Editorial
SNIGDHA RAO
FinNiche wishes you a very happy and prosperous Dussehra! May the power of goodness reside in you and give you the strength to face every evil and overcome it! Congratulations to all our peers who earned internships with enviable brands. You guys rock!! Congratulations, also, to all my friends who now have more people to smile at while walking in the campus. After all, in the hopeful hours spent together, we all got a little more closer, didn’t we? And now, here we are again. Its back to the routine. Classes, assignments, submissions and FinXpress. We hope the last two summer placement editions were informative and helped you in your processes. This week, we bring to you some more interesting stories in scams, scandals and stories, a story of a man from Kandivili who thought he could get away, major happenings in the economic and finance world in National and International, a special writeup on block chain technology in banking sector, explanation of another very interesting financial instrument, a class talks topic which you would highly appreciate and lots more. We hope it would help you in your upcoming processes and in keeping you well-informed and aware. The library would host the hard copies in a few days for your perusal. Hope you like it!
Thank you all for the love and appreciation you have been showering on us. It is invaluable to us and we would always try to meet and exceed your expectations. Let us know any specific topic that you would like us to include in the FinXpress. Your feedback and suggestions would be most appreciated. And we would like to dedicate this edition of FinXpress to the warrior in you because what counts is not the number of times you fell, it’s the number of times you got up again. From tomorrow, let’s give each other an encouraging smile, a pat on the shoulder, a nod of appreciation, something to show that we are all in it together and we will come out victorious. Spread the hope! Always remember, nothing is more powerful than your own grit and determination!
Contents 1) BLOCKCHAIN IN BANKING 2)FINSHORTS 3) NATIONAL -Darjeeling Crisis
2 4 5
3) INTERNATIONAL -Rohingya Crisis -UNGA 2017
7 8
4) MARKET
9
5) CLASS TALKS -TIME VALUE OF MONEY
11
6)SCAMS & SCANDALS -JIGNESH SHAH
12
7) WIZARDS -WARREN BUFFETT
14
8) STARTUP TRACKER
16
9)INSTRUMENTALLY SPEAKING -MUTUAL FUNDS
18
10)LOCK THE STOCK -SPICEJET
19
11) FINQUIZ
22
It has the power to change your destiny! We welcome your brickbats and bouquets with equal humility Once again, a very happy Dussehra to you! Happy reading!
1
BlockChain In Banking
ATUL RANJAN
In the year 2008, a personality named Satoshi Nakamoto (since no past record has been veified, it is a high possibility it might be an organization/ group) published his research regarding cryptocurrency and its underlying technology, and thus became the inventor of Blockchain technology. The original paper which is about bitcoin, describes it as a peer to peer version of electronic cash and the manner in which the record of the transaction was kept, resembled a Blockchain. The Bitcoin was not recognized by major economies and is still short of being legitimized officially. But one of the main implications of this whole exercise has been the popularization of the Blockchain technology. It has been hailed as one of the major technological revolutions in the financial sector. As the name suggests, Blockchain is a chain of blocks; the blocks being a set of financial transactions which are uniquely identified. It creates a decentralised database of transactions, electronically verifiable across the world by whoever holds the blockchain file. It is similar to a bank’s ledger which verifies a transaction being taken place. Here the ledger is online and editable by the concerned trading parties in real time. Hence any transactions taking place in this environment is displayed worldwide instantly. Since it is editable by the concerned user parties, it eliminates the involvement of financial institutions like banks to validate the transactions. Also it gives the facility to the concerned parties to track information using a secured network. Each time a block is completed, a new one begins which has a hash reference to both its predecessor as well as successor. Thus a chain of block is created and hence the name Blockchain.
*Picture Credit: Satoshi Nakomoto,“Bitcoin: A Peer-to-Peer Electronic Cash System” It was the highly transparent and secure Blockchain technology which led people to trust on the cryptocurrencies such as Bitcoin and transact in them. The current monetary system relies on a regulator to look after breaches, whereas in case of Bitcoin, it is its’ code which sets the rules of transaction and the whole network checks for compliance of these rules. This technology has the potential to affect the financial service industry in many ways. Listing a few of them: Fraud reduction; almost all banking system today are made on a centralized server which makes them more susceptible to cyberattacks. But since the blockchain has a decentralized server with same exact copy of the chain present with all the users, it is almost impossible to change an entry at one end. Also the transactions need to be verified by all the permitted members, so the instances of fraud occurring at one end is also eliminated. Other advantages are low cost and real time transactions, execution of smart contracts, which are coded to self-execute when the required terms are satisfied. Also the expenditure by banks on KYC norms compliance can be reduced heavily. To quote a few examples, the first use of this technology in the banking sector in India came in last year when ICICI Bank announced that it had successfully executed a transaction using Blockchain technology. So what exactly did ICICI Bank do?
2
It collaborated with Emirates NBD, a Dubai based bank where it executed foreign exchange remittance almost instantly and also facilitated the exchange of documents in real time. This process in regular banking process takes 2-3 days to complete. Also major global banks such as Morgan Stanley, Goldman Sachs and UBS have published research papers regarding the use of Blockchain technology. Banks have started partnering with Fintech firms to develop their own banking environment based on Blockchain. Instances of banks forming groups and experimenting upon transacting electronically through Blockchain have also been cited. Advent of a new technology is always met by skepticism, but what decides its fate is the strong underlying basics and its adaptability to the market environment. In the case of Blockchain it is evident that both the factors are favorable, it just needs more time and research to bring it to the mainstream banking environment. A point to note is that developing a working technology on the Blockchain platform is currently costly as the literacy about it is pretty low. Also being in a nascent stage, research is hard to come by. For a seamless transaction to take place using the technology, the participation of all the players involved - the corporations, banks, government agencies need to be there. Also a major factor that needs to be looked upon is its compliance and subsequent approval by regulators on the use of technology. Despite the challenges faced, the perceived gains from the technology are far greater to be ignored. It ensures that the technology is here to stay. With major financial institutions trying on Blockchain and also some central banks giving their positive views regarding the technology, it is evident that Blockchain technology is going to be a game changer in the field of banking and finance.
3
FINSHORTS India improves on WEF’s global competitiveness rankings: India has been ranked as the most competitive country in South Asia, appearing at the 40th position in the global competitiveness ranking conducted among137 countries by the World Economic Forum (WEF). Although India’s ranking has slipped by 1 position compared to last year’s, the two rankings are not comparable because of a change in the methodology. According to WEF India’s score is its highest ever according to the current methodology. Switzerland, US and Singapore occupy the 1st, 2nd and 3rd positions respectively. Oil prices near 26-month high, OMCs and aviation stocks decline: Share prices of oil marketing companies (OMCs) and aviation firms have declined this month as oil prices have hiked which could reduce their profit margins. Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd and Indian Oil Corp. Ltd shares dropped by 11-12% in September, whereas for companies like Oil India Ltd and Oil & Natural Gas Corp. Ltd, they dropped by 22.25% and 9.27% this month. The rise in fuel prices is not a good news for aviation companies where except SpiceJet Ltd which has seen a hike of 4.24%, aviation companies like Jet Airways (India) Ltd and Interglobe Aviation Ltd share prices decreased by 14-16% this month. Airtel to invest Rs. 20000 crore this year in digital infrastructure: Speaking at the India Mobile Congress, Sunil Bharti Mittal said that Bharti Airtel Ltd will invest up to Rs. 20,000 crore this year for digital infrastructure. He said that Airtel will be rolling out massive multiple input multiple output (MIMO) technology to keep India head to head with what is happening globally. He urged states as well as municipalities to recognise the power of digital India and enable easy on-ground implementation of policies like “The Right of Way.” IDBI Bank sells 9% stake in SIDBI: IDBI Bank sold 9.03% stake in the Small Industries Development Bank of India (SIDBI). IDBI Bank sold approximately 48 million shares of SIDBI, bringing down its shareholding to 3.68% from 12.71%. IDBI Bank started selling stakes in SIDBI last month when the bank mandated SBI Capital Markets to look for buyers for its entire 16.25% stake in the
RITU RAJAN
financial institution. Out of the total stake put up for sale, Life Insurance Corp. of India (LIC) bought 2% while Vijaya Bank picked 0.5%. At the inception, IDBI Bank held a 100% stake in SIDBI. In 2000, the lender sold 51% to state-owned banks and financial institutions. Prime Minister Modi launches Rs.16,000 crore Saubhagya Scheme for household electrification: Prime Minister Narendra Modi has launched a social welfare scheme, the Saubhagya Scheme. This scheme aims to provide electrical connections to over 4 crore families in rural and urban areas by December 2018. Under this scheme, household across India which do not have an electricity connection will be given connections free of cost. The government will bear the expected cost of 16,000 crores for providing electrical connections. Speaking at the launch of Saubhagya Scheme, PM Modi said that the welfare of the poor is linked to the identity of the NDA government and reducing the problems faced by the poor is his biggest responsibility. Sensex falls over 300 points: Amidst the recent surgical strike at the Myanmar Border, Sensex has fallen over 300 points while the Nifty 50 trades below 9,800. Sun Pharma lost 2% post AGM, Divis Labs fell 7% in USFDA observations. Being the seventh consecutive loss in a row, this is the longest losing run in 2017. Due to this, the rupee sank to a more than six-month low on a foreign fund outflow. MK Singh appointed as the new Chief Proctor of the Banaras Hindu University: In the light of recent violence at the Banaras Hindu University last weekend, chief proctor ON Singh took the moral responsibility and resigned from his post. Thereafter, Mahendra Kumar Singh has been appointed as the new Chief Proctor of the Banaras Hindu University. Slaughtered Hindus a testament to the brutality of Myanmar's conflict: Myanmar authorities have found bodies of 45 Hindu villagers in mass graves in the north of Rakhine state this week. The latest violence in Rakhine state took place on 25th August, when Rohingya Muslims attacked 30 police posts and an army camp, killing about 12 people. The military’s response to these attacks has driven 480,000 Rohingya refugees to Bangladesh.
4
Darjeeling Crisis comes to an end ANANYA NATH
The aspiration for Gorkhaland is one of the oldest movements in India; it began in 1907 when the Hillmen’s association of Darjeeling asked for a separate administrative unit. The Gorkhaland movement demands the creation of a separate state of Gorkhaland which mainly comprises of the Nepali speaking people of Darjeeling, Kurseong, Kalimpong and other hilly districts of West Bengal. Though the Gorkhaland demand dates back to 1907, the term Gorkhaland was coined recently in the 1980s by Subhash Ghising, the founder of Gorkha National Liberation Front (GNLF). The area covers the Terai and Duars regions which is famous not only for its beauty but also for tea, which are its main sources of income. The demand of separation arose due to differences in ethnicity, culture and language of the region with Bengali culture. Additionally, poverty, under-development and politicization of the issue are also reasons which have been influencing the demand for a separate state.
In 2005 the GNLF, the state and Central government signed an in-principle memorandum of settlement to include Darjeeling in the Sixth Schedule of the Indian Constitution, which addresses the administration of tribal areas. But Bimal Gurung considered this to be a betrayal to Gorkhaland and launched Gorkha Janmukti Morcha (GJM) in 2007. This also led to a rise in agitations for the demand of Gorkhaland. The volatile issue finally found some respite in 2011 when a memorandum for the formation of Gorkhaland Territorial Administration (GTA), a
semi-autonomous administrative body for Darjeeling was passed by West Bengal legislative assembly to calm the Gorkha Janmukti Morcha (GJM). However in 2013, the GJM adopted an innovative method of protest called Janta Bandh where people were asked to voluntarily stay inside on the 13th and 14th of August. There was no use of force but the silence on the street was a sure sign of revolt. In 2017, Darjeeling once more flared up due to the decision of West Bengal chief minister Mamata Banerjee to introduce Bengali as the second language in all school from I-IX. Bengali was offered as an optional language in Darjeeling where as Nepali was not offered by most of the premier educational institutions of West Bengal as a subject of study. People considered her declaration was aimed at consolidating the hold of Trinamool Congress in the recent municipal elections after it won only 1 seat where as GJM won 31. Political commentators speculated it was to hamper the growth of BJP which was gaining momentum in the state. Heavy handed responses by the state government lead to death of 11 protesters which deteriorated the situation. GJM called for an infinite bandh in Darjeeling which put it in more than 100 days of complete shutdown. Tea gardens, shops, banks, commercial establishments were all closed for over 3 months, bringing the life and livelihood of the people of Kalimpong and Darjeeling districts to a complete halt. Two rounds of talks, one on August 29th and one on September 12th between the hill parties and the West Bengal government failed to break the deadlock. 5
On 26th September 2017, the GJM announced the withdrawal of the bandh. A fresh appeal from the Union Home Minister Rajnath Singh to Mr. Gurung led to this development. Mr. Singh also asked Union Home Secretary Rajiv Gauba to convene an official level meeting within the fortnight in the Ministry of Home Affairs to discuss all related matters. GJM had demanded an official tripartite talk between the Centre, state and GJM for the strike to be lifted. Though there was no promise of tripartite talks by the centre, a proposal of an official meeting by the centre was enough to satisfy GJM. As tea gardens, markets and other commercial installations were slowly opening in the hills, pressure was mounting on the GJM leadership to call off the strike. An estimated loss 20% of quality tea production and 40% of Darjeeling’s tea industry revenue is expected. All manufacturing and plucking in the 87 famed gardens of Darjeeling were suspended during the strike. Annual productions are expected to take a hit as whatever the industry has lost so far cannot be recovered. Tea is an exportable product and as per industry experts, a direct loss of 100 crores mostly in foreign exchange and an indirect loss of 150 crores has been estimated.
The lives of the people of the hills of Darjeeling are at crossroads: while there is undisputed support for the formation of Gorkhaland, none of the central units of national parties support the cause. Even the BJP which from 2009 to 2014 was sympathetic to the issue has not come out in support of the cause. While the people of the hills are pushing for Gorkhaland, a host of other players like the state and central governments and other political parties are eying political dividends and benefits. Proper resolution of the issue is significant due to various reasons. Firstly, it would end one of the oldest movements in Indian history and help create a stable and responsible government in the region. Secondly, how India treats her Nepali origin citizens would in turn affect how Nepal treats people of Indian origin in its territory. Thirdly, Darjeeling has the potential to become an economic engine in the East due to its advantage in tea plants and tourism. However, for this to be possible, stability in the region is a prerequisite. Lastly, Darjeeling is in close proximity to the chicken neck that connects the rest of India with the North East, its prosperity is essential for the strategic and economic interests of the nation.
Source: haalkhabar.net 6
ROHINGYA CRISIS
Since the 1970s Rohingya have been having been targeted in a series of violence by Buddhists and Myanmar security forces. In 1982, Rohingya were stripped of their citizenship as part of decades-long persecution because of which they were denied basic rights, including freedom of movement. In 2012, the violent Buddhist mobs forced more than 140,000 Rohingya from their homes into squalid camps. In March 2014, the Myanmar government banned the word Rohingya and asked for registration of the minority as Bengalis which meant that 1.3 million Rohingya in Rakhine state were not included in the census. On April 2015, the government formally cancelled the temporary IDs for Rohingya, hence depriving them of voting rights linked to the cards. The Rohingya had hoped the election of Aung San Suu Kyi in November 2015 would see a turnabout in hostility towards them from the new government but violence against them has worsened since then. A UN report in February 2017 accused Myanmar security forces of atrocities against the Rohingya that could represent crimes against humanity and possibly ethnic cleansing. Myanmar has been under bitter attack from the international community recently for ‘genocide’ against the Rohingya Muslims. The Rohingya crisis has two competing narratives: one which portrays the Rohingya as a stateless group of people majorly concentrated in western Myanmar and considered by the United Nations as the “most persecuted minority group in the world”. Vocal rallies were held in Indonesia, Malaysia and Bangladesh to protect the Rohingya. The second Burmese narrative, mostly by the Burmese army describes the Rohingya as illegal Bangladeshi immigrants in the Rakhine state who are foreign in origin, language and faith and do not deserve to be part of the
SUSWETA BANIK
Burmese nation. While Myanmar perceives the Rohingya as migrants from Bangladesh, the latter considers them to be unwanted refugees from Myanmar, leaving this group of about one million people without a legal citizenship in any country. As per reports on August 24, 2017, by the UN Special Advisory Commission for Rakhine State, Government of Myanmar has welcomed the “meaningful and long-term solutions” proposed and assured that it will set up a new Ministerial-led committee that would be assisted by an Advisory Board on Rakhine for implementation of the recommendations, including a review of the 1982 citizenship law. However just hours after that report was made public, Arakan Rohingya Salvation Army (ARSA) carried out its attacks. According to Amnesty International, around 436,000 Rohingya have fled to Bangladesh and more than 80 villages in northern Rakhine State have been set ablaze by Myanmar security forces and mobs since August 25, 2017. On the other hand, Bangladesh is facing a serious problem in hosting over 400,000 refugees. Only about a fifth of the new arrivals have received an official food ration and aid agencies warn that existing water sources could be drained dry in just a few months. Many countries and international organizations have extended support to Government of Bangladesh in meeting the needs of refugees. It is evident that the only long-term solution to the situation in Rakhine State is the socio-economic development of the State which would generate employment opportunities and economic activity that should benefit all the communities living in the State. It is with this understanding that many countries have recently agreed with Myanmar to provide financial and technical assistance for developmental projects to be undertaken in Rakhine State in conjunction with the local authorities.
7
UNGA 2017
Every year a pantheon of global leaders converges for a fortnight in the month of September at the UN Headquarters on the 42nd street in Manhattan. This is the United Nations General Assembly. The world political equivalent of a Grammy or an Oscar. This year on the 72 nd anniversary of the establishment of the United Nations a curious thing happened, after a whole of 11 years, all 196 nations attended the UNGA and addressed the world from this August podium. The Assembly was chaired by Slovakia’s foreign minister Miroslav Lajčák who was elected as the President for UNGA in May, succeeding Fiji’s former ambassador to the UN Peter Thomson. The UNGA was held from 12-29 September amidst a backdrop of a host of issues plaguing the world, ranging from extreme climatic changes, to Rohingya refugee crisis to the Trump- Kim rhetoric spiraling out of control. More importantly nations had to tweak their foreign policies in light of a decreased US participation in the funding and peacekeeping operations. President Trump made his debut at the UNGA, and true to his abrasive and larger than life style of functioning, Trump’s speech was peppered with jingoistic references in line with his campaign, warning the North Korean premier Kim Jong-Un with dire consequences if he continued with the nuclear program. He also indicated that the agreement made with Iran during the tenure of his predecessor Barrack Obama, was an embarrassment and his administration was looking to renegotiate the same. This was received with much fury and anti-America rhetoric in Tehran, where Iranian President Hassan Rouhani said that renegotiation was off the table and called Trump’s speech a mistake. US had also earlier indicated through its UN representatives that it would be pulling out from the Paris Accord on Climate
SOUMYA RUP CHANDA
Change unless the terms of the accord were made more lenient and favorable to US. This official stance was steadfastly adhered to even at this event. From India’s point of view, Trump’s speech highlighted the importance of India as a strategic partner in the South Asian region yet again. However, the new Pakistani PM Shahid Khaqan Abbasi decided to debut at the UNGA with a speech designed to coerce the international community into ordering an investigation into the alleged atrocities by the Indian armed forces in Jammu and Kashmir and take the narrative away from its own domestic export of terror. In a fitting reply by the Foreign Minister Smt. Sushma Swaraj, India rebutted the baseless accusations and labelled Pakistan as having transformed from the ‘land of pure’ to ‘land of pure terror’. Another area of concern at the world forum was the Rohingya refugee crisis, where the Rohingya community in the Rakhine state of Myanmar has been subject to a brutal military crackdown, which has been labelled by the UN as ‘ethnic cleansing’ and as ‘genocide’ by several other nations. This has resulted in nearly 420,000 refugees fleeing to Bangladesh with over 60% of them children. The UN appealed to the entire international community to provide humanitarian aid for the refugees. Seven nations including UN Security Council members like US, Britain and France asked for the intervention of the Security Council. The UNGA is an important annual event as it helps to bring into the limelight the real issues around the world and to see people not as a collection of religions or ethnic groups or nations but as humans who need food, clothing, shelter, safety and healthcare to propel this world into the future and keep our humanity intact. 8
MARKET: At a Glance
SRITAM SAMANTARAY
9788.6 19.65
0.20%
31283.72 1.24
0.00%
As on 29th September, change shown on a daily basis
Source: http://www.bseindia.com
Source: https://www.nseindia.com
WEEKLY TOP GAINERS NIFTY50
WEEKLY TOP LOSERS NIFTY50
COMPANY
CURRENT PRICE
PREV. CLOSE (22 Sept)
CHAN GE
COMPANY
CURRENT PRICE
PREV. CLOSE (22 Sept)
CHAN GE
COAL INDIA
270.85
253.80
6.72%
ASIAN PAINTS
1131.70
1213.25
-6.72%
GAIL INDIA
419.05
398.55
5.14%
ADANI PORTS & SPECIAL
376.75
401.20
-6.09%
HINDALCO
240.60
230.90
4.20%
HINDUSTAN UNILEVER
1173.90
1239.20
-5.27%
Source: https://www.nseindia.com/live_market/dynaContent/live_analysis/top_gainers_losers.htm
9
CLASS TALKS Time Value Of Money
SUNIL KUMAR BEHERA
Hello People! Howdy? It has been three long months at IMT and the MBA life is in full swing. We have experienced almost everything starting from the boring lectures, to the assignments, to the projects, to the summer placement week. It has been quite a thrill. Hasn’t it? In previous editions, we talked about Baskin Robins Cost structure, Nescafe’s BEP or CVP analysis, but let us talk about ourselves this time. We will try to understand time value of money through our own example and will try to plan for our future at the same time. “Time is money” this figure of speech makes so much sense to us sleep deprived MBA people , but to succeed in business and take the correct decision we have to understand the monetary value of time a bit more quantitatively.
Present Value: The future cash flows expected from a project are discounted at a given rate of interest to arrive at the present value of cash flows. The future cash flows of the annuity are multiplied by the present value annuity factor derive present value. Higher the discount rate lower will be the present value of future cash flows. Future Value: It is the value of an asset or cash flow at a specified date in the future. It is calculated taking into account the growth rate in the value of the asset, in this case the interest rate or the discount rate. Annuity: Annuity is a series of equal payment, which are made periodically for a specific time period. Usually the time-period is of one year, which brings the name annuity, but the time period can be shorter or longer. Most annuities are paid in the end of the period, but if the annuity is paid at the start of the period, it is called annuity due. Annuity, which is to be paid period after period until eternity is known as Perpetuity. We all have made a huge investment of 16.5 Lakhs for this MBA journey. Most of us have taken loan from one or the other banks to cover for the same. Have you ever thought about how much time it will take to clear the debt and how much you actually will have to pay to clear that? If not you should start that, but do not worry we will be helping you with that too through this small example. In this example, we have taken our loan amount to be 16,50,000/- with an interest rate of 9%. Let us consider we are planning to pay back yearly. We will assume that we will be able to clear the loan amount within 5 years after our passing the course. Therefore, we will start our term payment of the loan after 2 years from now. Assume the term payment that we have to pay to be ‘X’ And the present value of the loan amount is 16,50,000/As we are not paying any term payment for next two years (‘moratorium period’ of our loan) Let us calculate what will be the future value of our loan after that time.
PV= FV / (1+r) n Where, PV= Present Value FV= Future Value r = Interest rate n= number of years 16, 50,000 = FV/ (1+0.09)2 FV= 16, 50,000 * 1.1881 = 19, 60,365/10
According to the above calculation, we will get to value of 19, 60,365/- for the value of the loan amount after 2 years. After that, we will start with our yearly term payment. Calculation of the annuity for this present value can be done through below formula: 19, 60,365= A/0.09 [1-(1 / (1+0.09)5)] 19, 60,365= A/0.09 * 0.35 A= (19, 60,365*0.09)/0.5775 = 5, 04,093.85 /Year
Opening Balance
Interest Amount (Rate @ 9%)
Total Loan amount due
Annual Installment
Closing Balance
1
₹ 1,650,000.00
₹ 148,500.00
₹1,798,500.00
0
₹ 1,798,500.00
2
₹ 1,798,500.00
₹ 161,865.00
₹ 1,960,365.00
0
₹ 1,960,365.00
3
₹ 1,960,365.00
₹ 176,432.85
₹ 2,136,797.85
₹ 504,093.85
₹ 1,632,704.00
4
₹ 1,632,704.00
₹ 146,943.36
₹ 1,779,647.36
₹ 504,093.85
₹ 1,275,553.51
5
₹ 1,275,553.51
₹ 114,799.82
₹ 1,390,353.33
₹ 504,093.85
₹ 886,259.48
6
₹ 886,259.48
₹ 79,763.35
₹ 966,022.83
₹ 504,093.85
₹ 461,928.98
7
₹ 461,928.98
₹ 41,573.61
₹ 503,502.59
₹ 503,502.59*
₹ 0.00
*slight difference due to rounding of values Let us see how much in total we are paying to clear the debt of 16.5 lakhs in the next 7 years.
Total installment value= 504,093.85* 4 + 503,502.59 = 25, 19,877.99 /We hope we gave you an idea about how the value of money changes across time as well as some knowledge, which will help you plan your future more accurately. Until next, time... Ciao :) Note – Do not be scared by the number. You know you are worth a lot more. Believe in yourself
11
SCAMS & SCANDALS
ASHWIN BANSAL
Jignesh Shah -The Kandivili boy of 5600 crore NSEL scam
Soon after becoming a billionaire, Jignesh Shah, who is the founder of MCX India's largest commodities market was arrested for allegedly being involved in India largest financial markets scam. He was the promoter of Fintech, the company which owned NSEL(National Spot Exchange Limited). Forward Markets Commission (FMC) issued a notification on July 12, 2013 restricting NSEL from making any further new contracts. This eventually led NSEL to shut its exchange as customers started pulling their money back. Investors in NSEL lost nearly $950 million which made the scale of this default dwarf the last big exchange crisis in 2001, that of Rs.600 crore settlement problem at the Calcutta Stock Exchange. What is a Spot Exchange? In spot trading physical exchange of goods take place on the ‘spot’. Buyer and seller agree to undertake the transaction immediately. NSEL was the first electronic commodity spot exchange in India allowing stakeholders to transact from anywhere in the world. Exchange acts as the guarantor in case either party defaults. This was done by storing the goods of the seller in exchange designated warehouses which are then tested and verified for quality and weight. The warehouse receipt is transferred to the buyer once the transaction takes place. What NSEL really did? NSEL was allowed to make T+2 contracts that meant the delivery and exchange of goods and cash should take place within 2 days of the initiation of contract. NSEL engaged in illegal activity by allowing customers to enter into multiple contracts of more than T+2 period such as T+25, or T+36 contract. One could ‘buy’ the T+2 contract and ‘sell’ the T+25 contract and easily earn 15% return on his investment on an annual basis. This led to increased exchanged volume of over 15,000 customers each of whom put in at least Rs 2 lakh. Was the arbitrage genuine? No. It appears not. One was only allowed to enter both of these contracts in pairs, single side contracts were not allowed by the exchange. Investors always had to have a ‘buy’ near term contract and ‘sell’ long term contract. The Ponzi scheme Just think, if everyone was earning 15% on their investments who was paying for them and from where? 24 members of the exchange were on the other side of these contracts and all the customers were buying and selling to these members who were collectively called Planters or Processors or Borrowers. They claimed to hold commodity processing plants. By now you can very well understand that NSEL worked as a financing program for these planters. These companies claimed to hold imaginary inventory as collateral in exchange warehouses. They were just rolling over the money from one investor to another in every 15 days. Some of these companies had bad financial health making them incapable of handling such large loans.
12
The End of the Game After the circular from FMC some investors smelt a rat and didn’t roll over their contracts. NSEL was unable to sustain this resulting in the eventual shutting down of the exchange. When borrowers were asked to return back the money, they could not. NSEL issued a circular stopping all future contracts. They also said that they would delay on their payments. Lies and Deceit According to the CEO NSEL had 800 crores as ‘Settlement Guarantee Fund’ and inventory of commodity in the NSEL warehouses. But, in reality they just had Rs 60 crore in cash and the rest of the ‘guarantee fund’ was in stock. Investigation revealed that a mall existed in a place where a warehouse containing 2 lakh tons of sugar was to be present. There wasn’t any stock. NSEL’s 24 Processor members were related to each other. NK Proteins on of the biggest borrower is owned by the son-in-law of NSEL’s chairman Shankarlal Guru. Indian Bullion Market Association was owned primarily by NSEL. As we say Show me the money. We still don’t know, however investigations revealed that it has gone abroad through hawala, used for funding of real estate and stock manipulation of Fintech and MCX shares , spent for personal gain and political bribe. The Future? NSEL crisis reflected on the lack of regulations and enforcement in Indian capital markets. Financial system depends upon investors trust, this scam resulted in loss of investors trust. Just imagine if everyone insisted on withdrawing their deposits from the bank accounts, we will have to shut everything down. NSEL’s ‘getting away’ has left us with Deficit of Trust which is far worse than fiscal or current account deficit.
13
WIZARDS
PARV SURANA
WARREN BUFFETT “The basic ideas of investing are to look at stocks as a business, use the market fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing”. - Warren Buffett The biggest living legend of investment that we all are aware of is Warren Buffett. He is one of the most successful investors in the world. As of August 2017, he is the second wealthiest person in the United States and fourth wealthiest person in the world. Net worth of Buffett is $78.7 billion. Early Life: Warren Buffett was born on August 30, 1930 in Omaha, Nebraska, USA. He is second of three children of Congressman Howard Buffett. He developed an early interest in investment and market and at the age of 11 he invested for the first time and filed a tax at the age of 13. He wanted to skip his college and go directly into business but he was overruled by his father. His interest in business started to evolve when he borrowed a book from Omaha public library at the age of 7, “One thousand ways to make $1000”. His early childhood years were enlivened with entrepreneurial skills. He started his business career by selling chewing gums, Coca-Cola bottles and by delivering magazines door to door. Later, Buffett and his friend spent $25 to purchase an old pin ball machine which they placed in a local barber shop. Within months they owned several machines and after a year, the business was sold for $1200 to a war veteran. At the age of 10, he decided to visit New York stock exchange. He started his investment career by purchasing three shares of Cities services. Buffet holds a degree in Bachelor of Science in Business Administration. After being rejected from Harvard Business School, he enrolled himself at Columbia Business School of Columbia University upon learning that Benjamin Graham taught there. Benjamin Graham played an important role in Buffett’s life. He earned a Master of Science in Economics from Columbia in 1951. Early Business career: 1951-1954: Investment Salesman, Buffett-Falk and Co. 1954-1956: Securities Analyst, Graham-Newman Corp. 1956-1969: General Partner, Buffett Partnership Ltd. 1970-today: Chairman and CEO, Berkshire Hathaway Inc.
Currently Buffett is Chairman and largest shareholder of Berkshire, an Omaha based Investment Company. The publicly owned business owns Geico, Clayton Homes and stakes in Coca-Cola, American Express and Wells Fargo.
Out of the box investment: Warren Buffett invested around $5 billion into Goldman Sachs during some of the darkest hours of financial crisis and generated a huge profit both in cash and on paper of around $3.1 billion. This happened when Goldman’s stock was falling sharply. This decision was criticized by many of the renowned personalities of the finance world. With the help of Buffett’s investment, Goldman Sachs was able to go to the market and raise a fresh capital by selling some stocks of worth $2.5 billion. 14
When Buffett’s enterprise Berkshire Hathaway invested $5 billion in Goldman Sachs, he got in return: $5 billion worth of perpetual preferred shares: On preferred share, Goldman had the right to buy the shares and did so in 2011 by paying Buffett around $5.64 billion out of which $5 billion was the principal, $500 million bonus for early payment and $140 million in dividends Buffett was due. So, Buffett made around $640 million on an investment of $5 billion with a return of 13% over two and a half years. Apart from that, Buffett was also collecting dividends while he held the shares, amounting to around $1.1 billion. In all, Buffett made a profit of around $1.75 billion, a return of 35%. Warrants for 43.5 million additional shares: Warrants derive their value from the difference between the price at which Buffett was entitled to buy $115 and the actual price at which Goldman shares are trading when he buys. When he got the warrants, the shares were trading at around $125. Since then, the price of the share followed a see-sawed up and down pattern. Regardless of this changes in price, he earned around $1.35 billion in stocks making a net profit of around $3.15 billion on an investment of $5 billion giving him a return of 62%.
Non Profit work:
Apart from being a great investor, Warren Buffett is also known for his charity work. He is a great philanthropist. He donates most of his salary to various charities. He has committed to donate more than 99% of his fortune to charity. Out of this 99%, approximately 83% will be go to Bill and Melinda Gates foundation and the rest will go to foundations of his children. So far he has donated around $32 billion in charity. He majorly donates his salary in the areas of education, health, nuclear threats, children and community services.
Gates Foundation: Buffett was very much impressed with the progress the Gates foundation has made in global health and development and in education in United States that he decided to donate 83% to this foundation instead of donating in his family foundation. To initiate this, he has pledged 10 million shares of Berkshire Hathaway class B stock to Gates foundation out of which 30% has already been donated. Buffett Family Foundation: Apart from supporting Gates foundation, he has also decided to donate $2 billion each into each of his children’s foundation which includes Peter and Jennifer Buffett’s NoVo foundation which seeks to empower adolescent girls, Howard G. Buffett foundation which focuses on food and water security, and Susan Buffett’s Sherwood foundation which focuses on early childhood education and welfare. Apart from this, Warren Buffett along with his friend Bill Gates has launched The Giving Pledge, which asks Billionaires to donate their wealth in different NGOs as they have the power to do so.
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STARTUP TRACKER
ANIRUDH MITTAL
Heckyl Technologies Pvt Ltd
Co-founders Mukund Mudras (left) and Abhijit Vedak pose at their office in Powai, Mumbai
Ever wondered how easy and hassle free your trading life would be if you could do all the comprehensive analysis and study of the market trends and sentiments under one roof? Customers trade on information, and there is too much of it out there. Identifying it, filtering through it, and getting a meaning out of what a particular news item or expert view means is a colossal task. Well, this 2010 founded startup, Technologies Pvt. Ltd is your destination.
Heckyl
Heckyl is one of the most promising Fintech start-ups that has come across in recent times. An all in one solution, the company seeks to provide an analytical platform for investors, traders and researchers. The comprehensive platform of the company allows users to find news, sentiments, and predictive data analysis; and chart the global market trends. The site is a one-stop shop to keep track on recent government moves, hedge funds or private equity investments, venture capital deals, economic announcements, and more. The story of Heckyl began in November 2010; when the world was trying to overcome the financial crisis, Som Sagar, working at Merrill Lynch Technologies' Mumbai office, quit his job. In India, the BSE Sensex was recovering from its lows in 17,000s in the beginning of the year to 20,000, with a short lick on 21,000 that stood as a record until recently. It was a great time to launch an innovative product aimed at the financial
markets. And that's when Sagar with his Merrill colleagues Abhijit Vedak, Jaison Mathews, and Mukund Mudras, set out to claim the opportunity. Working out of Sagar's home, they created a company called Heckyl Technologies and developed a prototype of their product. The name Heckyl, as explained by the Co-founders and CEO’s of the company, comes from a bird which can count numbers, differentiate between objects and when time comes, can take complex decisions. Heckyl offers a varied range of products that can help the stock market traders make informed decisions about how their investments are going to perform in the stock market. Their whole business model is based on the very idea of inclusiveness of its user so as to reduce the gap between brokerage and retail. The platform covers data of over 15000 public listed companies, Forex, commodities, a few hundred private companies & entrepreneurial ventures, along with the world’s leading private equities players, hedge funds, fund managers and venture capitalist firms. The company boasts of an impressive list of clientele comprising of top brands like Religare, SMC, Angel broking, IIFL, JM Financial and many more. The company had risen $3.5M from IDG Ventures and others in Dec 2013. From then on, Heckyl's ride has been upward.
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MUTUAL FUNDS
AKSHIT GOYAL
Mutual funds are a type of pooled investments. Pooled investment is the type of investment in which many investors invest in a single portfolio. Each investor owns a proportion of the portfolio according to money invested. Mutual funds bring together different people and invest their money collectively.
There can be two kinds of funds: Open-end funds In open end funds investors can buy newly issued shares at NAV. The total number of assets in the fund divided by number of such share issues is called net asset value. The additional cash raised is then used to buy additional portfolio securities.in this case investors have liberty to redeem their funds whenever they want. If in addition to a fee for managing funds, an additional fees is also charged the funds are called Load funds. If no such additional fees is charged the funds are called No-Load funds. Close end funds In case of close end funds new investments are not taken. Investors are also not given option to redeem their funds before maturity of the fund. Types of mutual funds: Money market funds In money market funds investments are made in short term debt securities and interest income is provided with very less risk of changes in price. Fund NAV’s are typically set to one currency unit, but there have been several instances in past when NAV’s of some funds declined when securities they held dropped dramatically in value. Money market funds are also differentiated on basis of the type of money market instruments they purchase and the average maturity time of the instruments. Bond mutual funds Bond mutual funds are invested in fixed income securities. They are differentiated by maturity period, credit ratings, etc. Government bond funds, tax exempt bond funds, high yield bond funds and global bond funds are some of the examples of bond mutual funds. Stock mutual funds Stock mutual funds invest in securities that represent part ownership in publicly traded companies. aim to provide long-term growth, unlike bond funds, which focus on income. With more growth opportunity, these funds also bring along more risk as compared to other parties
Index funds These funds are passively managed funds. The portfolio is constructed in such a way that performance of fund matches with performance of certain index. On the other hand, actively managed funds are the funds in which the portfolio manager selects individual securities with the motive of producing greater returns than the indexes. Fees charged in case of actively managed funds is also higher. Other forms of pooled investments: Exchange-traded funds These are similar to close-end funds. The sales and purchases are made in the market rather than the fund itself. One main characteristic of exchange traded funds is that in most of the cases they are passively managed. In case of close ended funds, the price of shares can differ significantly from their NAV’s but in case of exchange traded funds market prices are kept very close to their NAV’s. ETF’s can be traded at intraday prices. Separately managed account This is the portfolio in which there is a single investor and the portfolio is managed according to the needs of the needs and preferences of the investor Buyout funds (Private equity funds) These funds are used to buy entire public companies. These companies are then taken private i.e. their shares no longer trade. The purchase of company is often funded with a great increase in firm’s debt. The fund is used to reorganize the firm to pay its debt and increase the value of its equity. the restructured firm is then sold to some other party within a time of three to five years. Venture capital funds These funds are invested in the companies which are in the start-up phase. Investments are made with intent to make them valuable companies. These companies are then taken public by issuing IPO’s or the sold to some other companies. Both buyout funds and venture capital funds are actively involved in management of the portfolio companies.
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LOCK THE STOCK
ARCHIT BASER
SPICEJET
Red, Hot, Spicy… Off late the company’s performance on stock market has been similar to the abovementioned tagline. Almost every air traveller in India is aware of the good quality services that the carrier provides. However not all of them are aware of its stock quality. So, let’s gain some insights about the company – About the Company Offering the most competitive fares with highest consumer value, the company aims at becoming India’s most preferred airline. Its vision is to ensure that flying is for everyone. The company focuses the most on performance from recruiting the best pilots to the most efficient maintenance staff to well-trained cabin crew to deliver the quality service every time. Currently headquartered in Gurugram, the Company was incorporated in 1994 in the name of ModiLuft by Indian industrialist S. K. Modi as an air taxi provider. In 2004, it was acquired by Mr. Ajay Singh, an Indian entrepreneur and was renamed as SpiceJet. The company has a market capitalization of Rs. 7675.96 crores of which Rs. 3070.38 crores are its free float market capitalization. It operates with a fleet of more than 54 aircrafts currently. It consists of 4 planes of Boeing 737-900, 28 of Boeing 737-800, 2 of Boeing 737-700 and 20 of Bombardier Q400. Chairman & MD: Mr. Ajay Singh Chief Financial Officer: Mr. Kiran Koteshwar BSE Security ID: SPICEJET Current Market Price (CMP): Rs. 128.05 (As on 30th September 2017)
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Share Performance for last 5 years
Source – www.bse.com
The share price as on 30th September 2012 was Rs. 37.10. So, if any person has bought the share that day, he would have gained 245.15% by today. 1 Year Comparison with BSE Sensex
Source – Thomson Reuters
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SWOT Analysis
Business Performance The year 2017 has been full of positive events for SpiceJet till date as it launched a lot of new flights and brought Puducherry back on India’s aviation map. It enhanced its connectivity in the North East after adding Dibrugarh as its 50th destination. The Mega Monsoon Sale has been a hit and the company registered profits for the 10th quarter in a row which is a big achievement for any airline company. The above chart comparing the company’s performance with its peers also shows that the PAT Growth along with Return on Capital Employed (ROCE) which are among the crucial factors for any company have been the highest for SpiceJet. Financial Highlights
Source – SpiceJet Annual Report
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Future Forecast
Source – Thomson Reuters Report
Source – Thomson Reuters Report
DISCLAIMER: The above research report is a composed or electronic correspondence that incorporates examine investigation, inquire about suggestion or an assessment concerning securities or open offer, giving a premise to speculation choices. The perspectives communicated in that are construct exclusively in light of data accessible freely/inner information/other solid sources accepted to be valid. The data is given just as an integral administration and does not constitute an offer, sales for the buy or offer of any monetary instruments, instigation, guarantee, assurance, guarantee, or as an official affirmation of any exchanges or contract of any sort. 21
FinQuiz
SHASHANK MALLA
1) When was RBI established? a) April 1st, 1935 b) April 22nd, 1947 c) April 20st, 1943 d) April 21st, 1940 2)Who was appointed as the 44th chief justice of India a) T S Thakur b) Jasti Chelameswar c) J S Khehar d) Dipak Misra 3) When is National mathematics day? a) November 26 b) December 22 c) September 24 d) October 21 4) What is the name of the mobile wallet launched by SBI with BSNL? a) State Bank Mobile Cash b) State Bank MobiCash c) State Bank Mcash d) State Bank Mobiquick 5)What does MICR stands for? a) Monetary Ink Cheque Recognition b) Magnetic Ink Character Recognition c) Magnetic information Code Recognition d) Magnetic Ink Character Retrieval 6) Which of the following is a temporary pass through an account being held by a third party during the transaction process between 2 parties. a) Company Account b) Escrow Account c) Current Account d) Nominal Account 7) Who is the new CEO of Uber? a) Jeffrey Immelt b) Susan Wojcicki
c) Mary Barra d) Dara Khosrowshahi
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8) This Logo belongs to which of the following banks?
a) b) c) d)
Chase Bank Barclays Lloyds Deutsche Bank
9) Which of the following helpline number was launched to promote digital payments by the union government a) 12222 b) 12344 c) 14444 d) 16666 10) Among the following, who is the current Secretary General of United Nations? a) Antonio Guterres b) Ban Ki-moon c) Mรกrio Soares d) Antรณnio Costa Answers:1. A, 2. C, 3. B, 4. B, 5. B, 6. B, 7. D, 8. C, 9. C, 10. D
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