE

India Pesticides IPO Review – Grey Market Premium

The shares of Indian Pesticides Ltd. were trading at a 34% premium in the grey market a day before the IPO. The shares traded at a price of Rs. 396 giving them a premium of Rs. 95-100 over their issue price band of Rs 290-296 per share.

Key Information of India Pesticides IPO

The promoters of the company include Anand Swarup Agarwal and the ASA Family Trust. They have appointed Axis Capital Ltd. and JM Financial Ltd. as the lead managers to the issue. KFin Technologies Pvt. Ltd. has been appointed as the registrar to the issue.

ParticularDetails
IPO Size₹800.00 Cr
Fresh Issue₹100.00 Cr
Offer For Sale(OFS)₹700.00 Cr
Opening DateJun 23, 2021
Closing DateJun 25, 2021
Face Value₹1 per equity share
Price Band₹290 to ₹296 per equity share
Lot Size50 Shares
Minimum Lot Size1
Maximum Lot Size13
Listing DateJul 5, 2021
 

India Pesticides IPO Review – Purpose of the IPO

The proceeds raised from the IPO will be used for the following purpose:

  • Finance working capital requirements.
  • Other general corporate purposes. 

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Closing Thoughts

The IPO opens on 23rd June and closes on 25th June 2021. For retail investors, it can be a good opportunity to look into the company’s future prospects and apply for the IPO if they believe in the products and growth prospects of India Pesticides Ltd.

That’s all for this post. Do let us know what you think of the India Pesticides IPO review. Are you planning to apply for this IPO or not? Comment below. Cheers!

Standalone Vs Consolidated Financial Reports - What's the Difference

Standalone Vs Consolidated Financial Reports – What’s the Difference?

Understanding Standalone Vs Consolidated Financial Statements: As an individual investor being thrown into the world of investing may be a wild experience. Understanding ratios and deciphering financial statements like balance sheets, income statements, etc can all be a daunting task for beginners. And all this only to find out that there are different types of financial statements like consolidated and standalone.

In this article, we make the concepts of Standalone and Consolidated financial statements easier to understand. However, before we dive into the difference between standalone vs consolidated financial reports, first we’ll understand what consolidated and standalone financial statements are. Further, we’ll also understand why their need arises in the first place by understanding what holding and subsidiary companies are. Keep reading to find out.

What is a Holding and Subsidiary Company?

Top Companies with Zero Promoter Holding in India!!

A holding company is one that owns enough shares of other companies which it then controls. A subsidiary is an independent company where more than 50% is owned by another company. Whereas 20%-50% of an independent companies shares are held by another company it becomes an associate company of the holding company.

We generally hold the idea of a company in its early stages. When a company is formed it is a single entity focussing to succeed and thrive in one business. But as a company grows it also begins to expand horizontally into other businesses. This can be done by opening up new ventures or simply by acquiring other ventures. 

In this case, we have one company which is the holding company and others which it has expanded or acquired into known as subsidiaries.

Examples: One of the best examples we can take over here is Reliance, HDFC, and L&T.

Reliance started out in the textile industry and then slowly entered the petroleum business which today is part of its core business. But in the recent past, we have seen Reliance expand successfully into telecommunication, retail etc. This is done by opening up companies like Reliance Retail Ventures Ltd. and Reliance Jio.

Here Reliance Industries acts as a parent/ company which focuses on its core business. It is also called the holding company as it holds a significant stake in the Retail and Jio to have a controlling interest in them. Here Jio and Reliance Retail have their own separate areas of focus and are called subsidiaries. Here even Mumbai Indians is one of the subsidiaries of Reliance Industries.

This can be observed with HDFC too. HDFC Ltd is the holding company that holds a stake in its subsidiaries like  HDFC Bank Ltd, HDFC Life Insurance Ltd and HDFC Asset Management Company Ltd which operate as separate entities. 

Now that this is clear let us understand what are consolidated and standalone statements.

What are Consolidated financial statements?

Consolidated financial statements are combined financial statements of a company along with its subsidiary and associate companies. This shows us the overall financial position of the entire group of companies. 

These statements will include all the revenues, profits and debt by all the subsidiaries of the company too.

What is a Standalone financial statement?

Standalone financial statements are financial statements of the holding company alone excluding its subsidiaries and associate companies. These statements will only include the revenues and profits of the holding company.

This at times may be misleading as they may only include interest or dividends received by the holding company and only the debt taken over by the holding company. This may portray a favourable picture when its subsidiaries may be severely indebted. 

Example: Standalone Vs Consolidated Financials

Let us understand this scenario better with the help of an example. Take a company ABC Ltd which is an automobile manufacturer. ABC Ltd. has a subsidiary XYZ Ltd. in which it owns a 70% stake. Its subsidiary XYZ Ltd is engaged in the tire manufacturing industry. If one would only take a look at the standalone statements of ABC Ltd he would notice that the company has made a reasonable profit while maintaining reasonable amounts of debt. 

But if the investor were to look further into the consolidated statements of ABC Ltd he would be presented with the true picture. XYZ Ltd has taken huge amounts of loan to maintain profitability. And on top of that, it has also used this loan to pay dividends to its shareholders while ABC Ltd is a majority shareholder. 

The standalone financial statements would show that the company is profitable with low debt. But the consolidated statements show us a truer picture of what is actually going on. In this case, the group is severely indebted and not all its profits stem from operations.

How to find Standalone Vs Consolidated Financial Reports?

You can find the Standalone Vs Consolidated Financial Reports of public Indian companies on the Trade Brains Portal, the best stock research website in India. Here are the exact steps to find Standalone Vs Consolidated Financial Reports:

  1. Go to Trade Brains Portal
  2. Search a company in the Top Search Bar
  3. Open to the Stock Details Page and Toggle on ‘Standalone/Consolidated’ Switch to find standalone vs consolidated financial reports

standalone vs Consolidated Trade Brains Portal

You can find the standalone vs consolidated financial statements and ratios of each public company that you’re researching on this portal.

In Closing: Which one should you choose?

In this article, we looked into the difference between standalone vs consolidated financial reports. After going through standalone and consolidated financial statements it is evident that consolidated gives a truer picture of the business. While going through the consolidated financial statements can be harder it still gives us a clearer picture of the company’s financial health and efficiency.

Ignoring the consolidated financial statements will severely affect the decision-making of an investor. That’s all for this post let us know what you think in the comments below. Happy Investing! 

What is an Exchange-Traded Fund? How is an ETF different from a Mutual Fund? cover

What is an Exchange-Traded Fund? How is an ETF different from a Mutual Fund?

Basics of Exchange-Traded Fund Explained: To understand what is an ETF (Exchange-Traded Fund) it is imperative for us to first understand the concept of Investing in a Fund, in detail.

‘Investing via funds’ simply implies investing in a large pool of money and which in turn is invested and managed by a fund manager. The funds are managed by experienced professionals, whose sole job is to manage the money in this fund.

Professional management ensures that the money is invested after careful analysis and planning. And the maximum return is generated for the fund. Now, through this write-up, we will try and understand the concept of Exchange-Traded Fund in detail.

What Is an Exchange-Traded Fund?

ETF, unlike any other Mutual Funds, trades like a regular share in the stock market. The ETF is a combination of various stocks which are listed on a stock exchange.

Under a particular ETF umbrella, the money is invested in various stocks which fit the objective of that particular fund. The ETF is then divided into various units and is bought or sold through a registered broker via the stock exchange. They are and can be traded like any other share on the stock market.

As the shares listed on the stock exchange are part of these ETFs, so any movement in the prices of these shares has a direct impact on the NAV (Net Asset Value). An investor can buy as many units as one wishes to without any restrictions from the exchange.

To put it in simple words, ETFs are funds that track indexes like Nifty50, Sensex, etc. And when they invest in these ETFs, we are directly investing our interest in the movement of these underlying assets.

Therefore, ETF combines the range of stock in a diversified portfolio, and it is as simple as trading any stock in the stock market”

How do we earn using an Exchange-Traded Fund?

Two are two modes of earning via an ETF:

– Income in the form of Dividends
– Buying or selling in the secondary market like any other shares and gaining from it

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Why should we invest in an ETF?

Now, having understood the technical aspect of an ETF, it is important for us to understand whether it makes sense to invest in an ETF. Let us discuss that:

Firstly, Investing in an ETF is certainly very easy and convenient. It can be traded just like any other share in the stock market. And also the very fact that ETFs are listed on the stock exchange, makes it even more lucrative to invest in. And that makes it also a very transparent instrument to trade in as the movement on the prices can be seen on an ongoing basis.

Secondly, unlike in other mutual funds, ETFs don’t attract any expense cost. So, if one is unsure about investing in shares of any particular stock, then one can choose to invest in sector-specific ETFs also.

Performance of different Exchange-Traded Fund as of 11th June 2021(Source: MoneyControl)

How is Investing in an ETF different from investing in Mutual funds?

The basic premise of both ETF and Mutual Fund is the same. In both the forms of investment tools, the fund comprises a pool of shares and other assets and then the money is invested in them by the interested parties.

“A Mutual Fund is a collective investment that pools together the money of a large number of investors to purchase a number of securities like stocks, bonds, etc.”

However, the following are the most important point of difference between ETF and Mutual Fund:

  • In Mutual Funds, you can invest only during specific times of the day (mostly after the close of the trading activity for the day), whereas in an ETF we can invest any time during the day.
  • Price fluctuations happen throughout the day while trading ETFs, but in the case of Mutual funds, the price fluctuations happen only at the close of the market for the day.
  • While trading an ETF, the cost incurred is in the form of brokerage from the broker firm but while trading Mutual funds, the cost incurred is in the form of commission (depends on expense ratio).
  • The Mutual funds are actively managed by the fund manager and the idea is to beat the returns given by the market. But ETFs are passively managed as they track more of the performance of the index and they can be bought or sold just like any other shares in the market.
  • While trading ETF, there is generally an additional cost involved and which is the bid-ask spread. And in the case of Mutual Fund, there is no additional cost of buying or selling the units.
  • There is no penalty involved while buying or selling the ETF, but generally, mutual funds levy a penalty if we want to withdraw money before the stipulated time. Eg: some mutual funds levy a penalty if we withdraw money within 90 days after the initiation of investment.

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Closing Thoughts

The ETF has made a late entry into the world of investment, but it has been worth the wait. It has most of the features which a regular mutual fund has, but also gives the additional advantage of being able to be traded anytime during the day (unlike mutual or index funds). And with the growth of Mutual Fund as an investment incentive, the future looks very bright for this asset class.

That’s all for this post. We hope you have learned something new from our article on Exchange-Traded Fund. Let us know your views in the comment section below. Happy Investing and Trading!

Airtel vs Jio Battle - How did Airtel survived after Jio entering the market? cover

Airtel vs Jio Battle – How did Airtel survived Jio’s Disruption in Telecom?

A Case Study on Airtel’s Journey after Jio entered Market: India has the second-largest market by the number of users. Despite this, we see only 2.5 players out of which only one Jio thrives whereas Airtel manages to compete and VI looks to an uncertain future. Airtel vs Jio vs VI, the three side battle which started as Jio made its debut.

In this article, we take a look at how Airtel managed to survive the Jio storm. Keep Reading to find out!

The Backstory of the Telecom Industry

Poster showing telecom companies logo in India | Airtel vs Jio vs Vodafone-Idea

Bharti Airtel is one of the oldest operators in the telecom industry surviving for over 2 decades. But if we take a look at airtel’s hold on the Indian market for the period before 5 years we would notice that the company had a stronghold on the Indian market despite facing huge competition. So much so that the company even expanded its business to Africa. 

However, Reliance’s entrance into the telecom industry with Jio took all the existing operators by shock. Jio offered their Sim cards with 4G data capabilities for free. This also included free 4G data and free VoLTE calls for almost a year.

This took the industry by storm as the data packs provided by existing service providers which lasted a month now could be used in a day thanks to Jio. Jio users could now access up to 4GB 4G data per day for free whereas existing providers offered 1-3GB 4G packs per month.

Although the quality of network provided by Jio paled in comparison to others it was virtually impossible to compete with someone who offered their services for free. 

Bharti Airtel Office Building image

This forced the existing operators into damage control. 2016 started out with more than 12 operators, whereas there are only 3 private operators today. Within 6 months Jio managed to gain over 100 Million subscribers.

However, Jio did not stop after the free offer period. Once that was over they introduced the cheapest 4G data plans in the country. Here too the packs included data per day which otherwise were offered per month. 

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Supreme Court Verdict

However, Jio coming to existence was not the only bad thing that happened to telcos. In a court battle, the lasted more than a decade the courts ordered telcos to pay up their unpaid duties in AGR fees.

Airtel’s total liability is estimated to be ₹41,507 Crore. Vodafone Idea’s total liability was estimated to be ₹39,313 Crore. 

Mukesh Ambani and Reliance Jio logo

Within 3 years, Jio ranked second among telcos when it came to the number of subscribers and become everyone’s favorite in Airtel vs Jio battle.

Airtel and Vodafone Idea on the other hand ranked themselves among the companies to have the worst quarter in Indian history. They declared a combined loss of Rs. 73,000 crores. At the same time, Jio declared profitability. 

Why were these top telcos not able to handle Jio entering the market?

The telcos in 2016 which dealt mainly in 2G and 3G faced a very different digital environment than what we have today.

Although apps today that provide OTT content, music, and live TV existed they were not nearly as popular during the 3G era. Nor did the telcos make an effort to make data cheap enough to encourage this digitization. 

These telcos were still stuck in a world of voice calls. These telcos focussed on lobbying while spending too much on spectrum fees.

They also focussed on expanding their customer base outside India instead of providing the best services at the best rates possible. When they met a worthy competitor they suffered.

Where has Airtel reached today in Airtel vs Jio battle?

telecom market share jio airtel vodafone

(Source: Business Insider)

Taking notice of the stats above one would expect the telecom sector to become a monopoly. But in reality, Airtel has managed to thrive whereas Vodafone and Idea have merged to survive the onslaught. 

Over the years Jio has managed to become a market leader in terms of the subscriber base of almost 411 million for the last quarter FY20-FY21, while Airtel and VI’s stood at 307.94 million and 269.8 million respectively.

Although Jio is currently the undisputed leader right now it faces serious issues when it comes to active users.

According to the Telecom Regulatory Authority of India (TRAI) showed that Jio had the lowest active user base at  79.01%. On the other hand, VI had  89.63% and Airtel had 97.44% of its users active. 

What was the Main Cause of This?

As observed earlier, although Jio offered its services at cheaper rates the quality of service was no match to airtel. Once Jio was forced to increase its rates and airtel adjusted its rates and packs there was little difference.

Although price difference did not matter when Airtel’s products were slightly higher than Jio as they offered better quality. The main USP that Jio has held onto has now washed away.

Also, Jio faces concerns about active user numbers as their older customers are shifting to other networks or simply using Jio as a backup sim on their dual sim phones.

Jio’s network quality has suffered severely because of the limited spectrums available.  This bet by Airtel on quality has also bought it more quality users who are willing to spend.

When it comes to data consumption Airtel’s users consume 16 GB a month per user and 1,005 min a month per customer. On the other hand, Jio customers consume 16 GB a month per user and 1,005 min a month per customer.

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Closing Thoughts 

5G Network representative image | Airtel vs Jio

Airtel here cannot manage to rest of its laurels for having a high active user base. Jio too has identified this drawback and has accordingly acted on it in the recent spectrum sales to improve its quality.

In addition to this, the fate of the telecom industry will be decided on the basis of the telcos adaptability to 5G. With the way things are going with Idea struggling to survive if it fails to raise funds, its customer base will simply be carved up by Airtel and Jio. 

What do you think about the future of the telecom industry and how does the Airtel vs Jio vs VI battle gonna take shape? Let us know in the comments below. Happy Reading!

Best Leading Technical Indicators - Technical Analysis for Trading! cover

Best Leading Technical Indicators – Technical Analysis for Beginners!

Leading Technical Indicators Explained: Has it ever intrigued you, as to why do we have so many Technical Indicator tools and why don’t all the indicators work at the same time and also in the same magnitude? The answer to this question is very simple. This is because not all technical indicators are the same and they can be classified as leading and lagging indicators.

There are certain indicators that try to pre-empt the likely move in the market. They use different ingredients and try to understand what could be the likely move in the prices of the underlying asset. These indicators are called Leading Indicators. On the other hand, there are certain indicators that try to understand the historical price movement and do a post mortem analysis. These are called Lagging Indicators.

Today, we will try to understand the best leading technical indicators that stock traders should definitely know. Keep reading.

What are Leading Technical Indicators?

Leading technical indicators are those Indicators that try to analyze the data received from past price movements and try to pre-empt or predict the future price movements. They allow traders to anticipate future price movements.

However, one needs to be careful while using leading indicators as they have a tendency to give out wrong information (for obvious reason as it is a prediction). Nonetheless, if the results turn out to be true then they can provide substantial returns.

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Now, let us discuss the Best Leading Technical Indicators in detail that every stock trader should know:

1) RSI (Relative Strength Index)

The concept of RSI was developed by J.Wells Wilder and it is widely accepted as one of the Leading Momentum Indicators.

RSI is a very popular methodology amongst traders as it gives strong signals even during sideways and non-trending days​. The value of RSI oscillates between 0 and 100​. The default number of days while calculating RSI is 14 days​.

  • If the market starts to trade around 20 levels, then the falling momentum is expected to pause and we could be seeing a bullish reversal in the market.
  • On the other hand, if the market trades around 80 levels on the RSI scale, the bullish momentum is expected to be halted and we could be seeing a bearish reversal in the market.

Interpreting RSI

RSI on NIFTY | Best Leading Technical Indicators

(Source: Zerodha Kite, RSI on Nifty)

Now, if we look at the image above, we see the RSI indicator being applied on the daily chart of Nifty. The RSI is applied on the bottom half of the chart.

As we see that the market is in a bearish momentum and the momentum looks like it wants to continue. But, if we look at the RSI scale, we see market trading below the 20 levels and which is where the falling momentum is expected to be halted (at least technically).

RSI indicator gave this momentum even as the market was still declining. But soon, we see selling momentum fizzling out. Once we see a higher low pattern formation on the chart, more buying seems to come in the market and fresh buying momentum follows soon.

If in the bullish market, we see the RSI scale touching 80 and starting to turn downwards, the bulls and long position are required to be careful as we could see a bearish reversal in the market.

One needs to be careful while overcommitting to these indicators, as the leading indicators are trying to predict the market and as we are aware that the predictions have the tendency to go wrong.

2) MACD (Moving Average Convergence Divergence)

MACD is an Acronym for Moving Average Convergence and Divergence. It is one of the most prominent and the most reliable form of leading technical indicator. The Concept of Bollinger Bands was developed by Gerald Appel in the ’70s.

As the name would suggest, MACD is a convergence and divergence of two moving averages. Therefore, convergence here is the movement of two moving averages towards each other. And divergence is the movement of two moving averages away from each other.

Interpreting MACD

MACD is calculated by using a 12 day EMA and 26 EMA​. The convergence or divergence is calculated by subtracting 26 EMA from 12 EMA​. And a simple line graph is plotted from the calculated values and it is called a “MACD line”​.

If the 12 EMA is higher than 26 EMA, it means that there is positive momentum in the market because the short-term EMA is a better indicator of current market strength​. If the 12 EMA is below 26 EMA, that means that there is negative momentum in the market​.

The difference between the two EMA is the MACD spread​. When the share/stock is in momentum, then the spread increases​. And the spread decreases when the momentum dwindles. We should look for buying opportunities when the spread is positive and vice-versa when the spread is negative.

MACD on Reliance Industries | Best Leading Technical Indicators

(Source: Zerodha Kite, MACD on Reliance)

Now, the chart above is the daily chart of Reliance Industries and MACD has been used as a technical indicator. If we look at the chart above, a minimum of four trading opportunities has been spotted using the MACD indicator.

Starting from the left-hand side of the chart, in the first opportunity, when the MACD crosses from bottom to top, we get buying opportunity in the market. And the trade gives us a very substantial return of nearly 8-10% percent on the trade.

In the second opportunity, we get a selling chance in the market and even this trade gives us a return of more than 10% on the trade. A few more similar trade opportunities can be spotted in the market.

Again, importantly if we carefully look at the chart above, we see three MACD crossover trades in the market. A bearish trade when the MACD line goes below the 9 EMA line. And a buy trade when MACD crosses over 9 EMA on the upside.

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Analyzing MACD

Following are MACD interpretations:

  • When the MACD line crosses the centerline (0 levels) from negative to positive territory, it means that there is a positive divergence​. It’s a sign of bullish momentum​
  • When the MACD line crosses the centerline (0 levels) from positive to negative territory, it means that there is a negative divergence​. It’s a sign of bearish momentum
  • Now, a lot of you could be of the view that MACD is lagging and gives a signal after the move has happened​. So, to improvise a simple 9 EMA is added. So whenever a crossover happens between MACD and 9 EMA, a trade opportunity is generated.
  • The 12 EMA and 26 EMA are not hard and fast rules, one can change those parameters depending on one’s own trading style and aggressiveness.

Closing Thoughts

Now from the discussion above, it can be seen that the best leading indicator gives us very profitable opportunities as we try to enter the trade before the actual move starts. But it does come with its own set of challenges because the leading indicators have a tendency to give false results.

That’s all for this post. We hope you have learned something new from our article on Leading Technical Indicators. Let us know your views in the comment section below. Happy Investing and Trading!!

Why Should Young Adults Start Investing Early

Why Should Young Adults Start Investing Early?

Investing at a young age can sound intimidating. And, it is! But saving from your paycheck and letting it sit in a savings account idle doesn’t do any good to you. Plus, there won’t be any sudden short-term satisfaction when you will be reaping the benefits of investing in your thirties. 

However, investing at a young age is the smartest way to achieve the financial goals you want and build wealth. Here’s how investing early benefits you:

1. Low Expenses, Easy Investing

Without a doubt, the age between 17 to early twenties means fewer expenses. There’s not much in terms of monthly expenditure. The real deal starts when you graduate, look for a job, a place to live in, and possibly get married. 

That is when your expenses will increase. So, investing early can prepare you for hard times. You won’t have to rely on the minimum amount available in your savings account when your savings can double and triple overtime through investing. 

2. Let Your Money Work for You

The power of compound interest is highly beneficial if you look at the statistics. You must have heard of earning interest and earning interest on interest. If you aren’t aware of interest on interest, it simply means compound interest. 

The million-dollar question is, how is compound interest beneficial for your life? Through what ways can it help you? If you observe the life of a person that recently graduated and has a job, you will observe them living off and relying solely on their paychecks. 

There is no other way of income for them. This is how they will live until they start to invest. However, for investors (especially the young ones), the annual investment earnings will most likely be more than your annual salary. 

For example, suppose you invest $1,000 every month in a mutual funds account that returns you an annual return of 10% from the time you turn twenty years of age until you turn forty-five (and possibly reinvest your earnings). In that case, you will have made more than one million dollars as an investment. 

 This means the 10% makes an extra $100,000 every year for you. That is the magic of compound interest. And if you keep investing $1,000 every month till you turn sixty-five, you will have almost nine million dollars in investment. 

3. Exposure and Experience

We can’t learn a skill until we practice it daily. As the famous saying goes, “practice makes a man perfect.” This saying fits perfectly with investing as well. If you want to become a wealthy and top-of-the-line investor, you need to invest for a couple of years. 

You can’t substitute valuable experience with anything else. So, why not starting gaining exposure and build that valuable experience from a young age? 

You might be thinking, how does this help? Well, down the road and a few years later, when your friends and people of your age would start investing and learn the ins and outs of it, you will have become a professional with an experience of a professional investor. 

4. More Time to Recover From Losses

Investing at a young age is extremely valuable in terms of facing a loss. Investing at a young age makes you more receptive to seasoned pro’s advice. From there, you will be taking the step of learning from your mistakes.

You will also give the famous investors and their way of investing a chance and adopt it. However, going down the road of investment, you will most likely make some bad decisions that will make you lose some money. 

But, starting investing at a young age and from a small amount (until you are sure you should invest more) will help you recover from the losses you have faced. This will happen by changing your investing strategies. 

You will have ample time to learn from your mistakes and rectify them, which people in their late twenties and thirties don’t have. 

5. Youngsters Can Take Risks

This is how life works: the older you grow, the more financial obligations you will face. From buying a house and car, raising your children, medical expenses to paying bills and school fees, you will be bombarded with financial commitments. 

With all these responsibilities on your shoulders, you won’t be able to take valuable risks. Because what if you lose your money and lose everything you have? You must have noticed older people investing more in low-risk assets (deposits and bonds). 

This means low risk and fewer returns. But investing at a young age gives you the advantage of being free from these financial obligations. It also enables you to take the necessary valuable risks while investing. 

As higher risks lead to higher returns, gaining compound interest on these returns will make you wealthy sooner. 

6. Get Financial Freedom

Relying on a typical 9 to 5 job will never give you the financial freedom you are looking for. It will hardly pay off your monthly expenses. If you look at the millionaires of every industry, you will find that they invest in more than one type of asset.

They never relied on their salaries to become millionaires. Instead, they have many sustainable income streams, including rents and gains from investing in properties, business, financial securities, or investing in dividends.  

Being careful and responsible in investing in different types of assets and gaining returns, and then reinvesting the gains responsibly is the perfect formula for making you wealthy in the long run. 

In short, investing from an early age will give you financial gains and will make you less reliant on your monthly salary. And when the time comes (or if you want), you can retire or semi-retire at a proper young age than most people of your age group. 

Investing not only offers gains and wealth, but it also teaches you valuable life lessons. It makes you patient, responsible, and resilient, so you can stand the test of times and prepare for it from a young age.

Stock Market Investing for Beginners by ELLE J. C.
ELLE J C's stock market investing for beginners

Stock Market Investing is what new young investors should be looking at right now!

The first time I tried, I lost it all. Every penny I put into a stock market…the market crashed…and I was left with empty pockets.

But this is not the reason why I wrote this book. And I didn’t want you to read about how I lost everything and gained it all back and more.

The reason for this book is to teach motivated people like you to pull as much cash out of the stock market as possible Today. And do that with a few ups and downs. Is that what you want?

Take a look at what’s inside:

  • Are you a complete stock market newbie? This chapter is going to set you for a decent and profitable start, so read carefully….
  • Is the stock market investing for you? Discover 3 biggest benefits
  • “The Law Of Supply and Demand” – what it is and how it can affect your investing strategies?
  • Stocks vs. Gold, should you consider both or just stick to one? Which one is more profitable long term?
  • How to create your stock trading style for fast cash and whether you need it initially?
  • Long-term vs. Short-term investing, the most profitable strategies according to your financial needs and desires
  • How much money do you need to get started? Can you start with none? (don’t worry if your budget is very small, I have special strategies that will help you overcome this obstacle)
  • The #1 platform to start stock trading as a complete beginner (Perfect for experienced investors and traders as well)
  • When is the right time to sell and max out your profits?
  • What about taxes? Should you pay any, and are there any legal ways to avoid them?
  • And much much more..!!

And even if you are a complete stock market newbie and haven’t invested a penny in your life, this book will take you by the hand and lead you through every single step!

(Note: This guest article is written by ELLE J. C.)

Dodla Dairy IPO Review 2021 – IPO Date, Offer Price & Details! cover

Dodla Dairy IPO Review 2021 – IPO Date, Offer Price & Details!

Dodla Dairy IPO Review: The year 2021 was off to a great start and now we’re back with at least 4 awaited IPOs coming in this week. These also include the Dodla Dairy.

In this article, we cover the Dodla Dairy IPO Review. Here, we’ll look into important information on the IPO and find out the possible prospects of the company.

Dodla Dairy Ltd IPO – About the Company

Dolda Dairy Logo | Dodla Dairy IPO Review

Founded in 1995, Dodla Dairy Limited commenced its operation in 1997 at Hyderabad. Dodla Dairy is an integrated dairy company engaged in the procurement, processing, distribution, and marketing of milk and other dairy products.

Their product portfolio consists of Milk, Butter, Ghee, Paneer, Curd, Flavoured Milk, Doodh Peda, Ice Cream, and Milk Based Sweets. These products are conveniently packed to suit the various needs of its consumers. Their products are available for purchase in 10 states.

Profit After Tax of Dodla Dairy Ltd.

The company has 13 processing plants to process raw material into packaged milk and manufacture dairy-based value-added products. Their procurement is centered in 4 states Andhra Pradesh, Telangana, Tamil Nadu, and Karnataka.

When it comes to procuring the company is the third-largest dairy in India in terms of milk procurement with an average procurement of 1.00 million liters of raw milk per day as of May 31, 2018 (“MLPD”) and second highest in terms of market presence amongst private dairies.

The company also uses this network to manufacture and sell cattle feed to farmers through its procurement network.

Total assests of Dodla Dairy | Dodla Dairy IPO Review

The company has 86 milk chilling centers. They also have a strong distribution network of 40 sales offices, 3336 distribution agents, 863 milk distributors, and 449 product distributors across 11 states in India. Their key markets in India are Telangana, Andhra Pradesh, Karnataka, Tamil Nadu, and Maharashtra.

Dodla sells products in the domestic market under brands such as Dodla Dairy, Dodla, and KC+. The company also exports its products to Uganda and Kenya. It sells products overseas under brands Dodla Dairy, Dairy Top, and “Dodla+.

Like many other companies, Dodla Dairy too was faced the negative effects of Covid in its business. The company experienced a 20% drop in volumes and a 12% drop in sales for 4 quarters till the end of 2020.

ALSO READ

Sona BLW IPO Review 2021 – IPO Price, Offer Dates & Details!

Competitors of Dolda Dairy

Dodla Dairy Ltd – Key IPO Information

The promoters of the company include Dodla Sunil Reddy, Dodla Family Trust, and Dodla Deepa Reddy. 

ParticularDetails
IPO Size₹520.18 Cr
Fresh Issue₹50.00 Cr
Offer For Sale(OFS)₹470.18 Cr
Opening DateJun 16, 2021
Closing DateJun 18, 2021
Face Value₹10 per equity share
Price Band₹421 to ₹428 per equity share
Lot Size35 Shares
Minimum Lot Size1
Maximum Lot Size13
Listing DateJun 28, 2021

The company has appointed ICICI Securities and Axis Capital as boo running lead managers to the issue. KFintech Pvt. Ltd. has been appointed as the registrar to the issue.  

Dodla Dairy IPO Review – Grey Market Premium

The shares of Dodla Diary traded at a grey market premium of 18-20%. The IPO price band is set at Rs. 421 to Rs. 428 while the shares traded at a premium of Rs. 75-80.

Purpose of the Dollda Dairy IPO 

The funds raised from the IPO will be used for the following purposes.

  • Repayment/pre-payment, in full or part, of certain borrowings availed by the Company. This will be directed towards 32.6 crores raised from ICICI Bank, The Hongkong and Shanghai Banking Corporation (HSBC), and HDFC Bank. The total debt of the company stood at Rs. 87.37 crore as of December 2020. 
  • Purchase of equipment. The company plans to use Rs. 7.15 crore towards capital expenditure.
  • General corporate purposes

Quick Read

Paytm IPO Details (2021): Everything You need to know on India’s Largest IPO!

Closing Thoughts

The IPO opens on 16th June and closes on 18th June 2021. For retail investors, it can be a good opportunity to look into the company’s future prospects and apply for the IPO if they believe in the products and growth prospects of Dodla Dairy Ltd.

That’s all for this post. Do let us know what you think of the  Dodla Dairy Ltd. IPO review. Are you planning to apply for this IPO or not? Comment below. Cheers!

Sona BLW IPO Review 2021 – IPO Price, Offer Dates & Details!

Sona BLW IPO Review 2021 – IPO Price, Offer Dates & Details!

All you need to know on Sona BLW IPO Review 2021: The IPO season is back after over a month-long and this time possibly even covering for the one-month break this time. The Sona BLW Precision Forgings Ltd. IPO opens on 14th June and closes on 17th June 2021.

In this article, we cover the Sona BLW Precision Forgings Ltd. IPO review and look into important IPO information to find out the possible prospects of the company.

Sona BLW – About the Company 

Sona BLW IPO Review 2021 company logo

Founded in 1995 as  Sona Okegawa Precision Forgings Ltd in New Delhi, the company name was changed to Sona BLW Precision Forgings Ltd. in 2013. The company is one of India’s leading automotive technology companies.

The company is involved in designing, manufacturing, and supplying highly engineered, mission-critical automotive systems and components. These include differential assemblies, Electric Vehicle traction motors (BLDC and PMSM), gears, conventional, micro-hybrid starter motors, and motor control units to automotive OEMs across the US, Europe, India and China, for both electrified and non-electrified powertrain segments.

Sona BLW IPO Review 2021 financials

They also acquired Comstar Entities in 2019. Sona Comstar was named among the top 10 auto-component manufacturers according to a CRISIL report. Sona BLW Precision Forgings is among the top 10 players globally in the differential bevel gear market. As of 2020, the company held a 5% Global market share for differential bevel gears, 3% for starter motors and 8.7% for Battery electric vehicle (“BEV”) differential assemblies.  The company is also the leading supplier of BLDC motors in India which are used in two-wheeler and three-wheeler Electric Vehicles.

Sona BLW also ranks in the top 2 exporters for starter motors in India and is also the largest manufacturer of differential gears for passenger vehicles, commercial vehicles and tractors in the country.

Sona BLW IPO Review 2021 net profit

The company has 9 manufacturing and assembly facilities 6 of which are in India and the rest in USA, China, and Mexico. They also have 8 warehouses. 5 of these are located in India and the other 3 in US, Germany, and Belgium.

Customers of Sona BLW

Their customers of Sona BLW include Indian and also global MNCs like

  • Ampere Vehicle
  • Ashok Leyland 
  • CNH 
  • Daimler
  • Escorts and Escorts Kubota
  • Geely
  • Jaguar Land Rover
  • Carraro
  • Dana
  • Jing-Jin Electric
  • Linamar
  • Maschio.
  • John Deere
  • Mahindra and Mahindra
  • Mahindra Electric
  • Maruti Suzuki
  • Renault Nissan
  • Revolt Intellicorp
  • TAFE
  • Volvo Cars and Volvo Eicher. 

Financials of Sona BLW

The company has managed to grow its net profit and revenue at 46.6% and 49.7% CAGR respectively between FY 2019-21. Despite COVID the company has still managed to grow at a 28% EBITDA margin in FY21.

Sona BLW IPO Review 2021 – Key Information

The company is backed by American private equity giant Blackstone through its entity Singapore VII Topco III Pte Ltd which holds a 66.28% stake in the company. The remaining is held by promoters Sunjay Kapur and Sona Autocomp Holdings Private Limited. The Offer for Sale component of the issue worth Rs 5250 crores is by Singapore VII Topco III Pte Ltd. The IPO will result in a 33% stake dilution. 

ParticularDetails
IPO Size₹5,550.00 Cr
Fresh Issue₹300.00 Cr
Offer For Sale(OFS)₹5,250.00 Cr
Opening DateJun 14, 2021
Closing DateJun 16, 2021
Face Value₹10 per equity share
Price Band₹285 to ₹291 per equity share
Lot Size51 Shares
Minimum Lot Size1
Maximum Lot Size13
Listing Date:Jun 24, 2021

The company has appointed Kotak Mahindra Capital, Credit Suisse Securities, JM Financial, JP Morgan and Nomura Financial as the book running lead managers to issue. KFin Technologies Pvt Ltd. has been appointed as the registrar to the issue. 

ALSO READ:

Paytm IPO Details (2021): Everything You need to know on India’s Largest IPO!

Purpose of the IPO for Sona BLW

Apart from the Offer for sale the Rs. 300 crore raised from the fresh issue will be used for the following purpose

  • Repayment or prepayment of company’s borrowings fully or partially. The company intends to use Rs. 241 crores for this purpose.
  • The remaining will be used for general corporate purposes.

In Closing 

In this article, we covered Sona BLW IPO Review 2021. The IPO opens on 14th June and closes on 16th June 2021. For retail investors, it can be a good opportunity to look into the company’s future prospects and apply for the IPO if they believe in the products and growth prospects of Sona BLW Precision Forgings Ltd.

That’s all for this post. Do let us know what you think of the Sona BLW Precision Forgings Ltd. IPO review. Are you planning to apply for this IPO or not? Comment below. Cheers!

Top Companies with Zero Promoter Holding in India!!

Top Companies with Zero Promoter Holding in India!!

List of top Companies with Zero Promoter Holding in India: A high holding on promoters is generally considered a good symbol as it shows the confidence of the founders in their own company.

You might be aware of companies like WIPRO, where Ajim Premji Group holds a 73.02% stake in the company or Avenue Supermart where RK Damani and other promoters hold a 74.99% stake in the company. This high percentage of shareholding acts as additional confidence towards the company, apart from their excellent business model and strong balance sheet.

However, there is a lot of big and popular company in India where the promoters hold zero percentage. Yes, these companies have zero stakes with no promoter and are owned or managed by professionals. Today, we take a look at the top Companies with Zero Promoter Holding in India. Keep reading.

Top Companies with Zero Promoter Holding in India!

Here is the list of top Companies with Zero Promoter Holding in India and their shareholding pattern distribution among PUBLIC, FII (Foreign Institutional Investors), and DII (Domestic Institutional Investors):

1) ITC

ITC ltd stock is a large-cap stock in the Cigarette/Tobacco and FMCG sector in India with a market cap of Rs 255,962 Cr.

According to the latest shareholding pattern of ITC of March’21, Public owns 44.71% stake in this company, FII owns 12.79%, and the remaining 42.50% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

2) Yes Bank

yes bank logo

Yes Bank Stock is a large-cap stock in the Private Banking Sector in India with a market cap of over Rs 36,154.23 Cr. Kapoor, with his brother-in-law Ashok Kapur and others, set up Yes Bank in 2003, holding 26 percent in the bank. All the promoters have currently exited the stocks of Yes Bank.

According to the latest shareholding pattern of Yes Bank of March’21, Public owns 39.52% stake in this company, FII owns 13.77%, and the remaining 46.71% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

3) HDFC

HDFC Logo

Housing Development Finance Corporation (HDFC) stock is a large-cap stock in the Housing Finance sector in India with a market cap of Rs 4,62,006.06 Cr.

According to the latest shareholding pattern of HDFC of March’21, Public owns a 10.88% stake in this company, FII owns 72.78%, and the remaining 16.34% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

4) ICICI Bank

icici bank logo

ICICI Bank stock is a large-cap stock in the Private Banking sector in India with a market cap of Rs 440,079.54 Cr

According to the latest shareholding pattern of ICICI Bank of March’21, Public owns a 10.06% stake in this company, FII owns 47.78%, and the remaining 42.16% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

5) Larsen & Toubro Ltd (L&T)

Larsen and turbo LT logo

Larsen & Toubro Ltd (L&T) Stock is a large-cap stock in the Construction/ Engineering sector in India with a market cap of Rs 211,077.00 Cr. It was founded by two Danish engineers taking refuge in India in 1938.

According to the latest shareholding pattern of L&T of March’21, Public owns 44.29% stake in this company, FII owns 22.02%, and the remaining 33.69% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

6) IDFC Ltd

idfc ltd logo

Infrastructure Development Finance Company Limited, more commonly known as IDFC, is a finance company based in India. IDFC Ltd Stock is a midcap stock in the NBFC Finance sector in India with a market cap of Rs 9,051.52 Cr

According to the latest shareholding pattern of IDFC Ltd of March’21, Public owns a 50.87% stake in this company, FII owns 24.80%, and the remaining 24.33% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

7) Ujjivan Financial Services Ltd

ujjivan small finance logo

Ujjivan Financial Services Ltd stock is a smallcap stock in the Finance term lending sector in India with a market cap of over Rs 2,712.44 Cr.

According to the latest shareholding pattern of Ujjivan of March’21, Public owns 57.07% stake in this company, FII owns 23.61%, and the remaining 19.32% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

8) Federal Bank

federal bank logo

The Federal Bank Stock is a midcap stock in the Private Banking sector in India with a market cap of Rs 17,168.04 Cr.

According to the latest shareholding pattern of Federal Bank of March’21, Public owns 32.20% stake in this company, FII owns 24.51%, and the remaining 43.29% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

9) UTI Asset Management Company Ltd

uti amc logo

UTI AMC Stock is a midcap stock in the Asset Management and finance sector in India with a market cap of Rs 10,168.34 Cr.

According to the latest shareholding pattern of UTI AMC of March’21, Public owns an 8.95% stake in this company, FII owns 5.36%, and the remaining 85.69% stakes are held by DII including mutual fund houses, insurances, and other domestic financial institutions.

ALSO READ:

How to Find Debt Free Companies in India? Trade Brains Screener!

That’s all for this list of top Companies with Zero Promoter Holding in India. I hope it was useful to you.

Further, you can look into the Nifty MNC companies list to find the list of other popular Indian companies where foreign shareholding is greater than 50% and where the management control is vested in the foreign company.

Top 7 Agriculture Companies in India 2021 - Best Agriculture Stock to Buy!

Top 7 Agriculture Companies in India 2021 – Best Agriculture Stock to Buy!

Top 7 Agriculture Companies Stocks to Buy: It is a known fact that the agriculture sector is one of the most important industries in the Indian economy. Almost 60% of the country is engaged in agriculture; it contributes almost 20% to the Indian GDP.

In this article, we take a look at some of the top agriculture companies in India. Keep Reading!

Top Agriculture Companies Stocks in India

1. UPL Ltd.

UPL Ltd. is the largest and top agriculture company in India

Founded in 1969, UPL Ltd. is the largest and top agriculture company in India. The company manufactures and markets crop protection products, intermediates, specialty chemicals, among other industrial chemicals. 

Their agricultural products include agrochemical products, seeds, etc. Their non-agro segment also produces industrial chemicals, Nutri feeds, fungicides, herbicides, insecticides, plant growth and regulators, rodenticides, etc. 

This Indian MNC however is one of the top 5 players in the global agrochemicals industry with its products sold in over 150 countries. Approximately 70% of its revenues came from locations like Latin America, Europe, and the US for FY 2020.

Its global reach is one of the biggest advantages the company has as the agriculture industry is cyclical in nature depending on when crops are grown in different regions and at the same time is dependent on monsoon rains etc. This allows the company to reduce its risks and keep its business going irrespective of what happens in one region

One red flag investors must look into before investing in the company are the allegations placed against the promoters illegally transferring funds from the company which could have an effect on the price in the future. 

2. PI Industries

PI Industries was founded in 1946 as Mewar Oil & General Mills Ltd

PI Industries was founded in 1946 as Mewar Oil & General Mills Ltd. After setting up an Agchem plant in its early years the company also diversified into the mining and mineral processing business which was later split off into a different entity.

The name of the company was later changed to PI Industries. The company’s products include a variety of domestic agricultural inputs, insecticides, fungicides, and herbicides, etc.

The company currently has 8 multi-purpose plants in Gujarat. In addition to this, the company also has a strong export business for custom synthesis and contract manufacturing.

ALSO READ

Top Cement Companies in India 2021 – Best Cement Stock to Buy!

3. Bayer Crop Science

Bayer Crop Science is a subsidiary of German pharmaceutical - top agriculture companies

Bayer Crop Science is a subsidiary of German pharmaceutical and life sciences company Bayer AG. being one of the top global players in the field the company offers Indian farmers various innovative and world-class products.

Its products include fungicides, herbicides, insecticides, seed growth, plant growth regulators, and other crop efficiency products.

The company recently strengthened its position in the market through the acquisition of another company in the sector i.e. Monsanto India Limited.

4. Coromandel International

Coromandel International - agriculture

This Indian company was founded in the early 1960s by EID Parry and 2 other US companies IMC and Chevron co. The company is one of the leading producers of fertilizers in the country and has developed a strong presence in South India.

The company has over 800 rural retail outlets across Andhra Pradesh, Telangana, Karnataka, and Maharashtra. Each retail store meets the needs of approx 5000 farmers in the 30-40 villages around it. 

Its main products include fertilizers, pesticides, and specialty nutrients. The company has 16 manufacturing units across the country. This has allowed the company to have a 3.5 million-ton capacity in CPC (Crop Protection Chemicals) which accounts for 22% of production capacity in India. 

5. Godrej Agrovet

Top Agriculture Companies - Godrej Agrovet

Founded in 1990, Godrej Agrovet is part of the Godrej conglomerate. The company is one of the top agricultural companies in the country producing bird feeds, animal feeds, agrochemicals, poultry-based products, and palm oil plantations. 

The company is one of the largest producers of animal feed in the country with a capacity of 10,57,000 tons. These include products for dairy cattle, broiler, and aquaculture.

The company is also one of the largest palm oil developers in India. Their plantation extends to over 55,000 hectares spread across Telangana, Andhra Pradesh, Karnataka, Tamil Nadu, Goa, Maharashtra, Orissa, and Mizoram.  

6. Rallis India

Rallis India is top agriculture companies in india

A subsidiary of Tata, Rallis India is one of the oldest companies in the country tracing its roots way back to the 19th century.

The company produces a variety of agricultural products which include seeds, seed chemicals, fertilizers, and pesticides.

The company is estimated to have a customer base of over 5 million farmers. In addition to this, the company also has a strong R&D infrastructure situated in Bangalore.

7. Bharat Rasayan

Bharat Rasayan Logo

Founded in 1989, Bharat Rasayan manufactures Technical-grade pesticides Pesticides formulations and other intermediates.

The company is engaged in the production of raw materials which are then further used in the formulation of pesticides.

The company has rightly recognized the need for advanced agrochemical and infrastructure which has helped then provide better solutions to farmers which also includes irrigation facilities, warehousing, and cold storage.

Quick Read

Looking for Top Two-Wheeler Stocks in India? Find out here!

Top Agriculture Companies Financial Comparison

Here is the comparison of the financials of the top agriculture companies in India using the Trade Brains Portal:

ParticularsUPL LtdPI IndustriesBayer CropCoromandel IntGodrej AgrovetRallis IndiaBharat Rasayan
Market Cap (Rs Cr)64071.7143069.7424035.2625141.0910657.476709.185419.52
PE291.2459.9148.7419.1638.229.3435.31
Price/BV8.238.149.424.836.074.227.97
Div Yield1.190.180.471.41.440.870.01
ROE5.7618.2219.7727.1719.7815.2432.41
ROCE8.6822.6224.825.92219.9733.74
Price/Sales6.199.547.281.671.762.553.44
Current Ratio1.121.242.061.441.021.813.38
Debt To Equity0.130.200.370.250.030.17

(Source: Compare Stocks | Trade Brains Portal)

Closing Thoughts

The dependence of the economy on agriculture makes it a must-have in one’s portfolio. In this article, we looked into the top Agriculture Companies and what role they play in the Indian Agriculture industry. We hope this post was useful to you. 

Let us know which company you feel is the most attractive in the agriculture industry in the comments below. Happy Investing! 

Paytm IPO Details: Everything you need to know about India's Largest IPO! cover

Paytm IPO Details (2021): Everything You need to know on India’s Largest IPO!

Overview of Paytm IPO Details: In the year 2000, One97 Communications, the parent company of Paytm was started with a loan of 8 lakhs. In 2010, Paytm was established as a mobile wallet through which consumers could recharge their smartphones. And in 2021, the company is on its way to launch the biggest IPO in the history of the Indian Equity market.

Seems like a story that is too good to be true. But Yes, this is the story of Paytm. The Principal Board of Paytm has given approval for the biggest IPO ever in the history of the Indian Equity Market. The total value of the IPO will be $3bn (nearly 22,000 crores). In this article, we aim to discuss the latest Paytm IPO details.

Paytm IPO Details: Is the IPO Hyped?

Paytm logo

“Paytm is one of the established players in the Fintech space with deep market penetration and share. It started as a payments interface, has also got into alternate banking by becoming a payments bank.”

It is of prime importance for us to understand why is this IPO so hyped. Why is the Grey market of IPO so ‘Gung ho’ about Paytm IPO when Paytm is still a loss-making entity. Anyways, the losses are coming down considerably Year on Year basis.

The reason for the Paytm IPO hype is that the future seems to be bright for this e-commerce payment giant. The investment in this IPO will be more on the potential for a great business in the future.

Here are a few Paytm IPO details. The total value of the IPO will be $ 3bn (nearly 21500 crore rupees). If this IPO goes through, it will give Paytm a valuation of about $25 bn. So far the biggest IPO which India has seen is of Coal India and it was valued at Rs. 15,475 crores.

ALSO READ

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

How does Paytm make money?

Paytm is India’s largest mobile payments, e-wallet, and commerce platform. It offers UPI payments, Paytm Wallet, Online recharges, bill payments, Digital gold, investment in stocks/mutual funds through Paytm Money, as well as Paytm Mall and in-store payments. 

Looking into the Paytm Business Models, it makes money from two forms:

  1. Commissions: Paytm makes money from customer transactions while using its platform through various commissions.
  2. Escrow Accounts –  Paytm holds assets or escrow money is held by a third party or customers and also generates revenue from them.
  3. Cross-Selling – Paytm also makes money by partnering with other financial institutions and banks to sell their products and services (like insurance, investments, loans etc.) along with its own.

Early Investors of Paytm

Before understanding more about Paytm IPO in detail, let us understand who are the existing and early investors and shareholders of Paytm:

  • Alibaba’s Ant Group (29.71%)
  • Softbank Vision Fund (19.63%)
  • Saif Partners (18.56%)
  • Vijay Shankar Sharma (Founder, 14.67%)
  • AGH Holding, Berkshire Hathway, T Rowe Price, and Discovery Capital (holding slightly less than 10%)

More Details on Paytm IPO

Paytm IPO is likely to be opened for subscription around Diwali time (November) and has all the potential to be a blockbuster IPO. Although a loss-making entity right now, but Paytm is on track to breakeven in 12-18 months with increased financial discipline, and strategic financial investments.

In a report published by Bernstine, it said- “Paytm has come a long way from a simple digital wallet business to an integrated payments ecosystem. We believe the next stage of growth will be led by financial services, particularly delivering seamless credit tech products to consumers and merchants. With increased financial discipline (rare in the hyper-competitive payments space), Paytm is on track to break even in 12-18 months. We expect Paytm to continue being the largest payments and fintech ecosystem in India,”

Paytm Financials Over the Years

Paytm Financials over the years | Paytm IPO Details

(All the figures above are in crores)

As we can see from above, Paytm over the last 5 years has been spending much more than what they have earned. But the situation seems to be getting better and if the predictions are to be believed, it should be a profit-making entity by 2023.

Paytm IPO Details: Response from the Grey Market

The news of the IPO has received a blockbuster response from the Grey market. And the share price almost doubled with a week time. The share price was trading at Rs. 11,000 and it jumped to Rs. 21,000 within 5 days in the grey market. So, there seems to be a very positive response, at least in the grey market of the IPO.

But, we need to also be a little more cautious here because Paytm has not yet decided upon the listing price of Paytm shares. And it is possible that the price in the Grey market is very much higher than the listing price.

A similar thing happened when the IPO of Barbeque-nation, the pre-listing price was around Rs. 1,100 but the listing price was Rs. 500.

But does this robust response from the Grey IPO market means anything to Paytm Listing? Yes, very much. It has the potential of making the investor sentiment very positive. And as it is already a much-anticipated IPO, the possibility of very good listing gains becomes very high.

Is it worth investing in Paytm IPO?

To answer this question in simple “Yes”, but with precautions and after carefully looking into the real valuation at which Paytm offers its shares in the IPO. Looking at the Paytm IPO details which we have seen above, it won’t be wrong to say that we have quite a few things going in favor of the IPO.

For starters, they are backed by investors who are known for investing their money with utmost care and their money more often than not generates substantial returns. Their business model is based on what the future of e-commerce and digital banking will look like. And most importantly, they have already a huge customer base and their brand is very well respected.

Quick Read

What is DRHP in IPO? Draft Red Herring Prospectus Explained!

Closing Thoughts

From the discussion above on Paytm IPO details, we understand that apart from being one of the biggest IPO to be ever listed in the Indian equity market, this IPO has also goof tremendous response from the Pre-IPO market. Things only look bright for this digital payment and e-commerce giant.

That’s all for this post. Do let us know if you liked the provided Paytm IPO details. And are you planning to apply for this IPO or not? Comment below. Cheers!

Shyam Metalics IPO Review 2021 – IPO Price, Offer Dates & Details! cover

Shyam Metalics IPO Review 2021 – IPO Price, Offer Dates & Details!

Shyam Metalics IPO Review 2021: Yes! The IPOs are finally back after over a month-long wait no thanks to the Covid second wave. The Shyam Metalics and Energy Ltd. IPO opens on 14th June and closes on 17th June 2021.

In this article, we cover the Shyam Metalics and Energy Ltd IPO review and look into important IPO information to find out the possible prospects of the company.

Shyam Metalics and Energy IPO Review – About the Company

Shyam Metalics Logo | Shyam Metalics IPO Review

Founded in 2002, Shyam Metalics and Energy Limited (SMEL) is one of India’s largest producers of ferroalloys in terms of installed capacity and the fourth-largest player in the sponge iron industry.

The Kolkata-based company’s product list includes iron pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferroalloys.

In addition to this, the company also undertakes the conversion of hot rolled coils to pipes, chrome ore to ferrochrome, and manganese ore to silicon manganese for an Indian steel conglomerate.

Metallic construction site image | Shyam Metalics IPO Review

The company manufactures these through its 3 plants in Odisha and West Bengal.

Their Sambalpur plant in Odisha and Jamuria plant in West Bengal are integrated steel manufacturing plants that produce captive railway sidings, captive power plants, iron pellet, sponge iron, Thermomechanically treated (TMT), wire rod, and structural mills among other products.

Their Mangalpur plant in West Bengal produces sponge iron and ferroalloy plants. It also includes a captive power plant. 

Shyam Metalics Total assests over the years

As of December, it had an aggregate installed capacity of 5.71 million tonnes per annum. The company has plans to increase this capacity to 11.60 NTPA by 2025 as brownfield projects in two plants of Jamuria in West Bengal and Sambalpur in Odisha.

The company also plans to further diversify its product range by producing pig iron, ductile iron pipes, and aluminum foil. 

Its captive power plants had an aggregate installed capacity of 227 MW. On the distribution front, the company has  42 distributors across 13 states and 1 union territory.

The company’s client list includes a mix of both domestic and international clients.

Domestic Clients

  • Jindal Stainless Limited
  • Rimjhim Ispat

International Clients

  • Norecom DMCC
  • Norecom Limited
  • POSCO International Corporation
  • World Metals and Alloys
  • Traxys North America LLC
  • JM Global Resources
  • Vijayshri Steel Pvt Ltd

Shyam Metalics and Energy’s Competitors

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Shyam Metalics and Energy IPO Review – Financials

Shyam Metalics's profit over the years

On the financial front, the company has managed to maintain operational profitability since 2005. Since then they have managed to achieve a positive EBITDA every year. One of the biggest concerns when it comes to steel companies is debt.

As of December 2020, its standalone debt stood at Rs. 381 crore. The debt of its subsidiary Shyam Sel and Power Ltd (SSPL) stood at Rs.398.60 crores. The consolidated debt of the company for the period stood at Rs. 886.29 crores.

Despite this, the company has long-term finance of Rs. 182 crores and working capital of Rs. 682 crore. The company’s net worth as of December 2020 stood at Rs. 3,285 crores.

Shyam Metalics and Energy IPO Review – Key IPO Information

The promoters of the company are Mahabir Prasad Agarwal, Brij Bhushan Agarwal, Sanjay Kumar Agarwal, Subham Capital Private Limited, Subham Buildwell Private Limited, Narantak Dealcomm Limited, Kalpataru Housefin & Trading Private Limited, Dorite Tracon Private Limited, and Toplight Mercantiles Private Limited.

ParticularDetails
IPO Size₹909.00 Cr
Fresh Issue₹657.00 Cr
Offer For Sale(OFS)₹252.00 Cr
Opening DateJun 14, 2021
Closing DateJun 16, 2021
Face Value₹10 per equity share
Price Band₹303 to ₹306 per equity share
Lot Size45 Shares
Minimum Lot Size1 ( Rs.13,770)
Maximum Lot Size14 ( Rs.192,780)
Listing DateJun 24, 2021

Shubham Capital, Subham Buildwell, Kalpataru Housefin & Trading, Dorite Tracon, Narantak Dealcomm, and Toplight Mercantiles will be participating in the offer for sale.

Initially, the promoters had planned an Offer for Sale (OFS) of Rs. 452 crore making it a Rs 1,107 crore IPO. The promoters however revised this and decided to offload Rs. 252 crores of their stake reducing the total IPO to Rs. 909 crores.

Analysts believe that this may have something to do with the high valuation of steel stocks this year. 

ICICI Securities, Axis Capital, IIFL Securities, JM Financial, and SBI Capital have been appointed as the lead managers to the issue. KFin Technology Pvt. Ltd. has been appointed as the registrar to the issue. 

Purpose of Shyam Metalics and Energy IPO

  • Repayment and/or pre-payment of the company and its subsidiary (SSPL)’s debt fully or partially. According to the draft papers the company intends to use Rs. 470 crores towards this cause. 
  • General Corporate Purpose. 

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Closing Thoughts

The IPO opens on 14th June and closes on 16th June 2021. For retail investors, it can be a good opportunity to look into the company’s future prospects and apply for the IPO if they believe in the products and growth prospects of Shyam Metalics and Energy Ltd.

That’s all for this post. Do let us know what you think of the Shyam Metalics and Energy Ltd. IPO review. Are you planning to apply for this IPO or not? Comment below. Cheers!

Top Cement Companies in India 2021 - Best Cement Stock to Buy! cover

Top Cement Companies in India 2021 – Best Cement Stock to Buy!

Top Cement Companies Stocks to Buy: A common component whether it be while building dams, buildings, or roads are cement. This has been the case for almost two centuries now. As essential it is for construction let us take a look at the cement industry in India. And also have an overview of the stocks available to figure out if they can be just as essential to our portfolio.

A matter of pride not known to many which are also why the sector is often overlooked is that the Indian cement industry is the world’s second-largest producer.

India has a capacity to produce up to 545 million tonnes (MT) as of FY20, the same year the industry managed to produce 329 MT. These rankings are thankfully owed to the natural resource-rich geography that we live in.

India has huge quantities of high-quality limestone deposits throughout the country which will also aid the industry’s growth needs as production is said to reach 381 million tonnes by FY22. 

One must realize that an important growth factor for the cement industry is its demand put forward by industrial and commercial construction of houses, dams, bridges, roads, etc. This demand is expected to reach  550-600 MT by 2025. 

The sector also has a strong export base to countries like UAE, Sri Lanka, Nepal, Bangladesh, and the US. Over the next decade, India can also step up to be a major exporter to other countries in the middle east and Africa.

Cement Industry during Covid

Construction work site image | Top Cement Companies in India

Just like every other industry the cement sector too was hit hard during Covid due to the lockdowns. As we have understood earlier, the industry is dependent on construction which was almost non-existent during this period. There however was still a silver lining for the industry here.

Companies were now forced to reduce their operating costs to reduce losses or maintain profitability. As the lockdowns were slowly lifted the industry saw a step-by-step revival in the demand as construction resumed.

It was seen especially in rural areas of the country which were not as badly hit as their urban counterparts. This scenario however can prove to be beneficial to the companies if they manage to carry the same low cost of expenditure into the future.

Government Stance on the Cement Industry

If you had been a spectator to the budget 2021 you would not have missed the emphasis laid out by the Finance Minister on focussing on laying the foundation to boost growth in the coming years. To achieve this the government has shifted its focus to infrastructure development.

The budget has allocated US$ 1.88 billion for its Urban Rejuvenation Mission. It also has allocated US$ 1.68 billion for its Smart Cities Mission to develop over 100 Smart cities. The government’s focus on developing infrastructure will further the growth of the Cement Industry. 

Indian Cement Industry Market Share

Pie Chart of Indian Cement Industry Market Share 2020

The Top 4 listed companies by MCap in the cement industry are Ultratech Cement, Shree Cements, Ambuja Cement, and ACC whose shares will be the focus of this article.

Ultratech Cement tops the list with a 21.40% market share as of 2020. Shree Cement takes the second spot with a 6.2% market share.

They are followed by Ambuja Cements, ACC, and Dalmia Bharat holding a 6.2%, 6%, and 5.5% market share respectively based on the number of units sold. 

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Top Cement Companies in India

 Now let us take a closer look at these top Cement Companies in India individually to find which ones could be lucrative options to invest in:

1. Ultratech Cement 

UltraTech Cement Logo | Top Cement Companies in India

UltraTech Cement Ltd is the subsidiary of Grasim Industries owned by Aditya Birla Group and is the largest manufacturer of grey cement, ready mix concrete (RMC), and white cement in India.

Founded in 1983, the company is the leader both in terms of Mcap, market share, turnover, and is also the largest exporter of cement in the Indian Cement Industry. Its exports include countries like UAE, Bahrain, Bangladesh, and Sri Lanka. 

The company has a consolidated capacity of 114.8 metric tonnes per annum (MTPA). UltraTech has 23 integrated plants, 1 clinkerization plant, 27 grinding units, and 7 bulk terminals.

2. Shree Cements

Shree Cements Logo | Top Cement Companies in India

Founded in 1979, Shree Cement in Rajasthan is currently headquartered in Kolkata and run by the Bangur family. The company is India’s 2nd largest cement company in terms of the operational capacity of 40.4 million tonnes per annum (MTPA).

The company has a presence in 8 states i.e. Rajasthan, Uttarakhand, Bihar, Chhattisgarh, Haryana, Uttar Pradesh, and Karnataka. Cement is sold by the company under the brands Shree JungRodhak, Bangur, and RockStrong.   

3. Ambuja Cements

Ambuja Cement Logo | Top Cement Companies in India

Ambuja Cements was founded in 1983 by Suresh Kumar Neotia and Narotam Sekhsaria. The company however became a part of MNC Lafargeholcim the second-largest cement manufacturer in the world after it acquired a 50% stake in the company. 

Ambuja Cements has a cement capacity of 29.65 million tonnes. The company achieves this through its 5 integrated cement manufacturing plants and 8 cement grinding units across the country.

What set Ambuja cement apart from other companies in the industry was it becoming the first to build a captive port and have its own fleet of ships to transport cement. 

The company however does not only manufacture cement but also micro materials  Ambuja Plus Roof Special. and Alccofine, Dirk Pozzocrete.

4. ACC

ACC Ltd Logo | Top Cement Companies in India

Founded in 1936, ACC is one of the oldest cement producers in India. Earlier known as Associated Cement Companies Limited was formed when 11 cement companies belonging to the Tatas, Khatuas, F E Dinshaw, and Killick Nixon merged to form a single entity.

In 2004 Lafargeholcim took control of the company making it the second company in India to be owned by the MNC. 

ACC has a cement capacity is 31.8 million tonnes. The Company has 5 integrated cement manufacturing plants and 8 cement grinding units across the country.

Cement Stocks Financial Overview

ParticularsUltratech CementShree CementAmbuja CementACC
Market Cap (Rs Cr)197688.61105107.3767323.338418.46
PE37.0145.4632.7523.25
Price/BV4.566.893.212.91
Yield0.540.215.310.68
ROE16.513.948.4211.7
ROCE12.5315.7811.7214.43
Price/Sales4.848.474.942.35
Current Ratio1.032.130.981.74
Debt To Equity0.480.2400

(Source: Compare Stocks – Trade Brains Portal)

1. Debt to Equity

One can expect companies in the cement industry to incur debt due to the capital-intensive nature of the industry. Despite this ACC and Ambuja Cements have managed to have no debt. 

Even though Ultratech and Shree Cements‘ debt to equity ratio stands at 0.59 and 0.24 they are still at reasonable levels.

An impressive point to be noted here is Ultratech’s commitment to reduce debt. The company has successfully reduced debt from Rs.16,860 in March 2020 to Rs.9,436 cr as of Dec’20.  

2. ROE & ROCE

Although the best stocks would have an ROE and ROCE of over 20% it is ideal to have ROE and ROCE between 15%-20%.

The ROE gives us an idea of how well the company is managing shareholder investments to generate returns. Among these stocks, Ultratech has achieved the highest ROE followed by Shree and Ambuja. ACC however has performed poorly on this parameter. 

The ROCE shows us the ability of the company to generate profits based on total capital employed. Here we can see that Ambuja and Shree cement being the only ones to achieve an ideal ROCE. This is closely followed by ACC. Ultratech however performed poorest among the stocks on this parameter.

3. Stock Price

The PE ratio is one of the most important ratios which helps us analyze if the stock is overvalued or not. We can see that investors have already bet really highly on the growth prospects of Shree and Ultratech Cements. Whereas Ambuja seems reasonable after taking a look at where it stands on returns and being debt-free. 

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Closing Thoughts

It is important to note that the cement industry is dependent on access to raw materials and consumer demand. In addition to this, the rising prices of fuel could have an adverse effect on the industry. The stocks included above are all the biggest companies in the cement industry.

However, analysts have also have included other cement stocks like JK Cement, JK Lakshmi Cement, and Dalmia Bharat. Superstar investors like RK Damani have included stocks like India Cements in their portfolios. 

That’s all for this post, let us know in the comments below which stock you feel would perform best in the Cement industry. Happy Investing!.  

How to use Options for Hedging - Options Hedging Strategy Explained!

How to use Options for Hedging? – Options Hedging Strategy Explained!

Options Hedging Strategy Explained: Imagine if you were holders of the shares of Reliance Industries Limited (RIL) and you have a bullish view on the share price of same over the long term. However, there is some current news that are doing rounds in the market and which are likely to have a negative impact on the share price of RIL over the short term.

How so can you use your existing shares to hedge your losses? We will try and answer this question here. In this post, we’ll cover how does one use options to hedge his existing positions. However, before we look into the Options hedging strategy, let us understand in brief the concept of Options trading and Hedging.

What are Options?

Options are a derivative product that derives its value from the value of the underlying asset. An option contract gives the holder, the right (not an obligation) to buy or sell the underlying asset depending on the kind of contract they hold.

If you are the holder of the Call Option, then you have the right to buy the underlying asset on or before expiry. And if you holder of the Put Option, then you have the right to sell the underlying asset on or before the expiration of the contract. You can read this article to understand the basics of options trading.

What is Hedging?

Hedging is a risk management strategy that is employed to offset the risk on the existing investments by taking an opposite position. The reduction in risk also comes with the condition of reduced profits if the hedging trades end up making losses.

In general, Hedging is done using derivative products like Futures and Options. You can read this article to understand the basic concept of hedging in detail. However, through this discussion, we will be focusing on Using Options for Hedging.

Now, let us continue with our discussion on “How to Use Option to Hedge?” with the existing position of RIL. Now, the simple way to Hedge a long (or buy) position in the shares of the company is with buying Put Option (Right or sell at a predetermined price upon expiry) or to sell a Call option (Pocket the premium from the buyer of Call Option).

However, if only, it were as simple as that.

Hedging using Options comes with its own set of challenges. Time of entry, strike price to enter, number of lots to enter with, premium to be paid to enter the option position, etc., are few questions which we need to consider. Here are few strategies that we will be discussing to understand the hedging strategies which can be used.

Two Easy Option Hedging Strategies

Here are two Options Hedging Strategy that we will be discussing in this post:

  1. Covered Call &
  2. Married Put

Usually, the strategies are designed with the help of a minimum of two option positions running simultaneously. But these two strategies are used when one is looking to hedge the existing position.

What is Covered Call Strategy?

A covered call is a very popular and most commonly used strategy when one is bullish on the stock and wants to hedge his position against a decline (short term) in the price of the underlying.

To execute this strategy, one needs to have an existing long position in underlying stocks, and simultaneously write/sell one call option for an equal number of shares of the same underlying stock.

Note: This strategy is more fruitful when one is having an existing long position in the shares of the company and wants to either improve his entry price or exit price.

Let us understand how the covered call strategy works:

  • Assume the Stock under consideration here is XYZ company.
  • I have bought 200 shares of this company at a price of Rs. 95
  • The Current Price (CMP) of shares of XYZ company is Rs. 106 and it is trading near its 52 weeks high and we could see some correction in its price.
  • But rather than exiting at the existing price, I am looking to better my exit price or improve my point of entry. In order to do so, I will be implementing the Covered Call Strategy.

Now moving forward,

  • I look for a Call Option Strike Price that is above the Spot price.
  • Therefore, I choose the 110 CE (Call option) strike price and it is trading at a premium of Rs 4
  • Days left for expiry: 4 days
  • Upon expiry, if the buyer of the option wants to exercise his right, then I will be selling my stock position at Rs. 114 (strike price + premium received). And which is way above the current spot price of Rs. 106.
  • I would still be making a sizable profit of Rs. 19 (114-95) per share.
  • A sizable return of 20% on investment (Buy at 95, sell at 114)
  • Say, if upon expiry if the share price of XYZ does not go beyond 110, I stand to pocket the premium of Rs. 4 per share.
  • And the effective buy price of my share now is Rs. 91 (95-4)

Overall with the help of this strategy,

  • Either the profit potential gets increased or
  • We improve our entry price of the existing position.

What is Married Put Strategy?

Under Married Put Strategy, an investor has an existing long position in the shares of a company and simultaneously buys a put option for the same with an equal number of shares.

The rationale behind buying this strategy is to protect the downside risk just in case the share price of the underlying asset goes down. This strategy is very attractive as one can limit his loss just in case the stock price goes down because of unforeseen scenarios.

Let us understand this strategy with the help of an example:

  • Assume, I bought 200 shares of XYZ company at a price of Rs. 81
  • The CMP (Current Market Price) of XYZ company is Rs.98
  • To cover my risk of losing handsome returns, I am looking to take insurance against the fall in the price of XYZ company.
  • Now, I do so by buying Married Put Strategy.
  • After doing careful analysis by using Option Chain, I decide to buy 95 PE (Put option) by paying a premium of Rs. 2
  • The Option still has 12 days to expiry
  • If upon expiry of a Put option, it expires worthless and the price of one share of XYZ company is Rs. 100
  • Then, I just stand to lose the premium of Rs. 2, and the buy price of my share trails up to Rs. 83 (81 +2)
  • But compared to the CMP, I am still making a profit of Rs. 17 (100-83) per share
  • And if the share price of XYZ company upon expiry, comes down to Rs. 85
  • Then, on the Put option bought, I will be making a profit of Rs. 8 (95-2-85) per share
  • In that case, also the buy price of XYZ company share reduces to Rs. (81-8) i.e., Rs. 73 per share.
  • In any case, the minimum profit on shares of XYZ company is Rs. 12 per share, till the expiry of the option contract.

Therefore, this strategy is like buying an insurance policy against the weakness in the share and the maximum profit potential is still limitless minus the premium paid for buying a put option.

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Closing Thoughts

Hedging becomes a very integral part of any trader’s or investor’s day-to-day activity. It helps them to either protect their profits or improve their point of entry or to at least maintain their existing position and manage the volatility.

A proper understanding of the concept of options trading and the implementation of their strategies goes a long way if one wants to have a proper understanding of the art of hedging.

That’s all for this post. We hope you have learned something new from our article on Options Hedging Strategy. Let us know your views in the comment section below. Happy Investing and Trading!

SEBI Peak Margin Rules: How does it impact Trading? cover

New SEBI Peak Margin Rules is Here: How does it Impact Stock Trading?

SEBI Peak Margin Rules Explained: Last year, SEBI published a circular on margins that astonished the entire trading community along with the stockbrokers. Through this circular, SEBI announced tighter margin norms for the traders that will be completely implemented from August 2021. You can read the whole story about that circular in our previously published article on margin trading new rules here.

In this article, we will further explain what are the SEBI peak margin rules, their phases, and how exactly these rules will impact the investors. This topic has been of prime interest to all the brokers and all those traders who use margin as means of leveraging their position and become a part of the bigger game by using limited capital. However, before we get into the technicalities of SEBI Peak Margin rules, it is of prime importance for us to understand the concept of “Peak Margin”.

What is Peak Margin?

Peak margin is the minimum margin that must be collected by brokers from their clients before they place an order for intraday/delivery purposes. These rules are applicable for both cash and derivatives segments.

The clearing houses randomly take four snapshots at predefined time windows for arriving at the peak margin required for open positions during the day. The highest margins among these snapshots will be the peak margin.

Now, the change in the peak margin rules and their implementation in various phases has been a hot topic of discussion amongst the trading community and all the interested parties. Therefore, it becomes imperative for us to discuss these various phases.

Quick Read

What is SEBI? And What is its role in Financial Market?

Various Phases of SEBI Peak Margin rules

The following are the set of rules which have been set forth by the SEBI regarding the Peak Margin Norms:

  • Phase 1: In this Phase starting from December 2020 and February 2020, it was mandatory that the clients should have a minimum of 25% of the Peak Margin with the broker.
  • Phase 2: In this Phase starting from Mar 2021 till May 2021, the clients needed to have a minimum of 50% of the peak margin with the broker.
  • Phase 3: In this Phase starting from June 2021 till Aug 2021, the clients must have a minimum of 75% of the Peak Margin with the broker.
  • Phase 4: In this Phase starting from Sept 2021, it will be mandatory that the clients should have 100% of the Peak Margin with the broker.

SEBI Office Building | SEBI Peak Margin Rules

Why Sudden Change by SEBI with Peak Margin Rules?

This change in the rules by SEBI is not an overnight decision. These rules have a put forth to make the Indian capital market structure stronger. They want to build a System that guards itself against any fraudulent activities by using excessive leverage.  These new rules have been implemented in a phased-out manner (as explained above) for the same reason.

Now, the brokers who fail to adhere to the minimum peak margin requirement would be fined. These news rules have been designed in such a way so that the maximum leverage that a broker can offer to its client is capped at 20%.

SEBI is also of the view that the margin system should be extremely strong to assess their own risk and take trades accordingly. In a nutshell, SEBI is trying to bring a sense of discipline to India’s whole trading (and investment) system.

Previously, all the margin reporting from the brokers used to happen only at the end of the day for all the carry forwarded trades exected on that day by the customer. Because of these rules, the brokers were able to provide higher leverage in Intraday (MIS), Cover Order (CO), and Bracket Order (BO).

But leveraging comes with its own set of risks, as there could be cases where the customers might not be able to provide margins at the End of the day. And to solve this problem, this new set of rules have been put forth by SEBI.

How do Peak margin rules Impact Traders?

These ‘Peak Margin’ rules are bound to impact the traders who are very active and trade on daily basis. With the earlier rules, they could use the leverage provided by margin trading and could get much higher exposure than what would their capital allow. The margin required was computed only at the end of the session.

But under the “Peak Margin” rules, the amount of funds available to buy the shares on the same day will be much lesser. This is mainly because of the higher-margin required to buy the same amount of shares.

Are the new rules Good/Bad for the Market?

Now, coming to the main point i.e. are the new margin rules by SEBI any good for the market, here are the points to mention:

  • First of all, it is a little premature to say whether it is good or bad for the market as the rules haven’t been completely implemented. But one thing is for sure it will have a direct impact on the volumes in the market.
  • Nonetheless, this new rule will bring a sense of discipline to the market and will also strengthen the safety of the market.
  • Trading with high leverage is also a very risky affair as on a highly volatile day, the whole trading capital could be wiped off from the trading account. But with these new margin rules, there is a safety net around the traders and in an indirect way, the trading careers of small and medium-sized traders will be prolonged.

Overall, the trading volume will definitely be impacted significantly. But the overall trading ecosystem will become safe and secured.

Views of CAPI on the Peak Margin Rules

Recently, CAPI (Commodity Participants Association of India) has requested the SEBI to not increase the Peak Margin required to 75% and to continue with the 50% margin requirement.

“…penalizing the client in such a scenario would be unfair. There is no way for the member or the client to predict market movement and keep margin in advance,” CAPI said. “We, therefore, urge upon Sebi that current level of peak margins (50 percent) margins should stay for times to come or defer the next stage of the peak for time being,”, it added.

They also added that a 50% margin is enough to tackle the situation of volatility in the market. CAPI also concluded by adding that the heading activity will be greatly impacted because of the implementation of new Peak Margin rules by SEBI.

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Closing Thoughts

It is a known fact that embracing changes are always difficult and these change in the rules of Peak Margin are more than likely going to impact the traditional method of Intraday trading (highly based on margin trading).

The volumes are likely to go down and hedging the existing positions can become difficult because more margin will be required to execute trades. But SEBI has its own stance whereby which they want to make the whole ecosystem of trading in India very safe and difficult to manipulate.

We hope you have enjoyed this article and got a decent understanding of newly formulated Peak Margin rules in India. Do let us know what you think of these new SEBI margin rules in the comment section below. Happy Trading and Investing!!

Relative Valuation of stocks - stock valuation basics

How to do the Relative Valuation of Stocks? Basics of Stock Valuation!

Understanding how to do the relative valuation of stocks: Stock valuation is one of the most important aspects to analyze before investing in any share. You might be able to find a good company, however, if you not evaluating its valuation correctly and entering at an inflated price, then it might turn out to be a bad investment.

“A great company is not a great investment if you pay too much for the stock.“ – Benjamin Graham, father of value investing.

In this article, we’ll discuss how to do stock valuation using the relative valuation of stocks approach. Keep Reading.

Basics of Stock Valuation

There are two basic approaches to find the valuation of stocks: 1) Absolute Valuation Approach and 2) Relative valuation Approach.

The absolute valuation tries to determine the intrinsic value of the company based on the estimated profits and free cash flows discounted to their present value. It is a little difficult approach to find the valuation of stocks as it involves financial calculations and assumptions like the growth rate of the company for the next 5-10 years, discount rate, etc.

The Discounted Cash Flow model (DCF) is the most common approach for absolute valuation.

However, the major limitation of using absolute valuation is that the results are only as good as inputs as you will require to make many assumptions. This article is not focused on absolute valuation. You can read this post to understand absolute valuation with financial terms like future free cash flow projections, discount rate (weighted average cost of capital- WACC), etc find the estimated true value of a company.

Relative Valuation is a comparatively faster and easier approach to value stocks. Today, we are going to discuss how to do the relative valuation of stocks.

Relative Valuation of Stocks

Relative valuation of stocks is an alternative to absolute valuation. It is an easier approach to determine whether a company is worth investing in or not. Relative valuation compares the company’s financials to that of its competitors, industry average, or historical performance to find the company’s financial position.

It’s similar to comparing the different houses in the same locality to find the worth of a house to invest in. Let’s say if most of the 3BHK apartment in the same locality costs around 70 lakhs and you are able to find a similar 3 BHK apartment which costs 50 lakhs, then you can consider it cheap and undervalued.

Here, your approach is not to find the true worth of the apartment but just to compare its price with similar competitors to find whether it is over or under-valued.

Also read: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

Tools to Perform Relative valuation of stocks

There are a number of tools or financial ratios that you can use to do the relative valuation of the Indian stocks. A few of the most common financial ratios that you should definitely know to perform a relative valuation of stocks are described below:

1. Price to earnings (PE) ratio

This is one of the most popular financial ratios used to perform the relative valuation of stocks, used by investors all across the world. It tells us how much investors are willing to pay to buy that share compared to its earnings. A high PE ratio generally shows that the investor is paying more for the share. The PE ratio is calculated using this formula:

Price to Earnings Ratio= (Price Per Share)/( Earnings Per Share)

As a thumb rule, a company with a lower PE ratio compared to its competitors is considered under-valued compared to another company in the same sector with a higher PE ratio. However, the average PE ratio value varies from industry to industry, therefore always compare the PE of companies only in the same industry.

2. Price to Book Value (PBV) Ratio

The book value is referred to as the net asset value of a company. It is calculated as total assets minus intangible assets (patents, goodwill) and liabilities. The price to Book Ratio (PBV) is calculated by dividing the current price of the stock by the book value per share. Therefore, it can be calculated using this formula:

Price to Book Ratio = (Price per Share)/( Book Value per Share)

PBV ratio is an indication of how much shareholders are paying for the net assets of a company. Generally, a lower PBV ratio could mean that the stock is undervalued. As a thumb rule, companies with lower PBV ratio is undervalued compared to the companies with higher PBV ratio. In addition, the Price to Book Value Ratio should be compared only with the companies in the same industry.

3. Price to Sales Ratio

The Price to Sales Ratio (P/S) ratio measures the price of a company’s stock against its annual sales. P/S ratio is another stock valuation indicator similar to the P/E ratio.

Price to Sales Ratio = (Price per Share)/(Annual Sales Per Share)

A P/S ratio is a great tool because sales figures are considered to be relatively reliable while other income statement items, like earnings, can be easily manipulated by using different accounting rules. As a thumb rule, a lower P/S ratio compared to the other companies in the same industry means that the stock is comparatively undervalued.

Also read: 8 Financial Ratio Analysis that Every Stock Investor Should Know

A few other popular financial tools that you can use to perform relative valuation of stocks are PEG Ratio (Price to Earnings to Growth Ratio), Price to Free Cash Flow etc.

How to do the Relative Valuation of Stocks?

For estimating the relative value of stocks, you need to set a benchmark. The companies that you are comparing should be from the same industry and it’s even better if they have a similar size (market capitalization). For example, a large-cap stock in the pharma industry should be compared with other large-cap companies in the pharma industry only.

Let’s assume that there are 5 companies in an industry and the average price-to-earnings ratio of the industry (i.e. Industry PE) turns out to be 20. Now, if the PE Ratio of the company that you are researching is 15, then it can be estimated to be relatively cheaper compared to the other stocks in the same industry.

Anyways, you have to use multiple financial ratios to find the relative value of the stocks, and should not rely on just one financial tool. If all the valuation ratios are indicating that one stock is comparatively cheaper, then it is a strong signal of an undervalued stock.

For example, here is the comparison of stocks in the Tyre Industry. Here, you can look into the different financial ratios like PE Ratio, P/BV ratio, P/S ratio, etc to find out the one who is most undervalued.

ParticularsMRFTVS SrichakraApollo TyresJK TyresCEAT
Market Cap (Rs Cr)35,349.501,534.7814,184.983,124.675,335.16
PE Ratio22.0821.0919.6212.1812.9
Price/BV2.751.831.51.31.69
Div Yield0.1211.570.551.36
ROE12.3111.226.64119.54
ROCE12.9811.287.228.0110.87
Price/Sales2.180.710.560.250.54
Current Ratio1.541.190.810.980.83
Debt To Equity0.110.440.571.480.55

(Source – Compare Stocks | Trade Brains Portal)

Limitations of Relative Valuations

No valuation technique can be perfect. There are few limitations of relative valuations that are discussed below:

  1. The relative valuation approach does not give an exact value to enter stock (unlike discounted cash flow) as this approach is based on the comparison.
  2. It is assumed that the market has valued the companies correctly. If all the companies in the Industry are overvalued, then the relative valuation approach might give a misleading result for the company in which you are interested.

How to find the Relative Multiples for Comparing Indian stocks?

You can use Trade Brains Portal to find the financial ratios of Indian stocks. Trade Brains Portal is a popular stock research website in India. While researching a company, you can get its 5-year financial data and ratios on Trade Brains Portal.

Moreover, one key tool available on Trade Brains Portal to perform the relative valuation of stocks in Stock Compare. Here, you can compare the financials of up to five stocks, all in one place.  Just go on ‘Trade Brains Portal’ on the top menu bar, select the ‘Compare Stocks’ feature under ‘Products’. Enter the name of the companies and you’ll get the comparisons.

compare stocks trade brains portal

Here is the result that you will get if you compare the top Tyre Companies in India:

Trade Brains Portal is a powerful website for stock research. Just play around and get familiar with the website.

Conclusion

Relative valuation of stocks is a good alternative to absolute valuation. You can use this approach for a simple yet effective stock valuation. But do remember that comparing should be done for the stocks within the same industry and having a similar size (market capitalization).

That’s all for this post on the Relative valuation of stocks. I hope it is useful for you. Please comment below if you have any questions. I’ll be happy to help. Have a great day and Happy Investing.

Oldest Companies in India cover

The 5 Oldest Companies in India – Over 150 Years Old Businesses!!

List of Oldest Companies in India: India today is proud of the wildest out-of-the-box startups like Paytm, Ola, Zomato to name a few. But this entrepreneurial craze is not something that is recent. Every Indian has always levitated towards ‘Vyaapaar’ as a career choice. This has happened for millennials in India’s rich history.

In this article, we take a look at some of the oldest companies in India which operate to this day. You’re in for a surprise because they span centuries!

5 Oldest Companies in India that Still Makes Money

Here is the list of five of the oldest companies in India that are still in business and making tons of money:

1. Wadia Group (1736)

Wadia Group Logo | Oldest Companies in India

India’s oldest conglomerate, the Wadia group was founded in 1736 when Parsi businessman  Lovji Nusserwanjee Wadia secured contracts with the British East India Company to build ships and docks.

The company went on to build over 300 ships, some of them even used in wars like the HMS Minden and HMS Trincomalee which is still afloat and a historic relic today.

The Wadia group under the leadership of Lovji and his brother Sorabji also built the Bombay dry dock which was Asia’s first dry dock and the Surat Shipbreaking yard. They also can be credited for making Bombay a strategic port for the British in Asia.  

The company is also credited with starting the Bombay Dyeing Company in 1879 which today is a flagship company of their empire. The company was started in a small-scale operation where cotton yarn was spun and dyed by being dipped in red, green, and orange.

Currently, the company has an MCap of over Rs. 1,500 crores. Today the conglomerate functions in sectors like Aviation, healthcare, chemicals, FNCG, and even owns the IPL team Punjab Kings.

2. Eid-Parry Ltd (1788)

EID PARRYS Ltd Logo | Oldest Companies in India

Unlike several other companies, EID-PARRY LTD was set up by English Trader Thomas Parry as Parry & Co in 1788. It was formed as a trading company for sugar and spirits.

Over 6 decades the company had become the country’s largest trader of sugar. This prompted the company to separate its spirits and sugar business by forming East India Distilleries and Sugar Factories Ltd.

The company is also credited to be the first to manufacture fertilizers in the Indian Subcontinent. The companies once again merged to form EID Parry in 1962 and were acquired by the Murugappa group.

Today the company is still a giant in the sugar business with a capacity to crush 32,500 (TCD) Metric Tonnes of cane per day.

The conglomerate also operates in Industries like Distillery, Biofertilizers, Nutraceuticals among others. Last year the company successfully earned revenues of $2.4 billion.

3. State Bank of India – SBI (1806)

State Bank of India Logo | Oldest Companies in India

What catches many by surprise is that SBI is not only the oldest but also its purpose for being formed. Founded in 1806 as the Bank of Calcutta it was set up mainly to fund British General Wellesley’s war against the Marathas and ruler of Mysore Tipu Sultan!

The bank was renamed the Bank of Bengal in 1809. After mergers with other banks in the country and after being renamed to the Imperial Bank of India the Government of India in 1955. It was then that the bank was renamed the State Bank of India

There are very few banks in the country that can boast to have had esteemed customers like those of SBI. These included the likes of Nobel laureate Rabindranath Tagore, scientist and science fiction writer Sir Jagadish Chandra Bose who pioneered the investigation of radio and microwave optics, and also India’s first President Rajendra Prasad.

Today SBI is one of the biggest banks in the country with a market cap of Rs. 3.76 lakh crores. In 2020 SBI was ranked as the 43rd largest bank in the world and also as the 221st biggest corporation by Fortune 500.

ALSO READ

10 Indian Companies with Monopoly in Their Industry!

4. RPG Group (1820)

RPG Group Logo | Oldest Companies in India

Many today revere the Goenka billionaire family of India. But their roots can also be traced back to the 19th century when Ramdutt Goenka founded it in 1820.

The company however expanded under Keshav Prasad Goenka, Ramdutts nephew. He played an important role in acquiring Duncan Brothers and Octavious Steel among several other businesses making the company a conglomerate. His eldest son R. P. Goenka founded the RPG Group. 

Today the group is known for its flagship companies like CEAT Tyres, and pharmaceutical company RPG Life Sciences. The billion-dollar conglomerate also operates in infrastructure, technology, energy production among others.

5. Aditya Birla Group (1857)

Aditya Birla Group Logo | Oldest Companies in India

One of the biggest conglomerates in the country Aditya Birla Group was founded in 1857 by Shiv Narayan Birla. But it was Ghanshyamdas Birla who played a key role in catapulting the Birla companies to where they are today.

Setting up a trading business in jute the company grew thanks to the increased demand for gunny bags during World War I. Ghanshyamdas Birla was also a close confidante to Mahatma Gandhi and also played an important role in India’s freedom struggle.

The billion-dollar conglomerate today has come a long way from its humble roots. In  2019 the company bought in  US$48.3 billion.

The group operates in the Textile, Finance, Cement, Mining, Metal, Retail, and Telecommunication Industry among others. 

Quick Read

Most Profitable Companies in India – Top 10 Largest Companies by Net Profits!

List of Oldest Companies in India Year-Wise

Here is the list of the oldest companies in India (year-wise) including the top 5 mentioned above:

Company NameYear Established
Wadia Group1736
State Bank of India1806
RPG Group1820
Aditya Birla Group1857
Bombay Burmah Trading Corporation1863
Shapoorji Pallonji Group1865
Allahabad Bank1865
Nestlé India1866
Tata Group1868
Dabur India Ltd.1884
Kirloskar Group1888
Delhi Cloth & General Mills1889
Britannia Industries1892
Punjab National Bank1895
Century Textile and Industries1897
Godrej and Boyce1897
CESC Limited1899
Keshav Bhikaji Dhawale1900
Bengal Chemicals and Pharmaceuticals1901
Shalimar Paints1902
The Indian Hotels Company1903
City Union Bank1904
Phoenix Mill1905
Hamdard India1906
National Insurance Company1906
Canara Bank1906
Bank of India1906
Alembic Pharmaceuticals Ltd1907
Tata Steel1907
Bank of Baroda1908
Swan Racing1909
Apeejay Surrendra Group1910
Lakshmi Mills1910
ITC1910
TVS Group1911
Central Bank of India1911
The Bangalore Press1916
Birla Corporation1919
CSB Bank Limited1920
Kansai Nerolac Paints1920
Ingersoll Rand India1921
Berger Paints1923
SmithKine pharmaceuticals1924
Balmer Lawrie and Co.1924
Karnataka Bank1924
Raymond Ltd1925
Syndicate Bank1925
Bajaj group1926
Hindustan Construction Company1926
Lakshmi Vilas Bank1926
Dhanlaxmi Bank1927
Boroline1929
VST Industries1930
Arvind (company)1931
Bata Shoes1931
Bajaj Hindusthan1931
Travancore Federal Bank1931
Vijaya Bank1931
Dalda1931
Punchiri Boat Services Private Ltd1932
ISGEC1933
Eveready Industries India1934
Cipla1935
Godfrey Phillips India1936
Haldiram's1937
Colgate-Palmolive India1937
Crompton Parkinson1937
Tata Investment Corp1937
Indian Overseas Bank1937
Larsen & Toubro Limited1938
Bajaj Electricals1938
J. K. Organisation1938
Dena Bank1938
Jammu & Kashmir Bank1938
Tata Chemicals1939
Bijeram Dedraj Oil Mills Pvt ltd1940
Fairdeal corp ltd1940
Haldiram's1941
State Bank of Hyderabad1941
Blue Star Limited1943
BASF India1943
Tata Coffee1943
Oriental Bank of Commerce1943
United Commercial Bank1943
RBL Bank1943
Escorts Group1944
Bajaj Finance1944
Asian Paints Ltd1945
Mahindra & Mahindra1945
Tata Motors1945
Western India Vegetable Products Limited(Wipro)1945
Selvel publicity and consultancy1945

In Closing 

In this article, we covered a list of the oldest companies in India that are still in business today. Taking a look at the oldest companies and their past is a history lesson in itself. Moreover, these conglomerates are a testament to India’s entrepreneurial spirit.

Let us know what you think of the oldest companies in India list in the comments below. And which current Indian startup can last for the next two hundred years according to you. Happy Reading!

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