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. 

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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 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.

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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.

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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! 

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!.  

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.

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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. 

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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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Small Finance Banks Explained: Top Small Finance Banks in India!

List of Top Small Finance Banks in India: A year ago millions across the country rejoiced after the US classified India as a ‘Developed Nation’. However, there is far less to rejoice about as this would also mean that India which is far from being a developed country would also now have to carry the weight of one.

Don’t let these reports fool you especially when it comes to Financial Inclusion/exclusion as India still ranks 24th in the list of the world’s most unbanked Countries in 2021.

In this article, we take a look at Small Finance Banks (SFB) an institution set up to address these problems. 

Vector image of a Bank | Small Finance Banks in India

India, unfortunately, achieved this infamous rank despite the best efforts of the Pradhan Mantri Jan Dhan Yojana (PMJDY) over 27.32 crores Indians do not have a bank account.

On top of this, over 38% of the bank accounts with those fortunate are inactive. This means that these accounts had no withdrawals or deposits over the course of a year. 

Our leaders however have fought the battle for financial inclusion for years. In 1996 the then Finance Minister announced an experiment with small banks to address this issue along with the RBI. And accordingly, Local Area Banks (LAB) came into existence. The aim of these banks was to operate prominently in semi-urban and rural areas.

In 2014 the RBI began playing an important role and by 2015 released a list of 10 entities who were given a license to operate as a Small Finance Bank (SFB) in order to combat financial exclusion.

What are Small Finance Banks (SFBs)?

Small Finance Banks (SFBs) are financial institutions whose primary purpose is to further financial inclusion by providing their banking services to unserved and underbanked regions of the country.

SFBs also meet the needs of small farmers, Small Business units, micro, and small industries among other unorganized entities. 

A man in his farm land | Small Finance Banks in India

These banks are registered as public limited companies under the Companies Act, 2013 and provide their target communities with the basic banking services generally offered by commercial banks.

The main objectives of these banks are to expand access to financial services in rural and semi-urban areas (tier 3 and Tier 4 cities) that otherwise would be turned away by commercial banks when it comes to loans etc.

Hence SFB’s also focus on extending credit facilities to small farmers,  micro and small industries, and other unorganized sector entities.

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What are the Eligibility Requirements for Promoters? 

– Resident individuals/professionals all having at least 10 years of experience in banking and finance at a senior level.

– Companies and Societies in the private sector, that are owned and controlled by residents who have a successful track record of running their business for the last 5 years.

– Existing Non- Banking Finance Corporations (NBFC), Micro Finance Institutions (MFIs), Local Area Banks (LABs), Urban Co-operative Banks (UCBs) that are controlled by residents can also opt to be converted into SFBs. 

These promoter or promoter groups must be fit and proper with a sound and proper track record. This refers to the promoters having a successful track record for the last 5 years and the respective promoter’s integrity. 

Promoter Contribution and Capital Requirements for SFBs

These promoters are expected to set up the SFB with a minimum net worth of at least Rs. 100 crores. The SFBs net worth will have to be increased to Rs. 200 crores within the next 5 years.

The promoter’s paid-up capital must be at least 40% which can be bought down to 26% within 12 years.

When it comes to Foreign shareholding the aggregate of all FIIs/FPIs/Qualified Foreign Investors (QFIs) must not exceed 24% of the total paid-up capital. This however can be raised to 49% by the Board of Directors through a Special Resolution. 

In addition, the banks are also expected to maintain a capital adequacy ratio of 15% of Capital to Risk-Weighted Assets (CRWA).

What activities can the Small Finance Banks undertake?

SFBs set up can offer the following services to their clients.

  1. Basic Banking activities i.e. accepting deposits and lending to underserved sections of the society.
  2. Distribution of Mutual Fund Units, insurance products, pension products after gaining approval from the RBI.
  3. SFB can also become authorized dealers of foreign exchange.

These SFB outlets however must within 1 year open at least 25% of their banking outlets in unbanked rural centers. Population in these centers must be less than 10,000.

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Prudential Norms for Small Finance Banks

– The same prudential norms of maintaining Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) which apply to commercial banks apply to SFBs.

– SFBs will be required to extend 75% of  Adjusted Net Bank Credit (ANBC) to sectors eligible under PSL as per the RBI.

– At least 50% of loan extended must constitute loans of up to Rs. 25 lakh.

Top Small Finance Banks in India

Here is the list of the few Top Small Finance Banks in India:

  1. AU Small Finance Bank
  2. Equitas Small Finance Bank
  3. Ujjivan Small Finance Bank
  4. Suryoday Small Finance Bank
  5. Utkarsh Small Finance Bank
ParticularsAU Small Finance BankEquitas Small Finance BankUjjivan Small Finance Bank
Market Cap (Rs Cr)30,723.897,150.605,176.30
PE26.2418.61623.65
Price/BV4.92.11.74
ROE18.569.7515.26
ROCE12.7310.8212.26
Price/Sales4.0501.95
Net NPA Ratio0.811.660.2
Net Interest Margin4.658.039.19

Quick Note: You can find the complete financial details and fundamentals of these companies on the Trade Brains Portal.

In Closing 

Over the years some of the small finance banks have played a very important role in extending financial inclusion. The top 5 SFBs mentioned above have opened over 2000 branches across the country.

That’s all for this post on Small Finance Banks. Let us know what you would like us to cover next in the comments below. Happy Reading!

Best Two-Wheeler Stocks in India - Overview and Comparison cover

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

List of Best Two-Wheeler Stocks in India: Almost every family in India at least aim for a two-wheeler. But instead of just buying a 2-wheeler automobile in India, shouldn’t they also look for the best two-wheeler stocks to invest in?

In this article, we take a closer look at the top two-wheeler producing companies in India and which 2-Wheeler Stock can be a good investment option. Keep Reading!

Indian Two-Wheeler Industry Overview

Man assembling his power bike | Best Two-Wheeler Stocks in India

What sets the Indian two-wheeler sector apart from those around the world is its huge 136 crore population with the majority of it forming part of the low and middle-income households. This has made India one of the largest two-wheeler markets in the world which peaked in 2019 selling over 21 million units.

The two-wheeler segment is part of the Automobile sector which contributes to 49% of the manufacturing GDP in India. Out of this, it is the two-wheeler segment which made up 80.8% of total sales volume in the country for FY2020. This has resulted in the industry achieving an 11.8% annual growth rate. 

In addition, the two-wheeler industry also supports other industries like steel, iron, rubber, glass, etc.

The Indian government too has been taking a positive stance towards the industry. In August last year, the finance minister Nirmala Sitharaman suggested rate revision as 2 wheelers are neither a luxury nor a sin. Further, budget 2021 introduced policies that would work in its favor in the long run.

The voluntary vehicle scrappage policy makes it compulsory for private vehicles over 20 years of age and commercial vehicles over 15 years to undergo a test.

Introduced to encourage vehicles on road to follow modern environmental standards would discourage the use of older vehicles due to the green tax levied on vehicles that fail the test. 

Indian Two-Wheeler Stocks Market Share

2 Wheeler Indian Market Share | Best Two-Wheeler Stocks in India

(Source: Financial Express)

The Top 4 listed companies by MCap in the two-wheeler industry include Bajaj Auto, Eicher Motors, Hero MotoCorp, and TVS MotorCompany whose shares will be the focus of this article.

Hero MotorCorp tops the list with a 39.25% market share as of December 2020. Honda Motorcycles and Scooter India takes the second spot with a 24.55% market share.

They are followed by TVS Motor Company, Bajaj Auto, and Eicher (Royal Enfield) holding a 14.35%, 11.97%, and 3.58% market share respectively based on the number of units sold.  

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Top Two-Wheeler Stocks in India

Now let us take a closer look at these top Two-Wheeler Stocks in India individually to find which ones could be lucrative options to invest in:

1. Hero MotorCorp

Hero MotorCorp Logo

Hero MotorCorp is not only the biggest two-wheeler manufacturer in India but also holds this spot globally based on the number of units made per year. The company has held this position for 18 years.

One of the biggest advantages the company has is its understanding of the Indian markets. The company made headlines riding on the most asked question by an Indian buyer “Kitna Deti Hai.” Catering to this need they produced the world’s most fuel-efficient 2 wheeler, the Splendor ISmart which offered a mileage of 102 km per liter.

Some of their other top two-wheelers include the Splendor, Glamour, CBZ, Achiever, Karizma, Hunk, Passion, CB series in bikes. 

To extend its footprint in the Indian market, Hero is now partnering with Harley Davidson to manufacture and distribute its products in India. Harley Davidson was earlier forced out of the Indian markets after it failed to maintain sales in the luxury segment.

The company also plans to expand into the electric segment by investing in electric two-wheeler manufacturer ‘Ather Energy’. This segment could prove to be a major disruptor in the Indian markets soon. 

Although Hero MotorCorps’ biggest advantage remains its hold on the Indian rural markets this also acts as a bane. This is because its vehicles are highly domestic dependent. Its sales from exports make up only 4% of its total sales.

2. Bajaj Auto 

Rajiv Bajaj at the launch event of new Pulsar bike | Best Two-Wheeler Stocks in India

Founded in 1930 the two-wheeler manufacturer once ruled the Indian markets with its  Scooters like Vespa 150, Priya, and Bajaj Chetak.

Bajaj has long shut down its scooter segment but replaced its focus on motorcycles. Its most popular two-wheelers include Avenger, Pulsar, Platina, and Discover. 

What sets Bajaj apart is its focus on the foreign markets which also extends to bringing world-class bikes to India. This can be seen in its partnership with the KTM. Their products that they manufacture here include the KTM Duke and the Kawasaki Ninja.

When it comes to exports Bajaj is, without doubt, the market leader. Bajaj is India’s largest motorcycle and 3 wheeler exporter. Their revenue share from exports from 2010 to 2020 has increased from 28.2% to 42%.

Bajaj is also set to further its dominance by getting into a joint venture with Triumph Motorcycles and is set to launch its first sub Rs 2-lakh-200cc bike in 2022. 

3. Eicher Motors

Royal Enfield by Eicher Motors | Best Two-Wheeler Stocks in India

Eicher Motors owns and produces the premium motorcycle, Royal Enfield. The company makes it to this list as it has successfully managed to turn around a loss-making venture in the last 2 decades. The company dominates the 250cc plus segment with a 95% market share.

One of the main reasons for their success had been the lack of focus from other players in this niche. Eicher took advantage of this to produce quality premium products under Royal Enfield.

The company faces increased competition today as other domestic players also view this niche with global players like BMW, Jawa, Triumph, Baneli seeking to expand in the Indian markets. 

4. TVS Motors Company

TVS Motors Logo

Of all the top companies on this list, TVS is the oldest. It first began its operations in 1877. The company however only gained serious momentum in automobiles after partnering with Suzuki in the 80s. Its success can be attributed to bikes like Suzuki Samurai, Suzuki Shogun, and Suzuki Fiero. 

Today however TVS still competes in bikes but they have considered are serious competitors in the scooter segment.

One of their best-performing products includes the TVS scooty. Here the company recognized the need for a lightweight easy to handle vehicle for girls and women and successfully went on to deliver. Their other products include Jupiter and Wego.

The company has performed exceptionally well in the last year. This has caused their shares to jump finally after more than 6 years. TVS has managed to grow its revenue by over 50% which is a considerable feat considering the lockdowns. 

Two-Wheeler Stocks Financial Comparison

Now let us take a closer look at the financials of the companies and how their stocks have performed. 

A) Debt to Equity

What makes these two-wheeler stocks attractive apart from their robust growth prospects is their low or lack of debt. Thanks to the highly cash generative nature of their business these companies have managed to maintain low debt.

Here we can see that Hero and Eicher have no debt whereas Bajaj is nearly debt-free. TVS however has leveraged because it is currently the smallest player among these giants. But this too can be managed.

B) ROE & ROCE

Taking a look at the ROE and ROCE the returns offered by these companies are phenomenal. An ideal ROE of 15-20% is expected but Hero had provided an ROE of 26.94% followed by Eicher and Bajaj both nearing 25%. This is extended to the ROCE as well because these stocks have virtually no debt.

TVS Motors still performs well as all the stocks provide returns on equity and capital employed over 15%. One of the reasons for TVS falling short of the others in ROCE is its leveraged finances. 

C) Stock Price 

Before going to the final question on whether the stocks are purchasable or not, let us look at their PE ratio. We can see that investors have already bet really highly on the growth prospects of TVS and Eicher motors.

But after considering the aspects we have seen above being the market leader with low debt and high returns Hero seems to be the most attractive. This adds reason to why analysts have especially updated their prospects to buy on Hero.

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Closing Thoughts

Once again the growth prospects of the Indian two-wheeler industry is one of the biggest reasons two-wheeler stocks are a must-have in your portfolio. But investors must bear in mind that automobile stocks are extremely cyclical in nature.

These stocks tend to rocket when the economy is doing well but otherwise follow the economy downwards when it is not doing well. Also, these stocks are especially affected during the festive seasons. 

One interesting factor to notice has been the relation of these companies to agriculture. As most of these companies have deep penetration in rural India, the ability to purchase their products also depends on how well the monsoon has been in aiding crop growth. Recently two-wheelers gained momentum after a good rabi crop yield. 

Finally, investors must be wary that the industry is extremely prone to technological changes. This will only be amplified with the introduction of electric scooters and bikes. 

That’s all for this post on the best two-wheeler stocks overview and comparison. Let us know what you think in the comments below. Happy Investing! 

IPO Process in India: 7 Steps of Initial Public Offering cover

What is IPO Process in India? 7 Steps of Initial Public Offering!

All You Need to Know About IPO Process in India: We love it whenever an IPO is announced in the markets. Investors scramble to find out if the company has the potential to be the next Google or Apple. And the joy of receiving allotment cannot be compared. But have you ever wondered what goes on behind the scenes?

In this article, we take a look at the IPO process in India a company has to undergo before investing.

Let us understand some Financial Jargons before diving into the process.

IPO: An Initial Public Offer (IPO) refers to the process where a company offers its shares to the public in exchange for capital.

Lead Manager/Underwriter: The lead managers or underwriters are independent financial institutions appointed by the company. They are responsible for coordinating all the activities surrounding the issue.

DRHP: The Draft Red Herring Prospectus (DRHP) includes important information about the company, its business, the industry it is in, current shareholders, and its financials among various others.

Bid: An offer made to purchase something at a certain price.

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Steps of IPO Process in India

A person holding characters of IPO | IPO Process in India

Here are the steps involved in the IPO Process in India in order for a private company to go public:

1. Hiring of an Underwriter or Investment Bank

When a company decides that it will raise funds from the market they approach experts in the matter like underwriters or investment banks who specialize in the IPO process. Normally the company appoints more multiple banks for this.

The underwriters study the financial condition of the company and guide it by acting as intermediaries between the company and its potential investors.

If the company feels that these banks can meet their needs an underwriting agreement is signed. These banks assure the company that the capital will be raised but this is not a promise or a guarantee as this depends on market conditions and investor perception of the company.

2. Registration for the IPO

The next step involves creating a Draft Red Herring Prospectus and the registration statement. This is mandatory as per the Companies Act.

The DRHP includes key components about the company, its financials, its strengths, and risks, why it is raising funds and where will these funds be used. This document is prepared by the banks appointed as lead managers in coordination with the company.

The DRHP is one of the most important documents as it acts as a source of information helping investors decide on whether they should invest in the company or not. This document is also used by the underwriters to market the IPO.

3. Verification by SEBI

After the prospectus is submitted the SEBI reviews the document. Here it ensures that every important detail about the company has been disclosed.

If SEBI feels that adequate disclosures are not made or any errors exist then it is sent back to be changed. Then the company works on these issues and after making the required changes once again files for registration.

Once the document is compliant with the guidelines set, SEBI allows the company to carry on with the IPO.

The company going for an IPO is required to submit the Red Herring Prospectus at least 3 days before the offer is made available to the public for bidding. 

4. Application to Stock Exchange

The company then submits an application to the stock exchange where it plans to float the issue. 

5. Roadshow

One can look at the next step being the promotion of the IPO. This is undertaken by the investment bankers and underwriters appointed. They would travel to important financial destinations and create a buzz regarding the IPO.

The team advertises the IPO in an attempt to attract potential investors or get their attention. They also meet business analysts and fund managers. They hold sessions like Q&A, small group meetings, virtual presentations, etc. 

6. Pricing the IPO

The company here has the option to either go for a Fixed Price IPO or a Book Building Issue. Under Fixed-Price IPO the price of the company’s stocks is set and announced beforehand.

In a book building issue, the company sets a price band between which the investor can bid. Here the company sets an IPO Floor price which is the minimum price investors can bid and an IPO Cap price which is the maximum price they can bid. Based on this the highest price at which all the shares can be sold is determined.  

7. IPO and Allotment takes place

For a period that is usually 5 working days, the final prospectus and application forms are made available to the public both online and offline. Investors can apply for the IPO during this period. 

Once the price has finalised the company and the underwriters will work together to determine how many shares are to be allotted to each investor. This is done within 10 days of the last date of bidding.

If the shares are oversubscribed then the remaining shareholders are refunded. During this step, it is also ensured that no shares are allotted to internal or related parties. 

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In Closing 

As we have many IPOs lined up to arrive in the markets hope this post helped in understanding the process better. That’s all for this post. You may also read FAQs about IPOs to get more insights.

Let us know what you think about the article on the IPO process in India in the comments below. Happy Investing! 

SHIV NADAR BIOGRAPHY cover

Shiv Nadar Biography – The Man Behind HCL Technologies’ Success!

Shiv Nadar Biography and HCL Story: Like many tired of their corporate jobs today, Shiv Nadar too felt the same way back in 1976. But unlike many, he built a billion-dollar empire. Today, Shiv Nadar is a billionaire, and his company HCL Technologies is one of the top IT companies in India.

In this article, we take a look at a story of how he pioneered Indian computing even before the Indian economy made a mark in global eyes. Keep Reading to find out.

Part 1: Shiv Nadar’s Early Life

Let’s start the Shiv Nadar Biography, by first looking into his early life. Shiv Nadar was born on 14 July 1945 in Moolaipozhi, Tamil Nadu. He went on to graduate from  PSG College of Technology with a degree in  Electrical and Electronics Engineering. Thanks to his brilliance he was fondly called ‘Magus’ among his friends which translates to Wizard in ancient Persian.

Unknown to many, he is the sororal nephew of  S. P. Adithanar, founder of Dina Thanthi, a tamil daily newspaper. He is also the cousin of Tamil romance novelist, Ramanichandran. You can already notice that success already runs to some degree in his family.

Part 2: Shiv Nadar’s Early Career

Shiv Nadar began his career at the College of Engineering Pune (COEP) in 1967 and moved onto work at Cooper Engineering Company before securing another job at Delhi Cloth Mills digital products division. DCM was then the fourth-largest company in India.

It was here that Shiv Nadar finally realised that a mundane corporate life was not for him. These woes would spill out during lunch to 5 of his colleagues who also worked in DCM’s calculator division. Fed up and inspired by Shiv Nadar, all 6 decided to leave their well-paying jobs and create something for themselves.

Shiv Nadar with friends Biography

In 1975, Shiv Nadar along with Ajay Chowdhry, Arjun Malhotra, DS Puri, Subhash Arora, Yogesh Vaidya, Mahendra Pratap, and S. Raman started a company called “Microcomp Limited”. They manufactured tele-digital calculators and other office products like Televista. Shiv Nadar was the largest shareholder of the company.

But the team working in Shiv’s garage actually dreamt of venturing into computer production. This was visionary because India only had 250 computers then. Although they had started off by manufacturing digital calculators this was just to source their bigger dreams. But just like any other startup they still faced a shortage of funds.

Part 3: How HCL Technologies was Founded?

Shiv Nadar Success Story, HCL Founder

Lucky for them the Uttar Pradesh government was encouraging entrepreneurs to venture into the IT field at the time. Shiv Nadar took his idea to the UP Electronic Corporation, a public company. Impressed, the UP government decided to invest in the company to hold a 26% stake. This gave them an additional capital of 20 Lakhs.

It was one of the first Public-Private Partnership (PPP). They were, however, suggested to change the name Uttar Pradesh Computers Limited. However, Shiv Nadar chose to name the company Hindustan Computers Limited  (HCL) as it had a nationwide resonance. Being partially held by a government entity allowed him to do so.

The country has witnessed a lot of turmoil during the period. The BJP had finally come to power after defeating Indira Gandhi. And one of their first reforms was to ensure that foreign companies reduced their stakes within the country. This saw companies like IBM and Coco-Cola leave the country. IBM leaving the country caused a void in the country’s IT industry. Nadar recognized this and set out to make the best of the situation. 

In 1978, the first personal computer was built by HCL in Nadar’s garage. They offered the first PC called HCL Workhorse to Indian buyers in 1983. 

Part 4: HCL’s Expansion to Singapore and Developing talent

In 1979, HCL was already looking to venture globally. They found an opportunity in Singapore and set up Far East computers. HCL was worth Rs. 3 crore at the time and this new venture was successful enough to achieve sales of Rs. 10 Lakh in the very first year. 

During the period Nadar noticed that India lacked young trained candidates ready to take up jobs in the sector. Instead of looking elsewhere and simply relying on existing experience, he helped Rajendra S Pawar, Vijay K Thadani and P Rajendran set up an institute for this purpose. With the help of investments from Nadar, NIIT (National Institute of Information Technology) was founded in 1981.

In 1984, the Indian government changed its stance on the import of technology and computers. Nadar seized this opportunity. The founders flew around the world to bring back PC’s which they took apart and studied in an attempt to create their own. Soon the HCL busybee was released in 1985 which was the first multi-processor version of Unix. HCL beat Sun Microsystems and HP by creating the system 3 years ahead of them.

Part 5: HCL’s Offshore Dreams

Just like many others Shiv Nadar too dreamt of expanding globally. But he dreamt of making it big in the US. In 1989, HCL ventured into the American computer hardware market. This was HCL’s first failure. Their venture into the US turned out to be a disaster. But Nadar did not let this slow him down. 

He entered into a partnership with HP (Hewlett-Packard) to form HCL HP Limited. They did not stop here. In 3 years, HCL had also formed partnerships with other global giants like Nokia and Ericsson. This opened up opportunities for HCL and also gave it a new source of revenue.

Part 6: HCL Technologies’ IPO

Moving on to Shiv Nadar Biography, let’s now look into HCL’s stock market journey. By 1998, Shiv Nadar found himself in a tough situation as the revenues began shrinking. At the same time, one of the largest shareholders and co-founder Arjun Malhotra decided to leave the company to start his own venture TechSpan, headquartered in Sunnyvale, California.

At this time, Nadar decided to look to capital markets and decided to float an IPO in 1999. This was a huge success and also coincided with the dot-com bubble. 

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Part 7: HCL’s Further Expansion

Shiv Nadar Indian Businessman

Not known to many HCL had helped automate NSE across 261 cities and even worked on the Boeing Dreamliner’s Flight Management Systems. Thanks to having Shiv Nadar at its helm the company is among the top IT players in India.

In addition, the company has also expanded into aerospace and defense, automotive, finance, capital markets, chemical and process industries, electricity and utilities, healthcare, hi-tech, industrial manufacturing, consumer goods, insurance, life sciences, manufacturing, media and entertainment, mining and natural resources, oil and gas, retail, telecom and travel, transportation, logistics & hospitality.

Phew! that was a long and diverse list.

In Closing

Shiv Nadar was awarded Padma Bhushan (the third-highest civilian award in India) in 2008 for his contribution to IT Industry. Today, he is one of the richest men in India with a net worth of US$24 billion. 

In July 2020, HCL Technologies announced that Shiv Nadar had stepped down as chairman of the board of directors and handed over the baton to his daughter Roshni Nadar Malhotra. “I am sure HCL will fly high under Roshni, who leads with purpose, passion, and pride,” Nadar said. Besides, Shiv Nadar will continue as the HCL’s managing director, with the designation of chief strategy officer. Nadar’s stepping down as HCL chairman marked the end of an era in the Indian IT services industry.

That’s all for today. In this article, we discussed Shiv Nadar Biography. Let us know what you think of Shiv Nadar’s Success Story and who you would want us to cover next in the comments below. Happy Reading!

5 Top FMCG companies in India in 2021- Best FMCG Shares!

5 Top FMCG companies in India in 2021- Best FMCG Shares!

List of the best FMCG companies in India 2021: All our lives depend on FMCG (Fast Moving Consumer Goods) products that satisfy our basic needs. FMCG products are those that have a short shelf life that is produced in high volumes with low cost and are made for rapid consumption.

This industry includes household items, over-the-counter medicines, food, personal care items, stationery and consumer electronics, etc. The fast-moving consumer goods (FMCG) sector is India’s fourth-largest sector and has created employment for more than three million people.

Today, we take a look at the top 5 FMCG companies in India that are responsible for keeping over 1.3 billion Indians on their feet every day. Keep Reading!

Top 5 FMCG companies in India in 2021

1. Hindustan Unilever Limited (HUL)

Market cap: Rs 5,45,762.50 Cr / PE : 68.61

Hindustan Unilever best FMCG Shares

HUL is one of India’s oldest FMCG companies. It is a subsidiary of Unilever, a British-dutch company. The company was established in 1933 and has headquarters in Mumbai. HUL has served over 2 billion customers for over 87 years.

HUL has over 35 brands across 20 categories such as soaps, detergent, skincare, cosmetics, tea, toothpaste. The brand includes famous names like Surf, Excel, Dove, Lux, Lifebuoy, Clinic Plus, Wheel, Sunsilk, Knorr, Axe, etc.

In April 2020, HUL also completed its merger with GlaxoSmithKline Consumer Healthcare (GSKCH India) for Rs 3,045 Crores. Apart from Horlicks, brands such as Boost, Maltova, and Viva are part of GlaxoSmithKline Consumer which has now come under HUL’s umbrella.

HUL Popular brands in India

2. ITC Limited

Market Cap: Rs 2,61,993.75 Cr/ PE : 20.10

itc top fmcg share in indiaITC Ltd. has flourished in the Indian markets for over 110 years giving them a deep understanding of the Indian Consumer. The ITC is known to guarantee a certain standard in production and packaging. They have broad distribution channels in India. This has allowed them to penetrate into even the most rural areas through several retail shops.

Their products include Bingo, Sunfeast, Aashirvaad, Fiama Di Wills, Vivel, Savlon soaps and handwash, Papercraft, and Classmate. ITC has 77% monopoly in the Indian Cigarettes market share and offers brands like Wills Navy Cut, Gold Flake Kings, Silk Cut, India Kings, Bristol, Gold Flake Super Star, Gold Flake Premium Lights, Classic Menthol, etc. In FY2020, ITC made a net profit after tax of Rs 15,300 Crores. 

Most valuable brands of ITC

3. Nestlé India

Market Cap: Rs 1,68,800.78  Cr / PE : 78.18

Nestle India top fmcg companies in India

Nestle is a transnational food and beverage company headquartered in Switzerland. Globally the company has been around for more than 150 years. In India, Nestle dates back to 1912 when it began operating as Nestle Anglo-Swiss Condensed Milk Company. They cater to the nutritional and wellness requirements of Indian consumers. 

Nestle sells a plethora of products including beverages, bottled water, milkshakes, breakfast cereals, instant foods, performance, and health care nutrition, etc. A few of the 2000 brands they currently own are Nescafe, Maggi, Milky Bar, Kit Kat, Bar One, Milkmaid, Nestea, etc. Further, Nestle Cerelac has an undisputed market share of 96.5% in infants 6 months and older as a supplement for breast milk, despite functioning in an open to all industry.

How Nestle India Makes Money(1)

Quick Note: If you want to look into the financials and fundamentals of these companies, you can find it on our stock research and analysis portal here.

4. Britannia Industries

Market cap: Rs 82,414.29  Cr / PE : 46.83

britannia industries fmcg companies in India

Britannia Industries is one of the oldest food-producing companies in the country. It was established in 1892 in Kolkata with an initial investment of merely Rs. 295. Their products are available in more than 5 million retail outlets.

More than 50% of Indian households are proud users of their range of food items. The FMCG is known as the first Zero Trans Fat Business in the country. They have an extensive distribution network in India and 60 other countries. 

how britannia ind makes money

Their products include Good Day, Tiger, Milk Bikis, Bourbon, Marie Gold, Cake, Cheese, Milk, and Yogurt. The company is the largest brand in the organized bread market.

5. Marico

Marketcap: Rs 60,816.91 Cr / PE : 54.99

marico fmcg company

Marico was established in 1990 in Mumbai. It began as a brand for coconut and refined edible oil and later expanded into various kinds of consumer goods. The majority of its success lies in its two brands ‘Saffola’ and ‘Parachute’. The company has come a long way in the segment despite being around for only 3 decades. Safola which competes in the premium refined edible oil segment has maintained its market leadership with a share of 73%. ‘Parachute’ on the other hand holds a market share of 59%. These also form up to 90% of their income. 

how marico makes money

It is currently operating in 25 countries in the emerging markets of Asia and Africa. They maintain their innovation in manufacturing and packaging to preserve the tagline “Make a difference”. 

Marico’s household brand includes Parachute, Saffola, Nihar, Livon, Set Wet, Mediker. Its global products include Parachute, Haircode, Caivil, Black Chic, Isoplus, Code 10, and X-men.

Financial Comparison – Top 5 FMCG companies in India

ParticularsHindustan UnileverITCNestle IndiaBritanniaMARICO
Market Cap (Rs Cr)5,45,762.52,61,993.751,68,800.7882,414.2960,816.91
PE68.6120.178.1846.8354.99
Price/BV11.514.2864.3924.8320.03
Div Yield1.744.771.141.811.43
ROE28.6925.66105.7635.9428.95
ROCE38.2231.55147.8841.4735.69
Price/Sales11.875.6112.47.7510.45
Current Ratio1.264.021.681.452.32
Debt To Equity000.020.280.03
Last 3 Yr Returns46.41%-21.70%83.73%18.26%47.90%
Last 5 Yr Returns171.75%-10.42%177.58%149.34%85.67%

(Updated till May 2021 | Source: Trade Brains Portal)

Closing Thoughts

With the ever-growing needs and constantly improving standards of living the FMCG’s play an even larger role. In order to fulfill these requirements, there are several other FMCG’s too that compete for a significant spot in this market. They include Colgate Palmolive, Parle Agro, P&G, The Godrej Group, Amul, Patanjali, Dabur, etc.

how dabur india makes money

In this highly competitive environment, the FMCG’s have managed to keep customers satisfied by reaching out to every nook and corner of the country making each and every FMCG an integral part of the economy.

What is DRHP? | What to look for in a Draft Red Herring Prospectus? cover

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

Understanding what is DRHP and its Components: The Indian markets have gone gaga with IPO’s raising billions thanks to the bull markets. If your current strategy is to listen to friends and family or to just desperately apply for any of the IPO in an attempt to get allotted and make short-term gains, then sorry to break it to you but it can prove to be disastrous in the long run. But what should one do then?

Enter DRHP! This is one of the most powerful tools investors have in their hands that assists them in making informed decisions. In this article, we understand what is DRHP is and its important components.

What is DRHP (Draft Red Herring Prospectus)?

A woman filing up a form | What is DRHP

Before we directly jump into its definition, let us understand why its need even arises. Whenever a company plans to raise funds from the public they approach merchant bankers to prepare an offer document. This document is known as the Draft Red Herring Prospectus.

The DRHP document acts as a source of information so that investors can get insights as to why they should even consider investing in the company IPO. This document is filed with the Securities and Exchange Board of India (SEBI), which has made it mandatory for companies to file a DRHP. The SEBI then would review this document and ensure that adequate disclosures are made.

It must be remembered that the document is a draft reviewing which the SEBI may ask the merchant bankers to make adequate disclosures if needed. The SEBI does this in the interest of the investors as otherwise, the DRHP prepared may present the company too favorably. 

The DRHP includes important information about the company, its business, the industry it is in, current shareholders, and its financials among various other important information which is otherwise not available to the public.

The document also clarifies the reasons why the company is raising funds and where these funds will be used. The DRHP however does not include key details about the issue like the price at which the securities will be offered. 

Why is it called the Draft Red Herring Prospectus?

The document initially was called the red herring as it included bold disclaimers in red stating that the document has been filed with the SEC and is still not effective or complete and the information may be subject to changes.

But today we can still see sections of the cover page printed in red. For eg. we can see the same in the DRHP filed by Zomato

Zomato Limited's DHRP

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What to look for in a Draft Red Herring Prospectus (DRHP)?

Going through the DRHP completely may be a daunting task as the document may extent to almost 500 pages. To make it easier some fine details that are very important and must not be missed.

However, it is still advisable to skim through the document in search of fine details that could be a deal maker or breaker for the company. Some Key Details to look for in a DRHP:

1. About the Company and its Industry

This is one of the most important sections in the DRHP. This is because it offers details about the company which makes its background clearer and on how it functions. Investors will get a better idea if they feel that the company’s business idea is actually worth it or not. 

In addition, the prospectus also includes information on the industry the company is in. This allows investors to assess what the future prospects of the company could be if the industry is actually growing and to what extent.

The DRHP also informs investors about the company’s current competitors and its current position in the industry.

2. Purpose of the IPO

As investors, we obviously want to know what our money is eventually going to be used for. The ‘Objects of the offer section gives us this information.

It is very important to go through this section as one would not want to simply invest in a debt-ridden company that is going to use funds simply to pay off debt and fund its internal working capital. This is a lax alternative as compared to investing in a company that is going to use funds to fuel further growth.

Investors must ascertain by looking at this which investment could be productive and unproductive for him.

3. Strengths and Risks

Certain companies develop moats that give them added advantage over their competitors in the industry. This section lists out the strengths that a company could already have.

In addition to this, the company also includes the risks that it faces or could possibly face in the future. This gives investors a clearer picture of what they are getting into. The company also includes the legal cases it is fighting.

4. Company’s Management

This section gives you insights into who actually runs the company. It includes their names, age, and even their qualifications and remuneration.

It will also include the scams or frauds the individuals have committed in the past making it all the more transparent for promoters.

5. Promoter Holdings

Here the investors will get to know who actually owns the company. Investors must watch out for promoters who are diluting their stake heavily in the IPO.

Promoters selling off a small portion of their holdings is normal in every IPO. But investors should take notice when a substantial portion is being sold off by the promoters. 

It is rare that a promoter would sell huge amounts if he believes that the company has a multi-billion dollar potential. Substantial stake being sold off could mean that he does not believe that the company has what it takes.

6. Key Financials of the Company

Finally the most important portion of the DRHP. The information included here will probably not have been available anywhere else before if the company had been private. It shows us the profitability of the company, cash flows, and its assets and liabilities.

The section includes income statements, balance sheets, cash flow statements. All these give a better idea of the financial situation of the company.

Where can you find the prospectus?

Investors can find the DRHP on any of the following websites

  • SEBI Website.
  • Stock Exchange Website.
  • Respective Company’s Website.
  • Merchant Banker. 

Closing Thoughts 

In this article, we covered what is DRHP and how to read a DRHP from an investor’s prospectus. The DRHP is not just some regular document and shouldn’t be treated as such. Although it may be easier to simply base your investments on what others say reading the DRHP helps you make a more informed decision. Or in the words of Peter Lynch, “Behind every stock, there is a business. Try understanding what the business is all about.”

That’s all for this post. Do let us know if this is helpful for you in the comments section below. Happy Investing!

List of Indian Companies with Monopoly in their industry

10 Indian Companies with Monopoly in Their Industry!

List of Indian Companies with Monopoly in their Industry: How many Indian companies can you name that are monopolies? Today we identify one of Warren Buffets’ favorite categories i.e. monopolies, but in the Indian markets. Monopoly refers to the category of companies who due to their major competitive advantage are market leaders in their industry. These companies are very difficult to compete with and maintain the highest market share for their products and services.

In investing however the stocks of these companies are known as MOAT stocks. A Moat is a hole that used to surround Medieval castles. This was done as a defense measure in order to make it harder for invaders to attack the castle. The wider and deeper is the moat, the more protected is the castle is. In the business world, these Moats are either barriers to entry like huge capital, government restrictions, or business advantage that a company has made it hard to compete with them.

moat kings example

Today, we take a look at the public Indian companies with monopoly in their industry. There are market leaders in their industry with zero or very less competition. Let’s get started.

Top 10 Indian Companies with Monopoly

Following are the list of monopolies in the Indian markets i.e. the companies that enjoy the status of being a monopoly: (Company – Market Share)

1. IRCTC – 100%

IRCTC stock - Indian Companies with Monopoly

IRCTC is a state-owned entity and the only player in the Indian markets that operate in the Industry. This makes it a monopoly as consumers have no other alternative. The company was founded in the year 1845. It is one of the largest railways in the world and is one of the world’s largest employers. Rail networks are generally considered as ‘ Natural Monopolies’. This is because only one train can use the rack at a given time.

However, countries like the UK have bought in private players by allowing them to bid for rail lines. Earlier this year India too announced that it will be opening the sector for players.

2. HAL – 100%

HAL - Indian Companies with Monopoly in their Industry

The Hindustan Aeronautics India Limited represents the Indian aviation industry and plays a very important role in the Indian defense sector. The company a set up in 1940 by Walchand Hirachand and the Government of Mysore, with the aim of manufacturing aircraft in India. Today the company is state-owned and is associated with designing, fabricating, and assembling aircraft, jet engines, helicopters, and their spare parts. 

3. Nestle – Cerelac – 96.5%

Nestle - Cerelac - 96.5% monopolyCerelac is the brand of instant cereal made by Nestle for infants 6 months and older as a supplement for breast milk. Nestle is one of the worlds leading nutrition, health, and wellness company which was set up in 1866 in Switzerland. It has spent more than a century in the Indian markets over the years has become an undisputed market leader in the baby food segment. It has an undisputed market share of 96.5% despite functioning in an open to all industry.

4. Coal India – 82%

coal india monopolyCoal India Limited is a coal mining and refining company. It is also the world’s largest coal-producing company in the world. It is owned by the Union government of India and is managed by the Ministry of Coal. The company contributes up to  82% of the total coal production in India. It was only this year that the government announced that the coal sector would now be opening up for commercial mining possibly ending its monopoly in the future.

5. Hindustan zinc – 78%

Hindustan zinc - 78%Hindustan Zinc Ltd. is the world’s second-largest zinc-lead miner and holds a 78% market share in India’s primary zinc industry. The company was incorporated as Metal Corporation of India in 1966 as a Public sector undertaking. Today the company is a subsidiary of Vedanta Limited which owns a 64.9% stake in the Company while the Government of India holds a 29.5% minority stake.

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6. ITC- 77%

ITC- 77%Although the company has diversified into a conglomerate in the last century. Despite this, its cigarette business still holds 77% a strong position in the Indian markets. This can be attributed to the expertise the company has developed in the field and a willingness to develop products to match the evolving taste of different types of consumers.

ITC’s wide range of brands includes Insignia, India Kings, Classic, Gold Flake, American Club, Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke & Royal. Apart from a market experience, another advantage that the brand has is its supply chain and distribution network which spans across the country.

7. Marico – Oil Products – 73%

Marico - Oil Products - 73%Marico is one of the well-known FMCG companies in India but the majority of its success lies in its two brands ‘Saffola’ and ‘Parachute’. The company has come a long way in the segment despite being around for only 3 decades. Safola which competes in the premium refined edible oil segment has maintained its market leadership with a share of 73%. ‘Parachute’ on the other hand holds a market share of 59%. These also form up to 90% of their income.

8. Pidilite – 70%

Pidilite - 70%Pidilite’s product range includes adhesives and sealants (Fevicol and M-seal), construction and paint chemicals (Dr. Fixit), automotive chemicals, industrial adhesives, and industrial & textile resins. It is the leader in the adhesive and industrial chemical market with a market share of 70%.

9. CONCOR – 68.52%

CONCOR - 68.52%Container Corporation of India Limited (CONCOR) is a Public Sector Undertaking managed by the Indian Ministry of Railways. The company was set up in 1966 with the aim of containerizing cargo transport in the country. Concor’s core businesses include that of cargo carrier; terminal operator, warehouse operator & MMLP operation. They hold a market share in domestic business of 68.52% in 2019-20.

10. BHEL   

BHEL

BHEL is India’s largest engineering and manufacturing enterprise in the energy and infrastructure sectors and also a leading power equipment manufacturer globally. Its services and products range from power-thermal, hydro, gas. Nuclear and solar PV, transmission, transportation, defense & aerospace, oil & gas, and water. It also holds the single largest market share in the emission control equipment business in India

ALSO READ

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Closing Thoughts

In this post, we discussed the list of Indian Companies with Monopoly in their Industry. For a value investor, a monopoly or big Moat stock is similar to a gold mine. This is because if one can find a suitable Moat stock to invest in they provide significant returns in the long turn. But investors must watch out as these stocks just like other Blue Chip companies are generally overvalued and can lead to lower returns or losses. 

Top Indian companies with Monopoly - Presented by Trade Brains

That’s all for today. Let us know which other Indian companies enjoy a big monopoly in their industry in the comment section. Have a great day and Happy investing.

What is FPO? - Definition, IPO vs FPO and Examples cover

What is FPO? Follow-On Public Offer Explained!

Understanding what is FPO –  Follow-On Public Offer Explained: IPOs had flooded the markets early on this year. But did you know that there exists another type of public offer apart from an IPO called FPO? In this article, we take a look at what is FPO and what does IPO mean in order to differentiate between the two. Keep Reading to find out. 

Aspiring entrepreneurs open up businesses every day throughout the world with ideas that may revolutionize the market. It isn’t rocket science to understand that billion or trillion-dollar ideas don’t come to fruition on their own.

A few episodes of shark tank are enough to make one understand the importance of capital or funds to convert the dreams and ideas of an entrepreneur into reality. 

When a company is first set up, an entrepreneur raises funds from angel investors, venture capitalists, etc. But these funds raised are limited and may take the company only to a certain extent.  After a period of time, the company will still require greater funds for its huge expansion and growth needs. At this bigger stage, the company turns to the public markets to raise funds. 

A lady holding an umbrella while dollars falling like rain | What is FPO?

In India, companies do this by listing themselves in exchanges like the BSE and NSE where the shares will then be traded. But why will public investors invest in these companies?

They do this in return for a share within the company in hopes that either the company keeps providing consistent sufficient returns and is worth a lot more in the future. This means of raising funds through public offers can be classified into two types IPO and FPO.

What is an IPO?

An Initial Public Offer (IPO) is a process through which a company raises funds from this route for the first time by getting listed on a stock exchange. This is a very important source for the company to raise significant funds to meet their expansion and growth needs.

In return for their money, the public investors get shares within the company. The performance of these shares depends on the company’s performance and can be tracked on a daily basis in the stock market.

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What is IPO in Share Market? And Is it Worth Investing in IPOs?

Then, What is FPO?

 A Follow-On Public Offer (FPO) refers to when an already listed company opts to once again raise funds from the general public. Hence an FPO always follows an IPO. 

So basically both the terms mean more or less the same thing with the difference being the IPO is where the funds are first raised from the public. If the need arises and the same company once again opts to raise funds from the general public it is known as an FPO.

There are two types of FPO’s:

The differentiation for types of FPO’s is considering how the ownership is given to the new shareholders.

1. Dilutive FPO

A dilutive FPO refers to one where the promoters and existing shareholders raise funds from the market keeping the value of the company the same. This in turn results in the share price and other ratios like the EPS (Earnings per share) being reduced depending on how much is raised from the markets.

This happens because the number of shares of a company increases with the total value of the company remaining the same.

2. Non-Dilutive FPO

In a non-dilutive FPO, the larger shareholders like promoters raise funds by selling a portion of the stake that they already hold within the company. Here the number of shares remains the same unlike what we’ve seen in a dilutive FPO.

This method does not directly impact the share price and EPS (Earnings per share) of a company.

IPO vs FPO Difference (With Example)

Coming across these terms for the first time may be hard to grasp. Let us understand this better with an example.

Investment 1

A man deciding what type of investment should be done | What is FPO?

Say Mr. Stark has an exciting new business idea which he believes could be the next big thing. But he has only Rs. 10 lakhs worth of capital from his personal funds to finance the business, whereas he requires a total of Rs. 20 lakhs.

Here is where Mr. Angel Investor enters the picture and decides to invest in Mr. Stark’s business as he too believes that Stark is onto something. Mr. Stark convinces him to invest in the business by providing him with a 40% stake.

Investment 2

With the funds available Mr. Stark is able to open the company Big Ltd. in Mumbai. The company takes off and becomes a hit in the state over the next 5 years. But Mr. Stark is now no longer only interested in the state but wants to capture the neighboring states as well. But the funds he has and those generated by the company are nowhere close to what is required.

This time Mr. Stark decides to do a public offer. Since this is the first time Big Ltd is raising funds from the public the issue is known as an IPO. Mr. Stark successfully raises crores by selling his 20% stake within the business. His ownership within the company now stands at 40%.

The company gets listed on the stock exchange and they begin trading at Rs. 10.

Investment 3

5 years down the line the shares of Big Ltd are now worth Rs. 20 thanks to its successful business. Big Ltd. once again is in need of funds as it plans to expand to the rest of the country. This time once again the company opts for the public route.

This time when the company raises funds from the public it is known as an FPO. But Mr. Stark raises these funds from the public by offering them a 20% share within the company. Because Mr. Stark offered his shares to the public the offering is now known as a Non-Dilutive FPO. Post the FPO the shares still trade at Rs.20.

Investment 4

Now Big Ltd. has been in existence for 20 years. Now the company plans to expand globally. There are a total of 1 lakh shares of the company in existence trading at Rs. 30. The company once again plans to raise funds through a public offering but this time by offering 1 lakh shares in the market.

This public offering is known as a Dilutive FPO. Here, after a successful FPO, the shares are worth Rs. 15 as no one sold their stake but instead chose to be diluted in the offering. 

Closing Thoughts 

When we look at two terms from an investor’s perspective they have varied returns and have different risks inherent in them.

An IPO is the riskier of the two as in this case the investors have to only rely on the information released by a company through its DRHP. An IPO however also offers greater returns as it comes early in the life of the company. 

On the other hand, FPOs are less risky in comparison to IPOs. This is because here an investor can easily assess the past performance of the company as all data is publicly available now. The returns however also reduce the risk. 

That’s all for this post on IPOs vs FPO’s. Let us know what you think in the comments below. Happy Investing!

Banking Ratios – How to Assess the Financial Health of Banking Stocks

Banking Ratios – How to Assess the Financial Health of Banking Stocks?

7 Banking Ratios to Assess the Financial Health of Stocks: Banks are considered to be one of the safest places to hold your savings. But is this still true today in India? Banks crashing during the 2008 financial crisis and regularly in India thanks to the scams and internal negligence that keeps occurring has raised some serious questions.

In this article, we take a look at some very important ratios that one must look at before investing to check the financial health of banking stocks or simply using its service to hold their funds. Keep reading to find out! 

7 Banking Ratios to Assess the Financial Health of Stocks

Before jumping into the ratios it is very important to understand what a bank considers an asset. In a conventional business, machinery produces products helping them earn an income making it an asset.

For banks, it is loans that the bank gives out which makes it an asset as this helps them earn a profit. (Quick Note: You can find the financial ratios of any banking stocks on Trade Brains Portal.

YES Bank office | Financial Health of Banking Stocks

Now let us look at some of the important ratios that may help us assess the health of a bank:

1. Gross Non-Performing Assets (GNPA)

When banks give out loans the probability arises that some clients may default in paying back these loans. The Gross Non-Performing Assets (GNPA) refers to the total value of loans that are not recoverable and also on which the bank will not be earning any money. The GNPA is expressed as a percentage of the total loans issued by a bank.

A high GNPA percentage means that the bank has lent out funds which it will not get back meaning it has a poor quality of assets.

This makes it extremely risky to invest in these banks or use their services to park your savings.

2. Provision Coverage Ratio (PCR) 

After a period of time, the bank realizes that some of the loans which they have already given out may not be received back. Hence banks set aside some amount every year to prepare for this. This amount is known as Non-Performing Asset (NPA) Provisions. 

A provision coverage ratio gives us a picture of up to what extent the bank has tried to protect itself against the loans that are most likely to default. A bank with a high PCR i.e. above 70% shows that it is prepared if these loans default and are healthy. 

3. Net Non-Performing Assets (NNPA)

One of the best indicators of the health of a bank is its NNPA. The Net Non-Performing Assets (NNPA) refer to the loans that the bank expects to go bad but has not created any provisions against it. The NNPA is calculated as follows:

NNPA = GNPA – NPA Provisions

This NNPA is generally expressed as a percentage. The lower the NPA’s the healthier the banks.

lehman brothers bankruptcy 2008 09 | Financial Health of Banking Stocks 

4. Net Interest Margin (NIM)

Let us first understand the basic working of a bank before we look into how this ratio works. Banks take deposits from the clients in return for interest and to keep their savings safe. But a bank does not keep these funds idle.

They loan out a percentage of their deposits and charge a higher interest rate on these loans. This is how they make profits.

The Net Interest Margin (NIM) refers to the difference between the interest earned by the banks on the loans given out and the interest that they pay out on deposits. 

NIM = Income from Investments (loans) – Interest Paid out on Deposits.

Banks with high NIM are ideal as they have lower costs to earn a profit.  The NIM can also be looked at in combination with NPA’s. A bank having a low NIM and high NPA is a very unhealthy sign. 

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5. Capital Adequacy Ratio (CAR)

The Capital Adequacy Ratio (CAR) is the ratio of the bank’s capital to its credit exposure. This ratio measures the banks’ ability to meet their obligations in the future without having to dilute their capital. 

Banks with high CAR are ideal as it signifies that a bank has enough capital to withstand losses. Usually, a CAR of 8-12% is considered normal. 

6. Current Account Savings Account (CASA)

Current Account Savings Account or CASA Ratio refers to the share of current and saving account deposits out of the total deposits in a bank. A higher CASA is ideal as lower interest is paid on current and savings accounts.

A high CASA signifies better operating efficiency of the bank. A low CASA on the other hand means that the bank depends on costlier deposits which in turn hurts its profit-making margins. 

7. Return on Assets (ROA)

The Return on Assets shows us how profitable a bank is in using its assets to generate revenue. A high ROA is ideal. A low ROA means that the bank is not efficient enough in utilizing its assets to earn returns. 

Closing Thoughts

The ratios mentioned above are important to assess the health of the bank. One must assess a combination of ratios before taking any decision about the bank. While analyzing these ratios it is ideal to compare the ratios with others in the market to make the optimal choice. These ratios can be found in a company’s annual or quarterly reports.

That’s all for this post. Park your funds safely. Happy Investing!

What are Interim and Final Dividend Definition & Key Differences

What are Interim and Final Dividend? Definition & Key Differences!

Interim and Final Dividend Explained: We always see investors rejoice when the financial jargon ‘Dividend’ is thrown around. In this article, we take a look at what a dividend is with the intention of understanding its two types i.e. Interim and Final dividend. Keep Reading to find out!

What is a Dividend?

Interim and Final Dividend explained

Whenever we invest our money in a financial instrument or any other viable alternative the common theme across all is the expectation of return. Even a basic savings account offers an interest of 3%. But when we take a look at the investment made in the shares of a company there is no compulsion for the company to pay any interest.

One may argue that the shareholders benefit from the increase in share price as the company grows. But for a shareholder to actually benefit from the increase in share price he will have to give up the ownership of the shares. This means that he will have to sell off the shares to earn an income.

Instead, the company pays or passes on a portion of the profits it earns in the form of dividends based on the number of shares held. This acts as compensation for shareholders and if paid regularly a source of periodic income.

But why do companies do this if they do not have to? 

Companies do this as a sign of gratitude. This is because individuals have invested money which has helped the company operate and grow. In addition to this dividends also make the shares of the company more valuable. 

Take for example you hold 1000 shares of XYZ Ltd. Here the company announces a dividend of Rs 1 for every share held. This means that you as the investor will receive Rs. 1000 for holding the shares of XYZ Ltd. 

Here is the example for some recent dividends paid by a few popular companies in India:

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

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Dividend Investing Basics: Pros and Cons of Dividend Investing!

What is a Final Dividend?

A Final or regular/normal dividend refers to the dividend which is declared after the financial statement of the company is released at the annual general meeting.

Here the dividend is announced by the board of directors after the total earnings for the year are determined. 

The amount or percentage of profits given out as final dividends will depend on what the board of directors wants to achieve and their intentions for the shareholders.

The final dividend is approved and paid out only after it is voted on at the annual general meeting (AGM).

What is an Interim dividend?

What are Interim and Final Dividends? Definition & Key Differences cover

An interim dividend refers to the dividend which is declared and paid out before the financial statements are released and before the annual general meeting of the company.

This dividend is paid out of the retained earnings of the company. The retained earnings are a portion of profits that are set aside or not distributed in the previous years.

Out of the two dividends, Interim dividends are generally of lesser amounts. This dividend payment is generally done when the interim financials reports are released in between the year. These reports are generally unaudited. 

Interim and Final Dividend Examples

HDFC Life Insurance Company Ltd scheduled an annual general meeting on 26/04/2021 in order to approve the audited financial statements of the company. Here they also discussed and approved a final dividend of Rs. 2.02 per share for the effective date 30/06/2021.

Here the company did so at the AGM after the financial statements were released. 

On the other hand, HDFC Life Insurance Company Ltd had announced interim dividends earlier on 5th March 2019 and 4th December 2017 of Rs. 1.63 and Rs. 1.36 respectively. This was done in between the respective financial years before the annual reports were prepared. 

Key Differences between Interim and Final Dividend

BasisInterim Dividend Final Dividend
When is it Declared?Declared before the Financial Statements are prepared and in between two Annual General Meetings.Declared after the Financial Statements are prepared for the financial year and at the Annual General Meeting
When is it Announced?It is announced by the board of directors and then approved by the shareholders.It is recommended by the board of directors and announced by the Members of the company at the AGM.
Can it be Revoked after being Announced?It can be revoked with the approval of the shareholders. It cannot be revoked.
Dividend RateLower in comparison to Final. Higher than that of Interim
Is a provision required in the ArticlesIt can only be declared if the Articles of Association authorizes the declaration. Declaration is FInal Dividend does not require any provision in the articles of association.
SourceDeclared out of the retained earnings and free reserves of the company.Paid out of the Profits earned by the company for the year.

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Dividend Dates Explained – Must Know Dates for Dividend Investors!

Closing Thoughts

Dividends provide shareholders with an added incentive to hold the stock and also bring with them added excitement in the markets.

We hope this piece has made it easier for you to understand Interim and Final Dividend. Let us know about your experience in receiving a final or interim dividend in the comments below. Happy Investing!

Mukesh Ambani Success Story - The Real Journey of India's Richest Man!

Mukesh Ambani Success Story – The Real Journey of India’s Richest Man!

A Real Inspiring Mukesh Ambani’s Success Story: His house reportedly took over $1 billion to be built. Apart from owning the most popular IPL franchise Mumbai Indians, he holds a majority stake and runs one of India’s most valuable companies.

There is a greater chance that an average Indian may not know the Vice President of the country or the Chief Minister of his State but will still know who Mukesh Ambani, India’s richest man is. In this article, we take a look at Mukesh Ambani’s success story and his journey. 

Mukesh Ambani’s Success Story

We have divided this Mukesh Ambani’s Success Story in five parts to cover his success at different stages of life starting from his early life, dropping out from Stanford University, Split between the Ambani Brothers to taking Reliance Industries to new heights.

Part 1: Early Life of Mukesh Ambani

Mukesh Ambani was born on 19 April 1957 in Yemen. This was because his late father and Indian legend Dhirubhai Ambani then worked as a petrol station attendant there.

The family soon moved to India where their standard of living improved as they now lived in a 2 bedroom apartment. It was good times from here as his father successfully set up his business in the textile industry under the brand Vimal.

His father soon purchased a 14 story building for the family to live in. Despite this, his father believed that it was best for Mukesh to have a normal childhood. He would use public transport to go to school and never received any allowance.

He went onto graduate as a Chemical Engineer from the Institute of Chemical Technology, Mumbai.

Part 2: Dropping out for Reliance

Mukesh went onto pursue his MBA from Stanford. It was at the same time that his father had successfully beaten the Tata’s and Birla’s to secure a license for PFY (Polyester Filament Yarn) manufacturing.

His father always believed that real-life skills were harnessed through experience, not by sitting in a classroom. Due to this belief, he asked Mukesh to drop out and join him in setting up the plant.

Young Mukesh Ambani with his father | Mukesh Ambani's Success Story

Mukesh played an important role in setting up a plant that was way ahead of its time. This was possible because his father always considered him as a business partner and allowed him to contribute without the experience.

He went on to further the Reliance footprint by establishing the world’s largest petroleum refinery at Jamnagar, Gujarat. Mukesh however did not stop here as he also set up their telecom arm Reliance Communication.

Part 3: Anil vs Mukesh Ambani

To everyone’s surprise, Dhirubhai Ambani passed away from a stroke in 2002. This was the second time he had suffered a stroke. The first time in 1986 post which the company was run by brothers Mukesh and Anil.

Their father however passed away without a will. Soon cracks began to develop in the brothers’ relationship which blew up to become a public feud. Their mother decided it was time for the assets of the company to be split between the two brothers.

This was necessary to end the feud. Mukesh received Oil and Gas, Refining, and petrochemical companies in the split. Whereas Anil got what was called the rising sun companies – Electricity, Telecom, and Financial services segment. 

This was a blow to Mukesh as Anil received some companies that Mukesh had worked hard to create and which had a higher growth rate. Mukesh couldn’t even enter these industries as the split also came with a non-compete clause.  

Mukesh Ambani and Anil Ambani at an event | Mukesh Ambani's Success Story

Mukesh however saw his opportunity to get rid of the clause post the crisis of 2008. Anil had found himself in trouble as many of his projects were stuck and required gas at reasonable rates. Mukesh stepped in to supply the gas on the condition that the non-compete clause was annulled.

This however cannot be mistaken for brotherly love. What ensued soon after was Mukesh playing a hand to ensure that the deal between Anil’s Rcom and South Africa’s MTN never took place. This deal would have catapulted RCom to become one of the world’s largest mobile companies. 

Mukesh’s quest for the telecom sector was clearly not for business purposes alone. After all, RCom was a company whose creation and early growth was owed to Mukesh. Sadly he had unjustly lost the company in the split. 

Mukesh spent the next 5 years pouring money he earned from his oil and petrochemical business to create a competitive company in the telecom sector. This seemed to be a crazy decision at the time as the telecom sector was already dominated by a number of giants competing for every morsel in the industry.  

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

Part 4: Mukesh’s Jio is here to take over!

Reliance Jio Stake Sales - Quest to become the Global Tech Player cover

Eventually, Mukesh launched Jio with 4G. What followed was Jio offering the lowest prices possible in the industry making them impossible to compete with. Mukesh’s business acumen was clearly visible here. He took advantage of the industry as it had for years benefitted from expensive products in return for poor 2G and 3G services. Jio even forced other players now to offer their products at lower margins.

The pricing war that followed soon saw Anil’s Reliance Communication wash away. However, Anil wasn’t the only one affected. Giants like Bharti Airtel soon realised that Jio was there to dominate. In addition unlike others in the sector, Jio had deep pockets thanks to Reliance’s petrol business. Vodafone and Idea barely even managed to survive and their position hasn’t improved since. 

It took the combined efforts of the telecom sector 25 years to build a 2G network across India. It is noteworthy that Jio managed to do this in just 3 years thanks to Mukesh’s drive and successful execution.   

Part 5: Taking Reliance to new heights

Mukesh Ambani successfully diversified Reliance into a conglomerate that owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications.

Apart from setting up Telecomm Giant ‘JIO’, Mukesh Ambani is also slowly venturing into the Retail and e-commerce industry by Partnering with Mark Zuckerberg’s Whatsapp. In April 2020, Facebook had invested $5.7 Bn in Reliance Jio by acquiring a 9.99% stake at a pre-money valuation of $65.95 Bn.

Further to deepen its roots in the Retail segment, Reliance Retail Ventures Ltd (RRVL), a subsidiary of Reliance Industries also acquired Kishore Biyani’s Future Group in a ₹24,713 crore deal (which is currently engaged in a legal battle with Amazon). RIL also acquired a majority stake in online pharmacy ‘Netmeds’ for about ₹620 crores in the same month.

Under his leadership, Reliance became the first Indian company to exceed $100 billion in market capitalization.  It is also currently the most profitable company in India.

The company has been responsible for almost 5% of the revenue the government of India earns from Customs and Excise duty. The growth also propelled him to become the richest man in Asia. His net worth as of 2021 stands at $76.3 billion.

Mukesh Ambani at an event | Mukesh Ambani's Success Story

Although being India’s richest man for several years now, Mukesh never rested on his laurels and still doesn’t. It can be seen in his pursuit to turn Reliance into a zero-carbon company. This is despite Reliance’s petrochemical being one of its strongest pillars.

Ambani is also often heard saying “Data is the new oil”. This highlights a shift in his focus towards the tech sector.

Brothers Reunite?

In 2020, Mukesh also stepped up to help his brother Anil who was now broke upon the request of his mother. It was reported by Bloomberg that Mukesh had made Anil beg to receive this favour. To further salt his wounds Anil even furthered his humiliation by publicly thanking his rival. 

Mukesh goes where business takes him. This can be clearly seen when between 2019-20 period. He had clearly supported data nationalism in order to curb the outflow of Indian user data to companies like Facebook and Google. This soon turned to cooperation with the two companies when Reliance sold stakes to the two in order to become debt-free.

Closing Thoughts 

Mukesh Ambani’s success story for the better or worse is also India’s success story today. This is because the growth of the company today also plays a crucial role in India’s growth. What is even more astonishing is that Mukesh not only has managed to make a name for himself. He also has managed to step out of his father’s shadow of which towered the country in the last century.

It is very rare to come across a second-generation success story. Most of them end up messing up the wealth left behind by their forefathers. This can easily be seen in Anil Ambani’s case. 

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

Uday Kotak's Success Story: An Inspiring Journey of India's Richest Banker cover

Uday Kotak’s Success Story: An Inspiring Journey of India’s Richest Banker

Success Story of the Man behind Kotak Mahindra Bank: Kotak Mahindra could be one of the most successful banks the country has ever produced. Today we take a closer look at the man behind the multi-billion dollar bank i.e. Uday Kotak. In this article, we cover Uday Kotak’s success story and his journey from an aspiring cricketer to one of the world’s richest bankers. Keep reading to find out his self-made story!

Early Life of Uday Kotak

Uday Kotak was born on 15 March 1959 to an upper-middle-class Gujarati Lohana joint-family in Mumbai. His family had moved from Karachi, Pakistan to India during the partition and had set up a cotton trading business. 

His family followed a joint family system and so Uday grew up in a household of 60 members sharing a common kitchen under one roof. Today the billionaire looks back and calls this “Capitalism at work and Socialism at home”. 

Uday always had a knack for mathematics and this led him into the banking career which he pursued later on in his life. He went on to receive a Bachelors in Commerce from Sydenham College of Commerce and Economics. He also pursued a postgraduate degree in management studies from Jamnalal Bajaj Institute of Management Studies. 

Uday spent most of his childhood cricketing and learning the sitar. His love for cricket took precedence over maths and he even dreamt of going pro.

Uday Kotak’s Cricket Career

One of Uday Kotak’s earliest dreams was to become a cricketer. But he did not only dream it like millions but also made an attempt to pursue it. During his childhood, Uday captained his school and college teams. 

Uday Kotak while playing cricket | Uday Kotak's Success Story

He even went on to play the Kanga Cricket League (named after Hormasji Kanga, who played 43 First-class cricket matches) in Mumbai.

The league has also featured great cricketers like Sunil Gavaskar, young Sachin Tendulkar, Zaheer Khan, among others. Uday Kotak played as a left-hand spinner and a right-hand batsman.

Kotak’s cricketing career came to an end when he got hit on the head while running between the wickets while playing the Kanga League at Azad Maidan. This further led to complications and Kotak needed to undergo an operation to avoid a brain hemorrhage.

His injury had bedridden Kotak for several months and even put an end to his cricketing career. Uday also missed a year at his college due to the accident.

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Uday Kotak’s Success Story: Starting his own Business

Uday Kotak's image | Uday Kotak's Success Story

After completing his MBA, Uday had received an offer from Hindustan Unilever, a multinational FMCG company. Although Uday was all set to join the MNC his father made him rethink his decision. He convinced Uday to set up his own business in a 300 sq. ft office space.

Uday opened up Kotak Capital Management Finance Ltd his own small financial agency at the age of 23. It was engaged in the bill discounting business with borrowed capital from friends and family.

In 1986 Kotak received investment from his friend Anand Mahindra and renamed the business to Kotak Mahindra

Uday Kotak’s Business Brilliance

Uday noticed that during the 80s, Nelco a Tata company would borrow its working capital requirements from banks at an interest rate of 17%. At the same time, he also noticed that his friends would part their money in banks that would only provide a 6% return.

Uday saw the opportunity here and offered his friends twice the returns offered by banks i.e. 12% if they were willing to lend to Nelco. The company, being owned by Tata was an added advantage to its security.

Uday took these funds and went on to offer Nelco their requirements but at a 16% rate of interest. With a successful deal, Uday made 4% with little to no investment. 

Uday however did not stop here. He kept searching the markets for other opportunities. He observed that car buyers had to buy cars through means of cash. Even banks then charged their customers an interest rate of 13%.

Uday Kotak too began offering car loans at a 13% interest rate. But why would someone choose a newcomer over established banks? 

Billionaire Mindset

Uday observed that people buying the Maruti a popular vehicle in the 80s would often have a 6 month wait period. Uday took advantage of this and booked 5,000 Maruti cars in advance, a very risky bet. He then offered these to his prospective clients. His bet paid off as car buyers preferred to receive the car at the time of purchase.

The business acumen displayed by Uday Kotak set him, leagues, apart from others in the industry. It is important to note that Uday was still very young but making an impact in the industry. 

As the years went by Uday didn’t just keep growing his business but all diversifying it into different finance arms.

In 1995 Kotak entered the distribution and brokerage business. He kept doing this and in a few years, Kotak Mahindra was now involved in investment banking, bill discounting, stockbroking, life insurance, car finance, and mutual funds.

In 2003 Kotak Mahindra Finance Ltd. received a banking license from the Reserve Bank of India (RBI). Kotak Mahindra was the only non-banking finance company to receive a banking license from the RBI in 2003. 

Uday Kotak at his office | Uday Kotak's Success Story

By 2014, what Uday Kotak had started off in a 300 square feet office was already the 2nd largest scheduled commercial bank in India by market capitalization with more than 1270 branches.

What is even more astonishing is that despite the banking sector receiving one of the worst PR’s Kotak Mahindra has managed to survive with reasonable safety through the multiple crises the banking sector has fallen into.

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In Closing

Uday Kotak after so many years still holds the MD and CEO position for Kotak Mahindra. His story could easily be one of the greatest self-made success stories of our country. He is today worth $14.8 billion!

That’s it for this article! Let us know what you think of Uday Kotak’s success story in the comments section below.

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

Debt Financing vs Equity Financing – Which One is Better?

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

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

What is Equity Financing?

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

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

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

Debt Financing vs Equity Financing

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

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

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

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

What is Debt Financing?

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

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

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

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

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

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

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

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

Some Examples

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

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

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

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

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

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

Quick Read

Is Debt always bad for a company?

Is Debt Cheaper Than Equity?

Debt Financing vs Equity Financing illustration on a weighing machine

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

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

Is Debt Cheap Then?

A monkey thinking about something | Debt Financing vs Equity Financing

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

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

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

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

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

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

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

Formula for calculating WACC | Debt Financing vs Equity Financing

(Source: Fool.com)

WACC vs Leverage graph | Debt Financing vs Equity Financing

(Source: CFI)

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

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

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

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

Is Balancing Debt and Equity an Absolute Rule?

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

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

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

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

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

Conclusion

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

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

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

Riches to Rags indian riches to rags list

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

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

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

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

List of 7 Indians who went from Riches to Rags

1. Anil Ambani

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

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

2. Ramesh Chandra

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

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

3. Subrata Roy

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

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

4. Ranbaxy Singh Brothers

Ranbaxy Singh Brothers

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

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

5. Nirav Modi

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

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

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Nirav Modi Scam – What Actually Happened in PNB Fraud?

6. Vijay Mallya

Vijay Mallya

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

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

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7. Ramalinga Raju

Ramalinga Raju

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

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

Closing Thoughts

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

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

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

10 Indian Fintech Startups to Watch Out For in 2021 cover

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

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

Indian FinTech Startups to Watch Out For in 2021

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

1. MoneyTap

MoneyTap Logo | Indian Fintech Startups to Watch Out

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

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

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

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

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

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

2. PolicyBazaar

PolicyBazaar Logo | Indian Fintech Startups to Watch Out

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

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

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

3. ZestMoney 

Zest Logo | Indian Fintech Startups to Watch Out

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

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

4. NiYo

Niyo Logo | Indian Fintech Startups to Watch Out

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

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

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

5. RazorPay

Razorpay Logo | Indian Fintech Startups to Watch Out

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

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

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

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6. PineLabs

Pine Labs Logo | Indian Fintech Startups to Watch Out

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

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

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

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

7. Lendingkart

LendingKart Logo | Indian Fintech Startups to Watch Out

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

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

8. Khatabook

KhataBook Logo | Indian Fintech Startups to Watch Out

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

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

9. CRED

CRED Logo | Indian Fintech Startups to Watch Out

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

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

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

10. Cashfree

Cashfree Logo | Indian Fintech Startups to Watch Out

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

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

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

In Closing

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

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