The Finapolis August 2016 by The Finapolis

Retire the Right Way

Why Interest Rates Move Up and Down

Perfect Your Elevator Pitch

What Next for Driverless Cars?

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1st August 2016 `60

Your Personal Finance Advisor

Financial Planning for Newlyweds

AUGUST 2016 l The Finapolis

EDITOR’S DIARY

The

Your Personal Finance Advisor

Volume 10

Issue 05

August 2016

Editor Mandar M Bakre editor@thefinapolis.com Associate Editor S Vijaykrishnan Correspondent Sukanta Kundu Editorial Board Phani Sekhar Amit Saxena KP Jeewan Jagannadham T Design & Production Vijayendra Kumar Ch Kerthi Saikumar Advertising & Circulation Shabna R Iyer Vijayendra Kumar Ch For Ad Sales Queries subscriptions@thefinapolis.com

Be ‘Riskponsible’

ere is the backstory of a line that has stayed with me In November 2006, I attended the wedding of a colleague, and reimagining the ceremony at office the next day for those who couldn’t attend, I men-

tioned that the normally gregarious, often irreverent fellow was all solemn and serious at the function. “That’s how it should be,” his boss quipped. “It is only at the moment of the wedding that you realise your responsibilities.” That line has stayed with me. It is only at the moment of the wedding that you realise your responsibilities. One of those responsibilities, obviously, lies in the financial domain. Since the first half of India’s traditional wedding season ends in June, we wanted to do a piece on how new couples can achieve financial bliss. Regular contributor Balwant Jain delivers this with a checklist of items and guidance on the actions to take, in our cover story for August (July, we thought, would be too soon for such an article ). Having covered one major moment of financial

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responsibilities, we turn to another. Too many people leave retirement planning for too late a time. We bust some common myths to ensure your finances remains ticking even in old age. We also explain the intricacies of interest rates, and why falling interest rates needn’t affect your returns. Together, we hope these pieces help you become ‘riskponsible’, or responsible about risk. In our lighter features, we review Pandeymo-

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nium by Piyush Pandey and find that the book,

Published for the month of August 2016 Printed on August 1, 2016 Total No. of pages 68

Notice the one used a few lines back? We look at these symbols and their future

All charts and tables are sourced from Bloomberg, unless otherwise indicated.

just like the man, has a wide span and a multi-connected approach. WhatsApp has made emoticons or emojis part of standard communication. in Etcetera. The Olympics will get underway in Rio this month. In honour of the Games, we present a massive, full page of questions in Answer Back. They have been designed to prove progressively difficult, but winners will find immense satisfaction in cracking the code, while those stumped by a question or two can look forward to detailed answers in next month’s issue. Happy Reading!

For Editorial Queries Please contact The Finapolis Karvy Centre, 8-2-609/K, Avenue 4, Street No.1, Banjara Hills, Hyderabad-500 034 Tel: +91 40 66072560 Copyright The Finapolis. All rights reserved throughout the world. Reproduction in any manner is prohibited. The Finapolis does not accept responsibility for returning unsolicited manuscripts and photographs. All unsolicited material should be accompanied by self addressed envelopes and sufficient postage.

Mandar M Bakre

The Finapolis l AUGUST 2016

CONTENTS Cov Sto er ry

After Effects

Marriage alters your financial requirements, and calls for a fresh look at your plans as responsibilities increase

Investment Advice Retirement, Done the Right Way

34 Face to Face

COLUMNS

Harsha Upadhyaya, CIO - Equities, Kotak Mahindra AMC

AN Shanbhag and Sandeep Shanbhag Your Advance Tax Timetable has Changed a Bit

Adhil Shetty Make the Most of Your Credit Cardâ&#x20AC;&#x2122;s Rewards

A. Shankar The Comeback of Kochi

AUGUST 2016 l The Finapolis

WE ARE DIGITAL

Pharma Review

The Pills Should Get Sweeter

Auto Review

Your Mileage May Vary

Hot Wheels

Buy on

Will News of Tesla’s Fatal Crash put the Brakes on Driverless Technology?

Interest Rates Why they move up and down

With the proliferation of smartphones and tablet devices, reading habits are slowly but surely changing. We understand the importance of giving readers a cross-platform choice to access the magazine. The Finapolis is now available in a digital avatar as well via a global publishing platform such as Magzter and Indiamags. Besides allowing you to read on the go, the digital version offers an enhanced reading experience. It also eliminates delivery delays. You can download the digital magazine on the first day of every month. Go to www.magzter.com, Indiamags.com or Rockstand mobile app, search for ‘The Finapolis’, sample some pages of the digital magazine, and buy a subscription through your netbanking or credit card account. A one-year subscription for The Finapolis digital costs only Rs 540. You need to have a device that runs on Apple’s iOs, Android or Windows 8 operating system. Do let us know what you think of the digital experience by writing in to feedback@thefinapolis.com

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Emoticons Come of Age

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The Finapolis l AUGUST 2016

inbox GST: Game Changer Indeed! I really liked to read about the GST story that you have covered. It was a nice read and helped to understand how much complex currently it is for anyone to do big business across states. I think the government should take strong effects to make sure that this GST law can be passed this year itself. The Modi government is showing its interest in making things easy for people. — Rajesh Shah, Surat We are hearing about “GST, GST, GST” for so long now but still nothing is being done. It is shame that even though we want high GDP growth we are not able to accept a law like this. It has been in pipeline for more than 10 years now. When it will come to reality? — Harish Kumar, Patna Disclaimer: The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal

Time to Pull Out I liked the pullout you gave in the recent issue. It is proving of great help. This idea of pullout is really nice as we can keep things important for us. — Hans Raj, Guwahati

information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and

What About Finances Under Water?

using such independent advice, as they believe necessary.

The hotels you showed in Etcetera were so expensive that it is impossible for

While acting upon any information or analysis mentioned

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in this report, investors may please note that neither Karvy

These are more for show only, how many people actually can afford to go

nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising

there? — Kamlesh Panse, Pune

from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering

Brexit Not Big for India The media is unnecessarily getting excited about Britain leaving European Union. Everybody from our Finance Minister Arun Jaitley to RBI Governor

corporate analysis and investment recommendations are

Raghuram Rajan to even all our brokerage companies have said that it will not

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AUGUST 2016 l The Finapolis

INCREASING EXPOSURE

 EPFO may invest more funds in stock market

BIG WIN

The Employee Provident Fund Organisation (EPFO) has decided to deploy more of its funds in the stock market, beyond the present 5% threshold. The proposal will be presented to the body’s central board of trustees (CBT). Union labour minister Bandaru Dattatreya, who is also the Chairman of the CBT, said that the equity exposure shall be increased gradually. Currently, the EPFO invests 5% of its incremental corpus (or Rs 6,700 crore) in stocks via two exchange-traded funds, which have fetched a return of 1.62%. The EPFO is also looking to allow private lenders such as ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd to collect EPF contributions apart from PSU majors like SBI.

Jabong falls in Flipkart’s hands The big e-commerce battle for Jabong concluded late in July when Flipkart, India’s largest e-commerce company, acquired the online retail portal Jabong through its fashion subsidiary Myntra. Jabong is one of India’s major fashion multi-brand e-store with over 1,500 retail brands. “Welcome Jabong India to the Flipkart family. We’ll create history together,” Flipkart Executive Chairman Sachin Bansal tweeted after the deal. In a statement issued, Flipkart co-owner Binny Bansal said: “Fashion and lifestyle is one of the biggest drivers of e-commerce growth in India. We have always believed in the fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith. This acquisition is a continuation of the group’s journey to transform commerce in India. I am happy that we will now be able to offer to millions of customers a wide variety of styles, products and a broad assortment of global as well as Indian brands.”

Jabong, owned by the Global Fashion Group, has been on the block for some time now, and the company had been in touch with Snapdeal, Future Group and Amazon as well. Amazon reportedly wanted to acquire Jabong in 2014, but walked away because of the steep $1.2 billion price tag. Jabong posted an operating loss of Rs 426 crore in FY15, slightly lower than in FY14. Its revenue growth inched up by just 7% to Rs 866 crore in FY15 from Rs 811 crore in FY14.

ACRONYM SOUP Govt puts stakes in SUUTI, NBCC on the block In a major move, the central government has decided to initiate selling of stakes in 51 companies held under the Specified Undertaking of Unit Trust of India (SUUTI). It has invited merchant bankers to help manage the process for selling 43 listed firms and eight unlisted companies. The valuation of these holding may be as high as Rs 60,000 crore. Going by the present market valuation, stake sales of the three blue-chip companies (L&T, ITC and Axis Bank) alone could fetch up to Rs 59,732 crore. Some of the listed companies under SUUTI holding include Reliance Industries, Hindustan Unilever, Am-

buja Cements, Hero MotoCorp, Tech Mahindra, Tata Steel, Tata Power, Tata Motors, BPCL, Ultratech Cement, Sun Pharmaceuticals and Videocon Industries. However, most of these holdings are less than 1%. SUUTI also owns majority stakes in some unlisted companies like UTI Advisory Ser-

vices and UTI Infrastructure Technology. Additionally, the Cabinet Committee on Economic Affairs has approved divestment of 15% of stake in state-owned NBCC, formerly National Buildings Construction Corporation Ltd, which would raise a further Rs 1,706 crore. However, the actual response to the offer will depend on market conditions at the time of the sale. The government holds a 90% stake in NBCC, which has a market capitalisation of Rs 14,274 crore. The committee has also proposed that NBCC employees be offered additional shares at a 5% discount to the actual issue price.

The Finapolis l AUGUST 2016

 MULTIPLE RINGTONES DoT adds to woes of telcos trying to end call drops The Department of Telecommunications (DoT) is considering a ban on trading and sharing of airwaves through mergers and acquisitions until the spectrum auction is completed, so as to clearly define the caps and rules for the sale. If effected, the ban is likely to begin in September. The proposal of the banning has to be cleared by the Telecom Commission the highest decision making body of the DoT. The DoT has also served demand notices totalling Rs 12,500 crore on six telecom majors after the Comptroller and Auditor General (CAG) sent a report in June revealing they had miss-reported revenue of about Rs 46,000 crore for four years (2006-07 to 2009-2010). Those in the dock are Bharti Airtel Ltd, Vodafone India Ltd, Aircel Ltd, Reliance Communications Ltd, Tata Tele-

services Ltd and Idea Cellular Ltd. The CAG report pointed to a shortfall of Rs 5,000 crore of licence fee and spectrum usage charge and Rs 7,000 crore of interest. News of these notices comes as the telecom industry struggles against action by the Telecom Regulatory Authority of India on call drops. However, to get rid of the call drop issue, telecom companies have committed to the government that they will erect 60,000 towers under a 100-day action plan at an investment of Rs 12,000 crore. Installation of almost 48,000 towers has been finished. Recently, the companies decided to spend an additional Rs 20,000 crore over the next one year to install 100,000 additional new towers to reduce incidents of call drop.

GST UPDATE Minor consensus visible, but no readyness on rates The Goods & Services Tax (GST) has moved a few small steps more to reality, yet a full consensus remains elusive. The stalemate on big issues such as the revenue neutral rate (RNR) and dual control persists, even as agreement has been reached on three things: one, all states have unanimously rejected the rate of 15-15.5% proposed by a panel headed by chief economic advisor Arvind Subramanian. This implies that the actual RNR, whenever it comes into force could be well higher than 18%. States are also far from finding

also agreed to drop the demand for an additional 1% tax on supply of goods. There is also broad consensus that the Centre will

ter Thomas Isaac believe that the actual rate, whatever it is, will certainly be lower than the nearly 30% rate that is levied in-

common ground between the divergent rates proposed by the CEA panel and the National Institute of Public Finance and Policy, with the latter’s recommendations hovering above 26%. Two, the states have also trounced the demand for a constitutional cap on the GST rate, a red flag raised by a now lone Congress. Three, states have

compensate states for any revenue loss for five years after GST is implemented. While the above agreements offer hope, a lack of clarity on what the actual RNR (and its final impact on the common man) and the debate on dual control indicate that the bill will have miles to go before it rolls out. Some, like Kerala finance minis-

directly on consumer products currently. Amit Mitra, head of the empowered committee of finance ministers told reporters that the “wording on the tax rate” has been worked out. However, the RNR could prove a major roadblock in the days ahead. Experts believe that 18% as a starting rate could turn the GST ineffective.

AUGUST 2016 l The Finapolis

 POLICY CLARITY Parliament panel moots changes to debt recovery bill

A Joint Committee of the Parliament has proposed large-scale amendments to the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill to speed up almost 70,000 debt recovery cases pending across the country. Amendments will involve tweaking several terms including ‘company’, ‘financial lease’, and ‘secured creditor’. It also includes a proposal to de-

lete a clause imposing penalties on Asset Reconstruction Companies (ARCs). The debt recovery bill also seeks to amend existing laws such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamp Act, 1899 and the Depositories Act, 1996.

The committee has also proposed to empower the Reserve Bank of India and Comptroller and Auditor-General of India or similar authorities to hold special forensic audits so as to limit willful defaults. The provisions of the bill will take care on the conversion of debt into shares of any borrower company by the secured creditors without affecting rights of secured creditors to recover balance debt amount.

RISING INDEX

AN EYE ON THE AILING

Wholesale inflation hits 20-month high in June

SBI-Brookfield, Edelweiss eye distressed assets

The Wholesale Price Index (WPI) for June showed a gain of 1.62% against 0.79% in May. Last June, WPI inflation had contracted 2.13%. The gain in June this year was mainly due

WPI. In case of manufacturing

to food inflation, which came in

products, which have a 65%

at 8.18% in June, against 3.12%

weightage in the index, prices

in the same month last fiscal.

inched up 1.17% against a con-

Food items enjoy a 15 percent-

traction of 0.77% in the same

age-point weightage in the

month last fiscal.

State Bank of India (SBI) and Brookfield Asset Management Inc. have agreed to launch a fund to manage distressed assets, through a joint venture. While Brookfield will bring in Rs 7,000 crore, SBI would contribute up to 5% of the total investments under an in-principle agreement. The fund op-

eration will leverage the expertise of the Canadian firm in evaluating, investing and managing the recapitalised businesses. SBI chairperson Arundhati Bhattacharya said the move would be welcomed by both borrowers and lenders in cases where there is a stalemate between both parties to infuse funds. In other news, Edelweiss Financial Services too plans to launch a fund for distressed assets, raising a corpus of $750 million.

The Finapolis l AUGUST 2016

 CLEANING TIME Govt softens amnesty scheme for black money The government has decided to soften the scheme to encourage holders of black money to come clean. An amnesty scheme from June 1 to September 30 will require persons disclosing income or cash to pay an effective tax of about 31% against the 45% stipulated in the Income Declaration Scheme 2016. This emerged in a clarification issued by the tax department on June 30 that said the department would not enquire about the declarant’s “sources of income, payment of tax, surcharge and penalty”. The government has also stated that information used in the declaration would not be shared with other law enforcement agencies. The clarification also said the purpose of obtaining information about the nature of undisclosed income should not be confused with the source of income. “There is no need to indicate the source of

income,” said the circular issued by the Central Board of Direct Taxes. “We lose our peace by violating rules. Why not give correct information about our income and assets to the government” Prime Minister Narendra Modi said in his radio address while mentioning the

scheme. The aim is also to highlight the stringent punishment meted out under the new law on black money. Officials said the government intended to bridge the trust deficit, as the previous scheme had failed because there was a lack of clarity on penalties.

TAX KITTY

FIRST MOVER

Govt Q1FY17 tax collections touch Rs 3 lakh crore

HDFC raises Rs 3,000 cr through masala bonds

There’s relief for a government with some big spending lined up as tax collections have come in big. Recent Finance Ministry data released on July 8 reveals that tax collections rose to over Rs 3.23 lakh crore during the first quarter. The indirect tax collections are measured at 30.8% between April and June 2016 at Rs 1,99,790 crore, while net direct tax has grown by 24.79% to Rs 1.24 lakh crore in the period. The government has a target of collecting a gross tax of Rs 16,30,888 crore, or 12.5% more than last fiscal’s Rs 14,49,490 crore. The rise in indirect tax collections has

come about as part of different measures, such as higher excise duty, a revised schedule for individuals to pay their advance tax and others. One notable increase was Central Excise collections, which rose by 50.1% to Rs 91,225 crore in the first quarter from Rs 60,787 crore a year ago.

Housing Development Finance Corporation (HDFC) has successfully raised Rs 3,000 crore from its debut masala bond issue. The issue was oversubscribed 4.3 times, receiving Rs 8,673 crore worth of bids. The bonds were issued at a price that was 99.24% of the par value and would be redeemed at par. The all-in annualised yield to the investors is 8.33% per annum, 5 basis points lower than on July 12, 2016. Institutional investors made up for more than 80% of the subscribers. The term ‘masala bond’ refers to rupee-denominated bonds issued by Indian

companies in foreign markets. This insulates the issuing company from currency fluctuation risk, as the bonds are denominated in the home currency and not a foreign currency.

AUGUST 2016 l The Finapolis

 BRIEFLY

DARK SIDE

SIT recommends a ban on all cash transactions above Rs 3 lakh

E-commerce websites under govt scanner for illegal wildlife trade

In a fresh bid to control the black money economy, the Supreme Court’s special investigation team (SIT) has recommended a ban on cash transactions of above Rs 3 lakh. The SIT has also suggested capping cash holding of companies and individuals at Rs 15 lakh. If the Centre agrees to the recommendations, every high-value cash transaction will require stringent paperwork.

Tata Steel opts to ‘Bremain’ Britain’s decision to exit the EU has forced a delay in the sale of Tata Steel’s UK assets. Subsequently, the company announced that it had entered into discussions with strategic players, including ThyssenKrupp AG, to look at “alternative and more sustainable portfolio solutions” for its European businesses. In March, Tata Steel had said that it would explore strategic alternatives including a potential sale of the business as a whole or in parts.

Companies feel the heat of loan recovery; queue up at BIFR More companies are willingly reporting sick. The Board for Industrial and Financial Reconstruction (BIFR) has found an alarming rise in referrals for reconstruction in the past 18 months (the number has reached 91 as of June 30, 2016). Some of the referrals are also seen as willful efforts by firms to delay loan recovery.

Quote of the month

The government has alleged that websites such as Quikr, Olx, eBay, Amazon and YouTube are allowing trade in rare animals and their body parts. Environment minister Anil Madhav Dave told the upper house of parliament that such websites are advertising sale of animals, citing from a list of 106 websites indulging in illegal activities, as collated by the Wildlife Crime Control Bureau (WCCB). Dave highlighted steps taken to curb the illegal trade including using services of cyber-crime specialists and regular monitoring of such sites.

FALLING OUT Diageo to slash Mallya payout Diageo Plc claims to have found evidence of fund diversions of Rs 1,225.3 crore between 2010 and 2014 in United Spirits, the company it acquired from Vijay Mallya in 2014. The company said it may reduce its $75 million payout to Mallya, until it sets these losses right. Diageo may also seek Mallya’s stake in the Force India Formula One as security until it recovers the funds. These findings will also be reported to the Serious Fraud Investigation Office, the enforcement directorate and the Securities & Exchange Board of India (Sebi), Diageo said. Mallya told reporters that he was unaware of these developments.

“If the missing link is only to interview me, come to London and interview me, get on the radio conference and interview me, send me an email with questions and I will reply. I have nothing to hide.” — Vijay Mallya, speaking about a “witch-hunt being waged against him in India” to motor racing magazine Autosport

The Finapolis l AUGUST 2016

 OVER AND OUT Yahoo! ends innings, joins AOL at Verizon Yahoo’s days as an independent company are over, after Verizon Communications said it had agreed to pay $4.83 billion for the Internet company’s core operations. Under the deal, Yahoo’s lucrative investments in Chinese e-commerce giant Alibaba and Yahoo Japan, valued at ~$40 billion, will be spun out into a separate company. Certain patents and cash will also remain with existing shareholders. In a letter sent out to employees, Yahoo CEO Marissa Mayer said that the deal “will help us achieve tremendous scale on mobile,” adding that Verizon “opens the door to extensive distribution opportunities.” “I’m incredibly proud of everything that we’ve achieved, and I’m incredibly proud of our team,” Mayer wrote to employees in the letter, adding that she would be staying on at the company: “For me personally, I’m planning to stay. I love Yahoo, and I

believe in all of you. It’s important to me to see Yahoo into its next chapter.” The sale will complete Yahoo’s evolution from an influential search pioneer and web portal juggernaut to finally a brand that had lost its way. Verizon, the largest US

BRIGHT FUTURE World Bank to mobilise $1 trillion for solar To improve on renewable energy resources worldwide, the World Bank has signed an agreement with International Solar Alliance (ISA) led by India to mobilise $1 trillion in investment by 2030. Apart from supporting the alliance, the World Bank sanctioned a $625 million grid-con-

wireless carrier, will receive more than one billion monthly active users. The company will also get smaller but faster-growing assets including mobile applications and advertising technology for video and handheld devices. Verizon also owns AOL, another dotcom-era Titan that subsequently fell in popularity. Yahoo will be integrated with AOL at Verizon. “We have enormous respect for what Yahoo has accomplished: this transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth,” AOL chief executive officer Tim Armstrong said on Monday in a statement. “Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.”

UNPLUGGED nected rooftop solar programme in India. Signing the agreement, World Bank president Jim Yong Kim said that as a financial partner, the World Bank Group would be helping the alliance in creating a roadmap to mobilise finances, help to deploy affordable solar energy and join hands with other development banks and financial institutions to develop financing instruments to accelerate solar energy development initiatives. At the UN Climate Change Conference in Paris in November last year, Indian Prime Minister Narendra Modi and French President Francois Hollande had launched the ISA, which consists of 121 countries to collaborate on increasing solar energy use around the world.

Ford opts out of Indian electric vehicle grouping An Indian government-backed consortium that sought to create a supplier base for critical hybrid and electric vehicle parts in India has received a setback as Ford India has decided to opt out of the consortium.

The company has been denied permission to participate by its parent Ford Motor Company, USA. Further to barring participation, Ford Motor also asked its Indian unit to concentrate in strengthening financial and sales performances, as the global automaker believes that the electric vehicle consortium is a financially unviable project.

AUGUST 2016 l The Finapolis

 news scan

HEALTHY MOVE Kerala levies ‘fat tax’ on junk food such as burgers, pizzas The Kerala government has introduced a ‘Fat Tax’ in its revised budget for 2016-17 presented on July 8. A 14% tax will be applicable on burgers, pizzas, tacos, doughnuts, sandwiches, burger patties, pasta and bread-fillings. This is a part of the government’s initiative to raise tax revenues through nine different schemes. Through such schemes, the government expects an additional Rs 10 crore as tax. However, P. Mara Pandiyan, additional chief secretary at Kerala’s tax department said that the “fat tax” is concerned with

issues related to public heath more than revenue generation. However, the Confederation of Indian Industry (CII) urged a review. The move “would adversely affect growth of the quick

service restaurant segment of the food industry and might set a similar trend for other segments as well,” Piruz Khambatta, Co-Chairman, CII National Committee on Food Processing Industries, said.

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The Finapolis l AUGUST 2016

 newsmaker YOGESH CHANDER DEVESHWAR Yogesh Chander Deveshwar, who took charge at ITC in 1994 during “turbulent times” (his words), retired in July from the company he headed for two decades. ‘Yogi’ transformed ITC from a maker of cigarettes into a diversified powerhouse, with business interests in hospitality, FMCG, retail and paper, among other areas. Like all great chief executives, Deveshwar’s name was fused with that of the company headed. Except that ITC was not a family-run affair. Deveshwar was a professional, and reached his position entirely on merit. Within India Inc, perhaps the only comparable example is A M Naik, the erstwhile boss of Larsen & Toubro.

AUGUST 2016 l The Finapolis

company update

We take a look at some companies’ performance to figure out what impact they will have on the share prices HPCL

HPCL plans capex of Rs 558 bn over FY16-21, which includes ~Rs 257 bn for refineries, ~Rs 262 bn for marketing, and the remaining for renewables, R&D and JV projects. For the next two years, capex will be funded through internal accruals; the company could take loan in later years as refinery capex will be back-ended. Refinery capex of Rs 257 bn includes Rs 42 bn for Euro VI upgradation and brownfield expansions (a) at Vizag from 8.3mmt to 15mmt (~Rs 200 bn, up from Rs 170 bn) along with upgradation, (b) at Mumbai from 6.5mmt to 9.5mmt (Rs 42 bn) and (c) JV Bhatinda refinery from 9mmt to 11.3mmt (Rs 24 bn). Management expects overall GRM to improve by ~$1.5-2/bbl: (a) Vizag to complete by April 2020 and expand GRM by $4-5/bbl, (b) Mumbai to complete in three years and expand GRM by $1-1.5/bbl and (c) Bhatinda by Jun-17. Management also expects GRM to remain stable in the medium term (FY16 GRM: $6.7/bbl), at $5-7/bbl helped by higher distillate yields. The Bhatinda refinery (HPCL stake 49%) is expected to continue posting profits in FY17 (FY16 PAT was ~Rs 18 bn) even at the current petroleum product cracks, and expects GRM to be in double-digits.

The updated capex plans place high emphasis on marketing; five-year marketing capex is significantly high at Rs 262 bn (~47% of total capex). Management announced plans to set up three new LPG plants, three POL depots and Lube Blending Plants at Mumbai and Kasna (UP). Marketing margins remain strong at Rs 1.7/1.6/ltr for petrol/diesel (vs regulated era of INR1.4/ltr). Volumes remain strong with FY16 POL growth at 9.3%. Dynamic pricing is already underway in some test markets, and could be rolled out on a pan-India basis. It will help the company sweat marketing assets better and improve profitability. While refining will continue to be cyclical, marketing (including pipelines) gives earnings stability and the lubes business also contributes meaningfully

IndusInd Bank

Driven by robust business momentum, enhanced liability franchise and controlled asset quality, IndusInd Bank (IIB) has put out an all-round performance for first quarter of FY17. The core operating performance continues to be intact with sturdy 34% y/y operating profit growth. Subsequently, PAT at Rs 6,613 mn grew a healthy 26% y/y growth. Had it not been for the elevated provisioning against one stressed account, net profit growth could have further climbed to 30% levels on y/y basis. Strong retail loan traction, rich liability franchise supported by expanding branch count, controlled asset quality and comfortable capital position

ITC

Current Market Price Rs 1,143 Target Price Rs 1,352 Potential Upside 18.3% reinforces our belief in the sustainable superior earnings performance of the bank. IIB is seemingly mirroring the quality depicted by couple of top league private banks. Given further scope for NIM expansion, strong growth visibility and other positives, the bank receives a higher multiple. Historically, IIB has traded quite on a higher note. Using multiple for the bank at 3.5x P/ABV FY18E arrives at a target price of Rs 1,352. Sept’FY18E implied P/E seem fair given ITC’s expected

(10-20%) to results. On a

Q1FY17 net sales

standalone basis, HPCL trades

(net of excise

earnings growth and a

at 7.3x FY18E EPS of Rs 140.6

duty)/EBITDA/

strong ROIC profile.

and 1.4.x FY18E BV. On a con-

adj. PAT grew

solidated basis, HPCL trades

9.7%/8.1%/ 10.5%

at 6.1x FY18 EPS of Rs 169.

YoY. Cigarette net

Valuing HPCL at 5.5x for refin-

revenues grew 8% YoY to Rs 50.3

ing and 8x for marketing gives

bn and FMCG-Others sales grew

us a fair value of Rs 1,359.

9.5% YoY to Rs 27 bn. Cigarette

Dividend yield is attractive at

EBIT grew 8% YoY and the FM-

~3-4%.

CG-Others business posted EBIT

Current Market Price Rs 1,029 Target Price Rs 1,359 Potential Upside 32%

losses of Rs 45 mn. Agri-business grew 20.2% YoY to Rs 28 bn off a soft base while segment EBIT margins slid 160 bps YoY. The hotels/ papers businesses declined 0.2% / 1.6% YoY; hotels segment EBIT stood at Rs 12 mn and paper EBIT margin contracted 20 bps. Valuations at 25x

Ascribing 23x forward P/E and 2xEV/sales to cigarette and FMCG businesses, respectively, we derive target price of Rs 270. A sharp increase in cigarette taxes due to the GST rollout is a key risk to the target price.

Current Market Price Rs 250.60 Target Price Rs 270 Potential Upside 7.7%

The Finapolis l AUGUST 2016

VARIETY ANSWER BACK # 6 It’s only a few questions long, but the Finapolis quiz will still test the mettle of the best: we ask anything on everything. This month, we pose questions on the Olympic Games. 1) What is India’s cumulative Olympic medals count? (Gold+Silver+Bronze)

10) Which of the following designed the interlocking rings that is the symbol of the Olympic Games?

A) 26 C) 29

B) 18 D) 34

2) Cricket was once an Olympic sport. Which countries have won a gold and silver in this game?

A) West Indies and England C) England and France

B) Australia and Wales D) England and Spain

3) Match the logos to their respective Olympics:

A) Rome, 1960 C) Montreal, 1976

B) Munich, 1972 D) Barcelona, 1992

4) In which Games was the Olympic fire introduced?

A) Los Angeles C) Melbourne

B) Moscow D) Amsterdam

11) Which of these Olympians is the odd one out??

5) In which Games was the concept of the Olympic torch relay introduced?

12) What was the Unified Team??

A) Berlin C) Tokyo

B) Helsinki D) Amsterdam

A) Abhinav Bindra C) Sergey Bubka

B) Muhammad Ali D) Roger Bannister

6) Which other countries have won the same number of Summer Olympic medals as India?

A) A group of Soviet and American dissidents that competed as a joint group in the 1980 and 1984 Games

B) The IOC name of the sports team of the former Soviet Union at the 1992 Games

C) The IOC’s name for sportspersons who qualify for the Games individually, instead of their national Olympics association

D) The former name used by the West Indian nations before they decided to field separate teams

A) Hungary and Nigeria C) Azerbaijan and Egypt

B) Mongolia and Peru D) Peru and Mexico

7) Which of the following countries have never won an Olympic medal?

A) Monaco, Mali, Myanmar and Malta

B) San Marino, Honduras, Bangladesh and Sri Lanka

C) Belize, Yemen, Chile and Kiribati

D) Moldova, Romania, Jordan and Angola

8) How many Olympic medals have been awarded till date?

A) 12,388

B) 14,714

C) 16,714

D) 20,660

9) What is common to Bahrain, Barbados and Bermuda?

A) They march together because of the small size of their contingents

B) They march in succession due to the sequence of their names

C) Their medal tallies are identical with each winning one bronze medal

D) All three participated for the first time at the London games in 2012

13) Which of the following countries have never won an Olympic medal?

A) Suva, Kuwait City, Mexico City, Abuja and Rome

B) Tokyo, Montreal, Sydney, Durban and Paris

C) London, Seoul, Wellington, Buenos Aires and Nairobi

D) Cairo, The Hague, Manila, Canberra and Rio de Janerio

-------------------------------------------------------------------------------------------------------Send your answers to feedback@thefinapolis.com latest by August 25, 2016. Winners will be acknowledged in the quiz section of the subsequent month’s issue.

Answers to Answer Back #5 1- A; 2- B; 3-C; 4-C; 5-A; 6-D Winners: B S R Murthy; Divya Tanwar; Jayesh K

AUGUST 2016 l The Finapolis

VARIETY QUOTABLE “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” — Robert G. Allen

SEE AND SMILE

KNOW YOUR COUNTRY Khooni Darwaza: A real ‘bloody’ door

ust opposite the Feroz-eshah Kotla ruins and bang in the middle of Bahadur Shah Zafar Marg in central Delhi lies Khooni Darwaza. The three-level structure is 15.5 metres high, and made of quartzite stone.Although it acquired its current name during Jahangir’s time, the darwaza (Hindi for ‘gateway’) traces its history to a time much before. It was built in the 16th century during Sher Shah Suri’s tenure, and known as the Kabuli Darwaza because caravans to Afghanistan would pass through it. At that time, the

structure served as the northern gate to Suri’s capital, which was centred around the Purana Qila. Even at that time, the darwaza’s walls were used to display heads of criminals since it was situated in the outskirts of the city. The darwaza received its

name when Jahangir had the two sons of Abdur Rahim Khan-i-Khanan, a minister in his father Akbar’s court, killed and hung on the gate. Jahangir was angry because Khanan had supported the claims of Khusrau (Jahangir’s son and Akbar’s grandson) to the throne, and ordered the killings as an act of vengeance. The bodies of Khanan’s sons were left to rot and be eaten by vultures. When Aurangzeb defeated his elder brother Dara Shikoh for the Mughal throne, he too had the latter’s head displayed at the gate.

The Finapolis l AUGUST 2016

the chartist Heads-up on Hydropower Water is probably one of the best renewable sources for electricity, but its contribution to Indiaâ&#x20AC;&#x2122;s generation mix shows a steady decline. Here are some key facts of its status in the country.

Proportion of hydropower in total installed capacity 46%

50% 40%

Status of hydropower development in India 0

42% 41% 34%

30%

29%

25% 25% 26%

20%

20% 18% 17%

North

15%

1966 1974 1979 1985 1990 1997 2002 2007 2012 2013 2014 2015

East

Source: Central Electricity Authority (CEA) West

Major reasons for slippage for 10th Plan projects (MW) 5,000 4,000 3,000 2,000 1,000 0

South

North-east

Poor geology

Delay Environmental Law in land concern and acquisition order

Remote Contractual Procurement Critical sites dispute issues electrical and mechanical works

Source: Working Committee on Power for 12th Plan

India medium-term forecast: Moderate growth scenario (MW) 2,50,000 2,00,000

4.5%

4.7%

3.4% 3.8%

4.2% 4.6%

FY17

FY19

5.1%

5.6%

FY21

FY22

2.6%

1,50,000 1,00,000 50,000 0

FY14

Peak demand (MW) Source: PwC analysis

FY15

FY16

Peak met (MW)

FY18

Deficit

80 Hydro potential (GW)

10% 0%

FY20

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

Installed capacity (GW)

AUGUST 2016 l The Finapolis

The Chartist Benefits of Hydroelectric dams Recreation, 2,879 Navigation and fish breeding, 1,850

Hydropower and flood control, 8,645

Use of dams by purpose as per International Commission on Large Dams (ICOLD) database (2015)

Others, 1,173

Irrigation, 5,977 Water supply, 4,334

India's generation mix Renewable energy sources (RES), 13% Nuclear, 2%

Hydel, 15%

Thermal, 70%

Source: Ministry of Power, Coal, New & Renewable Energy

WHEN TWO

BECOME ONE

The Finapolis l AUGUST 2016

COVER STORY AFTER EFFECTS

Financial Planning for Newlyweds Marriage alters your financial requirements, and calls for a fresh look at your plans as responsibilities increase. Balwant Jain lists some core items to discuss with your spouseÂ Â

M Balwant Jain is a CA, CS and CFP, and currently the Company Secretary of Bombay Oxygen Corp Ltd. Reach him at jainbalwant@gmail.com and @jainbalwant. Views are personal

arriage brings about a million changes in our lives, and those changes extend to our financial plans as well. Marriage changes our insurance requirements, be it life insurance, or health insurance or even critical illness insurance. In this article, we will examine financial planning for newlyweds, and the different goals for which they will need to plan their finances. This article does not cover the honeymoon, as the same is usually already planned by the time the knot is tied.

wife should have a health insurance policy for at least Rs 5 lakh each. In case hospitalisation expenses rise further, a super top-up plan can be purchased by each of Rs 5 lakh or more. It is recommended to buy individual health plans, but in case you have a liquidity problem, then it is advisable to buy a floater policy and then a super top-up plan. One tip: Buy the basic and super top-up plans from the same insurance company to avoid administrative hassles at the time of reimbursement.

Health Insurance

You do not need life insurance as long as you do not have someone financially dependent on you. After marriage, this could likely change. In case of a traditional family, the husband would earn and the wife would take care of the household. In such cases, the wife becomes financially dependent on the husband. Here, it is incumbent on the newlyweds to buy life insurance for the husband to ensure that in case of an eventuality, the wife remains financially secure. Even in the case of a dual-income couple, a life insurance policy may prove handy to maintain the dual-income lifestyle or service any pending loans. Moreover, it is always advisable to buy life insurance as soon as you have financial dependents (not necessarily the wife, but children in case of dual-income families) as the premium rises substan-

Most couples would have been individually covered before marriage, either through their parents or through their own policies. However, these might not suffice to cover hospitalisation expenses after marriage. The quantum of health insurance you need depends on the city where you reside and also your family health history. Considering present medical costs, the husband and the

Life Insurance

tially for subscribers aged 35 years and above. An early policy will ensure a lower premium for the tenure of the policy. As a thumb rule, I recommend a couple buy life insurance equal to 12-15 times their combined annual income. However, the exact quantum will depend on the value and liquidity of the coupleâ&#x20AC;&#x2122;s assets and liabilities. It goes

AUGUST 2016 l The Finapolis

COVER STORY

without saying that the couple should buy only term plans for this purpose. Online term plans are preferable as there are cheaper than regular term plans, making them more affordable.

Annual Holidays Indian families are holidaying more in recent times than in the past. Moreover, foreign holidays are in vogue now. These are more expensive than domestic vacations and therefore require more planning, as the necessary funds have to be arranged. Planning for such holidays will also depend on when these holidays are scheduled. For instance, if you have a 5-7 year horizon for going on a long, overseas holiday, you should start investing in debt and balanced mutual fund schemes through systematic investment plans (SIPs). For holidays to be undertaken after seven years, you can start investing in a good equity fund scheme.

withdraw the money required for the holAs a thumb rule, I idays from these schemes. Such a strategy recommend a couple buy may help you accumulate a larger corpus in the long run. However, you will have to life insurance equal to be content with skipping an annual holiday 12-15 times their combined or having to take two holidays in a year in annual income through case you want to maintain average of the holidays that you go on. term plans, preferably online as these are cheaper Home Purchase In respect of your investment in balanced and equity-oriented funds, as your holiday nears (say a year or two away), you

In the good old days, people used their retirement corpus to build themselves a home for retirement. However, in this age of ever-rising real estate prices, the young

should start to transfer the money into debt funds or liquid funds through a systematic transfer plan (STP) to ensure that your holiday funds are not upset by market volatility. In case you have the flexibility of changing the time of undertaking such holidays, you can stay invested in balanced funds and equity-oriented schemes and

generation often ends up purchasing a house even before tying the knot. If a couple has already bought a house (with a home loan of course), they will need to budget their combined cash flows so as to ensure regular payment of their home loan EMI. However, in case a house has not been purchased, the financial planning required

24 The Finapolis l AUGUST 2016

COVER STORY loan eligibility (loan-to-value ratio) is also enhanced as the bank will consider two income streams.

Children’s Expenses

With the time between marriage and children shortening, it is advisable to start planning for children’s expenses as soon as you are married would be different. Since a couple would have likely exhausted most of their savings for the marriage and honeymoon, in most cases, it is not possible to arrange cash for a downpayment (generally 20%) for a home loan. In such a case, you will need to build this corpus of 20% so that you can avail a home loan. Here, the duration by which you want to buy the home should guide your process for building the corpus. In case you would like to make your purchase within three to five years, it is not advisable to take the risk of investing in equities. You should start investing in debts schemes through a monthly SIP. Alternatively, you can invest in debt-oriented monthly schemes where around 10%-15% of the corpus is invested in equity, so as to give your investments a chance to benefit from equity performance. This will ensure that in the worst case scenario, your returns might be marginally

lower than a regular debt scheme, but in case of good returns from equities during this period you stand to make gains. One important point: When accumulating the funds to buy a home, remember to factor in an expected price rise in the property. This should be at least equal to the average rate of inflation over the period. Otherwise, you will be shocked to discover that the downpayment accumulated by you is not enough to cover the purchase of the home you have in mind. Also, it is advisable to go for joint purchase of property from the tax angle. The Income Tax Act allows both the husband and the wife to claim a deduction of Rs 2 lakh each u/s 24 on the home loan interest every year, and an additional up to Rs 1.5 lakh each on repayment of principal u/s 80C, if the property is purchased and owned jointly and both are co-borrowers in the home loan. Also, when applying for a home loan, the

Here, some pressure has been building up of late. Since the average age of marriage has gone up significantly across all communities in recent times, the couple has a child sooner than in earlier days. Therefore, as soon as you are married, it is advisable that you start planning for your children’s expenses, including big spends such as education and perhaps, marriage. For an education corpus, note two points. Firstly, the overall cost of education (especially after secondary school) has surged over the last decade, outpacing inflation by a big margin. Secondly, a dual-degree qualification has become the norm rather than the exception these days. Due to these twin reasons, the amount of money required to meet a child’s higher education expenses has become huge and cannot generally be met without concrete investment plans. As the corpus required for this expense is at least 16-18 years away, you can accumulate the corpus by investing in equity-oriented funds. Among equity-oriented funds, allocation can be made among large-cap and mid-cap funds. Also, as this money will not be required in one go but over the five to seven years of your child’s higher education, the funds needed for next two years should ideally be transferred to debts funds so that they are insulated from the volatility of equity markets.

Retirement Planning This is the most important of the goals and the one most ignored. Ideally, you need to plan for your retirement from the day you receive your first salary. Funds for other goals such as annual holidays or marriage of children can be scaled down. Retirement is an inescapable reality and with the concept of joint family fast disappearing and children often moving away to pursue their careers, a person is often left staying alone in old age and might even have to fend for him/ herself. If you have not yet planned

AUGUST 2016 l The Finapolis

COVER STORY

for retirement, it is advisable that you start planning immediately, looking at the importance of retirement funds in the overall scheme of the things. As your retirement would be far away (at least 30 years), you can invest the money in equity schemes allocated among diversified, large-cap and mid-cap funds. As life expectancy has gone up without any extension of the retirement age, our retirement life is almost equal to our working years. Therefore, here I would not advise you to shift your corpus to debt funds once you reach retirement. However, to reduce the volatility from the retirement portfolio, it is advisable to shift the portfolio to well-performing balanced funds. It is also pertinent to not invest in the so-called retirement or pension plans of insurance companies. Due to higher expenses, the rate of return achieved on these investments is usually not even sufficient to match the rate of inflation. Even after retirement, if you are able to manage your portfolio, you need not buy any annuity from an insurance company. You can treat your mutual fund portfolio of balanced

When building the corpus to buy a home, remember to factor in the rise in property prices. This should be at least equal to the average rate of inflation over the period. Also, it is advisable to go for joint purchase of property from the tax angle funds as annuity and redeem the money required every month.

Income Budgeting A budget is critical for rational allocation of resources. This applies to the monthly salary as well. In case both of you are working, you may need to sit together and spell out in clear terms the allocation of the joint salaries for different goals as discussed

above. Based on the amount of salary, one salary can be assigned to cater to regular expenses, while the other salary can be used for making investments in various goals. The actual budgeting will depend on your financial situation.

Updating Records Although prenuptial agreements are not yet in vogue in India, there is still some documentation which needs to be taken care of. First of all, in case you open any new bank account to make a fresh investment, do so in joint names so as to ensure smooth succession in case of any untoward event. In respect of your existing bank accounts and investments in single names, please submit nomination forms to the bank/ mutual fund/ depository in the name of your spouse. In respect of life insurance policies, please ensure that your spouse is appointed as nominee in the records of the insurance company. In respect of bank accounts and investments, the mode of operation should ideally be either or survivor, for smooth operation as well as for succession. F

26 The Finapolis l AUGUST 2016

INVESTMENT ADVICE PLAN AHEAD

Retirement, Done the Right Way Just because you have stopped working doesn’t mean your money has to! Viral Bhatt busts some myths that we hold

ow would it feel to live without a salary for 20-30 years? To be precise, that’s what retirement is all about! An HSBC survey, titled “The Future of Retirement: Healthy New Beginnings”, said that financial concerns are the biggest roadblock to many Indians’ retirement plans. One reason for this is that not many of us plan for retirement, the last

a typical answer is, “Dekha Jayega”. This very answer is revealing; it indicates that the requirement is not urgent. Usually, in India, people expect their children to look after them or presume that their EPF corpus will suffice for their retirement expenses. But if you calculate the approximate money needed to lead a stress-free, retired life, you will realise why planning for your retirement is

Hence, whether you are about to start planning your retirement or have already started it, about to retire or have already retired, this article is for you.

and probably the most crucial of life’s financial goals. Indians generally make it a point to save for a house, their children’s education as well as their marriage. However, when asked about their finances for retirement,

as important as planning for your other life goals. Similarly, while you have been planning for your retirement, you may have also believed some of the retirement planning myths that are branded about.

ence alienation during their retired life as their role as a worker is over. They do not feel productive and feel disengaged from their lives. Some look for support in their communities or try to find light work to feel productive. Hence, retirement is not

1) Retirement is a Lifelong Process Retirement is usually treated as a long holiday. But that is exactly what it is not. How can you be on holiday for 20 years of your life? Certain retirees often experi-

AUGUST 2016 l The Finapolis

INVESTMENT ADVICE a long holiday for the rest of your life. It has various phases, and individuals keep thinking of various ways with which to productively utilise their time.

2) You Save and Invest When You Earn and Spend When You Retire

While it is true that you are encouraged to keep saving and investing for your retirement, that is simply so that you can be relatively free of financial burdens during your retirement years. But does this imply that you only keep spending during retirement? Hardly. Even in your retired life, you have a future to consider, bills to pay and expenses to meet. You may have a corpus hefty enough to meet your needs for the next 20 years, but can you say you will be able to meet all unplanned expenses as well? Retiring does not give you a free ticket to go binge spending. If saving money is a habit you have inculcated all your life, there is no reason to stop it the moment you retire. If you have a substantial retirement corpus, you will not be using the entire corpus at one go. Hence, keep a part of it invested, ensuring that your funds are not lying idle. If you also generate supplementary income by doing some part time or consulting work or have rented out a property, income coming from these streams is adding to your corpus. Hence, you need to work out a plan for investing this regular income too. In short, just because you have stopped working does not mean your money has to.

3) ‘I don’t plan to retire, so no need to save’ With such quick changes in technology, many kinds of jobs have become obsolete. By the time you retire, the work you do may become obsolete as well. Hence, to find work suitable to your skill set could be challenging, especially if companies are looking to hire young, temporary workers. Instead of relying on your continued working, rely on your present income to generate future income. The future might be uncertain, but the present is not. You salary comes in every month; you might be getting a yearly bonus and

salary increment as well. Start your savings and investment for retirement. Do not give yourself the illusion that you can be frivolous today and keep working because you anyway do not plan to retire.

4) You Should Exit Equities At Retirement One of the biggest myths surrounding retirement planning is that your corpus should not be invested in equities or equity-oriented mutual funds. There are taboos surrounding equity investments for retirees which have led people to believe equities are unsafe and volatile. You could not be more wrong! Equities or equity-oriented mutual funds are the best instrument for long-term investments. It is true to a certain extent that short-term investment in equities does not always yield the best returns, but equities as an asset class have been the highest return generators over the long run. The longterm period reduces volatility and also increases returns. Hence, if you are planning to start investing for your retirement, equities should be your priority as you benefit from the time value of money and the power of compounding.

5) You Need 80% Your Pre-Retirement Income This is not an exact figure. You can be certain that you will have to pay less tax, that

Viral Bhatt is head of Money Mantra, a Mumbai-based financial advisory firm.

you will hopefully not have loans to repay, and will not have to save for specific life goals — no need to save for your children’s education and so on. All your major life expenses will have been taken care of by the time you retire. You only have to bear living costs, and for everything, you will have your corpus. This is not to state that you should not aim to invest and save the most that you can for your retirement. In case you have not managed to create a corpus which gives you 80% of your pre-retirement income, you do not have to worry about not making a living. Everyone has their own set of expenses and lifestyles and nobody can accurately predict the percentage of pre-retirement income that will be sufficient. However, the idea simply is that when your major expenses have been taken care of, less is more.

6) You Should Repay Loans Before You Start Saving for Retirement

A lot of us tend to believe that since the goal of retirement is far away, we can start planning for it much later. This is a costly mistake. If you start early, you can start small and reduce the financial burden later on. Many investors prioritise repayment of loans before starting their plan for their retirement. They tend to treat retirement planning as a secondary goal compared to the repayment of debts. At this stage, you have to remember that a person who cannot help himself is no good for others. Hence, break the myth of “shall plan for retirement later” and start doing so now, along with your various debt repayments.

Conclusion Retirement is that one goal for which you must have a plan. For every other goal, you have the option of taking a loan and repaying with your future income. Retirement does not allow you that luxury. You have to make the best with what you have saved and invested. Hence, do not fall for these myths and set up hurdles in your retirement planning process. F

28 The Finapolis l AUGUST 2016

INVESTMENT ADVICE HIGH AND LOW

The Interest Rate Conundrum

A common man may rejoice when he gets loans at cheaper rate, but he feels deprived when he gets a low interest rate on his deposits. But there another way to see it, says Balaji Rao

f you are one among millions who are disappointed that the bank fixed deposit rates have fallen from 9.00% about a year ago to the prevailing 7.25%, you have not understood the dynamics of interest rates. In fact, you should be happy that interest rates have

higher than necessary, and this was alleged to have hampered the growth prospects of the country. It is true that high interest rates can indeed hamper growth. Primarily, the growth of an economy, measured by way of Gross Domestic Product or GDP, hinges on creating jobs or

ture and/ or expand existing businesses. Here lies the opportunity for employment and growth. It does not require an Einsteinâ&#x20AC;&#x2122;s brain to understand that to start a business one requires capital by way of money, and that such funds are usually sourced from

fallen, and this article is an effort to make you comfortable with this puzzle of interest rates. Behind all the brouhaha surrounding the not-so-surprising resignation of the RBI governor Raghuram Rajan, a few ground realities are to be understood. He was criticised for keeping interest rates

having a high rate of employability. Ongoing investment is necessary to create such continuous employment. When we say investment, it refers to businessmen/ promoters (the likes of Tatas, Ambanis among others who have been among the most successful entrepreneurs) who invest money to start a new business or ven-

financial institutions that lend money and offer financial assistance. When such funds to commence a business are sought, naturally it would be beneficial if the borrowing rates are low and encouraging; lower rates are always better for borrowers. For the government, it is a challenge to make cheap funds available for busi-

AUGUST 2016 l The Finapolis

INVESTMENT ADVICE nesses, while on the other hand, such funds have to be sourced through lowcost mobilisation. Here comes the understanding of how funds are mobilised to be eventually loaned to companies; the funds are mobilised by way of deposits that are accepted by banks as a common financial intermediary between the depositors and the borrowers. The fundamental tenet of a financial system is “credit creation”, that is done through mobilising savings from individuals and in turn offering them as credit to entrepreneurs wishing to start businesses. Thus, the rate at which savings are mobilised and loaned becomes the fulcrum of economic growth. Since a lower rate is what will encourage borrowers, the government always endeavours to mobilise funds at low cost. For this, it needs lower cost of mobilization, and therefore it likes to have deposit rates low. However, due to various unavoidable economic challenges such as inflation, crude oil prices, political issues (both domestic and global), money supply (liquidity), and Monsoon among others, this rate cannot be kept perennially low and the RBI, which manages the interest rate, increases it. As we have witnessed and also experienced that over the last two years, the deposit rates have steadily decreased from plus 9.00% per annum to the present 7.00% p.a., which offers a precise understanding of the stance of the government and the central bank — to bring down the borrowing cost for the borrower and let the economy grow. To make this possible, the onus is on the government to ensure adequate supply of food and pulses, keep inflation low, ensure adequate liquidity (money supply in the system) and have pro-growth policies. While such concerns are being addressed on one hand, on the other hand, if the rate at which a depositor gets his interest from bank starts getting lower and lower, it leads to distress and anguish. A common man may rejoice when he gets loans at cheaper rate, but he feels deprived when he gets a low interest rate

on his deposits, but what he should realise is that he is actually participating in the macroeconomic growth of the country and the price he is paying is to receive low interest on his deposit. Interest rates are, in fact, two faces of the same coin; one side the money is accepted as a deposit and on the other side, offered as a loan. Prudence lies in not worrying about receiving low return on deposits, but in understanding the dynamics of other asset classes that have the ability to offer superior and comparable returns on investment. One such asset is equity. It was created to beat inflation and also offer growth over the long term. If one is scared

Prudence lies in not worrying about receiving low return on deposits, but in understanding the dynamics of other asset classes that have the ability to offer superior and comparable returns on investment, such as equity

of entering the market directly, it would be easier to opt for the mutual fund route, which is much safer than buying and selling stocks directly. Empirical evidences have proved that over the long term (five, 10, 15, 20 years) equity mutual funds have indeed beaten inflation and also assisted in wealth creation. In the future, interest rates are expected to trend lower than what they are at now, and could come down to as low as 5% over the next decade. The rates of bank deposits, post office savings, provident fund and other risk-free and sovereign guaranteed instruments too would be lowered in line with changes in the government policies. The key to successfully overcoming the problems that emanate from low interest rates would be financial literacy and a refusal to hold prejudiced views about other investment instruments. Those who adapt will prosper, others would suffer. Like Alvin Toffler, the author of the book Future Shock, said “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn.” So, the next time when your bank offers you low interest rate on your deposit, there is no need to worry. You are participating in the growth of the country, but do remember to diversify your investments, because therein lies your growth story. F

Balaji Rao, with 23 years industry experience and six years in academics, is the author of six books on investing and personal finance.

30 The Finapolis l AUGUST 2016 AN SHANBHAG AND SANDEEP SHANBHAG

expert speak

Watch Out: Your Advance Tax Timetable has Changed a Bit

ll taxpayers are required to pay advance tax in spite of the fact that most of their income is subject to TDS. If the tax payable for the year is Rs 10,000 or more, advance tax is payable without having to submit any estimate or statement of income to the ITO in 4 installments. The recent Budget 2016, however, has changed a minor detail, mandating that advance tax be paid in four installments. This has been done by amending Section 211 of the Income Tax Act, so as to provide that advance tax be deducted in four installments in the case of individuals, Hindu Undivided Families (HUFs), firms, etc, to align them with the norms applicable to companies.

Change in Schedule This amendment requires taxpayers to pay the first installment of 15% on or before 15th June instead of 15th September. The remaining installments are adjusted taking into view the first installment (see table).

Exceptions However, there are some exceptions. For taxpayers with salary as the only source

of income, TDS deducted by the company is considered as advance tax. Similarly, senior citizens who do not report business or professional income need not adhere to the new schedule. The above schedule applies for taxpayers having an income from any source other than salary However, the Budget 2016 has also clarified that an income tax return, which is otherwise valid would not be treated as defective merely because self-assessment tax and interest payable in accordance with the provisions of Sec. 140A, have not been paid on or before the date of furnishing of the return.

Penalty for Failure If advance tax is not paid as per the schedule mentioned above, penal interest is levied before filing of the return of income. Sections 234B and 234C of the Income Tax Act may become applicable. You may be

New Dates Date 15th June 15th September

Old Rate

New Rate

15%

30%

45%

15th December

60%

75%

15th March

100%

liable to pay interest in any of the following scenarios: Simple interest @1% per month or part thereof as reduced by the interest paid, if any, is chargeable on the shortfall in advance tax or TDS paid and in following cases:

1. Not filing or late filing of the returns: U/s 234A Interest is payable from the due date to the date of i) filing the return or ii) completion of assessment where no return is furnished. There is no provision for reduction or waiver of interest and the question of granting opportunity of being heard does not arise — CIT v. R. Ramalingair [2000] 108 Taxman 1 (Ker.). Interest is leviable on the tax on the total income declared in the return and not on the income as assessed and determined by the assessing authority –– Tej Kumari v. CIT 22 TCR 250 (Pat.) 2001.

2. Best judgment basis Sec. 144 provides that the ITO shall assess an income tax return to the best of his judgment in the following 3 cases: 1.The assessee has failed to make the voluntary return. 2. There has been a failure to comply with all the terms of a notice to produce ac-

AUGUST 2016 l The Finapolis

EXPERT SPEAK counts or other documents. 3. The assessing officer considers the return to be incorrect or incomplete and serves a notice, but the assessee does not respond. In such cases, interest is chargeable from the due date to the date of best judgment assessment.

3. Advance tax paid is less than 90%: Sec. 234B Interest is payable on the shortfall in advance tax from April 1 next to the date of assessment. In this case, the interest will be charged on the income as assessed by the ITO. The assessee is entitled to interest u/s 214 for excess advance tax paid during the financial year, even if the tax was paid beyond the dates specified u/s 211 of the Act â&#x20AC;&#x201D; CIT v. Praveen Kapoor [2005] 144 Taxman 682 (All.)

4. Shortfalls in first two installments: Sec. 234C Interest is payable for three months each (when the next installment falls due) on a shortfall of 30% or 60%, even if the delay is just by one single day. For instance, if the advance tax paid on or before 15th March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest @ 1% on the amount of the shortfall.

5. Excess refund paid to assessee: Sec. 234D Where any refund has been granted to the assessee u/s 143(1) and subsequently on regular assessment, no refund or lesser amount of refund is found due to the assessee, then, the assessee shall be liable to pay simple interest u/s 234D @ 0.5% on the excess amount refunded for every month or part of the month, starting from the date of refund to the date of such regular assessment.

6. Refund due to assessee: Sec. 244A The ITO has no power to withhold any refund due to an assessee, irrespective of its size, even if it is felt that grant of the refund could be detrimental to the interest of the department in recovering some other dues from the assessee.

Where a refund is due on account of excess payment of tax, simple interest should be paid to the assessee @ 0.5% for every month or part of a month from the date of payment of the tax to the date on which the refund is granted. However, no interest will be paid if the refund is less than 10% of the tax. The recent Budget 2016 has raised the interest paid on excess tax to 9% per annum from 6% per annum in case of delay beyond 90 days in giving effect to an order by the Appellate Tribunal. In such a case, the responsible officers will be accountable for this loss to the government.

7. Advance tax on unanticipated income No interest is charged in respect of any income that was neither anticipated nor contemplated, and was received after the due dates for advance tax payments. However, it is necessary to pay advance tax on such income at the next due date. For instance, if the assessee earns capital gains on October 25, he should pay 60% tax (on such income) on or before December 15 and

40% balance on or before March 15. Earlier, advance tax paid on or before March 31 was treated as advance tax paid on March 15. Many assessees used to make the payments only towards the end of the year. Corrective legal action has been taken to treat such payments as late payments. We submit that accurately estimating income earned during the year before the year-end is extremely difficult, more so due to the possibility of receiving unanticipated income after March 15. The optimal solution would be to fix two dates â&#x20AC;&#x201C; one at the end of six months and the next shortly after the end of the fiscal â&#x20AC;&#x201C; for paying advance tax. For example, say by October 15, taxpayers will have to pay tax on all their income earned till September 30. Then, by April 15, the tax on the balance income should be paid. Also, the Income Tax Department should levy interest and penalties only on shortfalls in payment of such advance tax. This would be a much smoother and cleaner way for tax collection, both for the taxpayer as well as the exchequer. F

The authors are leading financial advisors. Write to them at wonderlandconsultants@yahoo.com

The Finapolis l AUGUST 2016

FINANCIAL PLANNING MENTOR

Financial Advisors Should Copy this Tactic of the Airline Industry Dharmendra Satapathy looks at boarding passes and moots the creation of zones to guide clients’ investments

n order to ensure orderly boarding in an aircraft, it is important that people sitting in the rear board first and people sitting in the front board after them. This prevents the gangway from getting blocked which in turn means faster boarding and ‘on time’ take off. The boarding announcement while boarding an air craft would usually go somewhat like this, “Passengers with seat numbers 30 to 40 kindly proceed for boarding ” and so on and so forth. The problem with this style of announcement was that as a passenger one had to relate to the announcement and seat number and the range to which he belongs. While it may seem easy in isolation, it isn’t so when scores of people are anxiously waiting to board the aircraft. I have used the word ‘anxious’ because simple and plain travel for many is an ‘anxious experience’. In such a state of mind passengers often can’t relate the announcement to their seat number range. To overcome this, the airlines have smartly printed Zones on the boarding

Hence, there is no longer the need to read his seat number (which itself is written in smaller font size) and then mentally analyse whether it falls in the range being announced and relate to the action to be taken (to board or to wait). A simple ‘short cut’ works so beautifully when large number of people are in-

her long-term goals and market valuation shoots up, perhaps it is time for him to move all or most of his assets to debt. This can be termed as Zone 5. So when your portfolio is in Zone 5, move money from equity to debt. Similarly, some other scenarios can be constructed and appropriate action built

cards and the announcement goes something like this “passengers belonging to Zone 1 proceed for boarding” Now, as you can see, any passenger can easily comprehend the announcement. Just check his zone written in large font on the ticket and act according to instruction.

volved. Likewise, in Financial Advisory, we need to make things simple. Instead of narrating terms like market valuation, P/E, equity-debt asset reallocation and so on, why can’t we allocate Zones to our clients based on the market situation and their goals? For example, if as client is nearing his/

around it and a new zone allotted. During indoctrination or education, the clients should be explained the significance of the zones because at the time of being educated, anxiety levels are low and comprehension abilities a lot higher. However, once in the thick of action, anxiety levels can soar as markets fluctuate.

AUGUST 2016 l The Finapolis

FINANCIAL PLANNING

At such times, this simple ‘short cut rule’ can play a crucial role in regulating the client’s investment. Since the client cannot track market parameters, it is the job of the Financial Advisor to inform the client in which zone he has fallen and why, and hence explain what action needs to be taken. In this way, the advisor is able to monitor his client’s portfolio more efficiently and the investor too will come to appreciate the decisions and recommendation of his Financial Advisor.

Why Everybody Loves LIC and FD The answer to this, strangely, has nothing to do with the products. In fact, both products fall short of being perfect and still people swear by them and recommend them to others. Ever wondered why this happens? While we love to romance the product, you may be disappointed to learn that products are never the heroes. Product perception is what drives people towards products and this perception is created and altered by marketing people and the communication designed by

them. One of the tools used by marketing people is the power of the crowd. We tend to follow the herd not just in stock markets but across all walks of life. We seem to assume that if a lot of people are doing the same thing, they must know something which we don’t. Hence best is to follow them. This happens even more often when we ourselves are uncertain. We are willing to place an enormous amount of trust in the collective knowledge of the crowd. The irony is that, the people recommending these products themselves have little knowledge of what they are so strongly recommending other than the knowledge that a vast majority

While we love to romance the product, they are never the heroes — it is product perception that drives people towards products. The perception is created and altered by marketing departments

use them. Hence, they believe that the products must be good and worth recommending. Such simplistic thinking drives product destinies. Sadly, intrinsic product features and virtues that are so painstakingly built into the product have if at all very little influence on the customer. We seek easy ways to decide because learning and understanding is rather cumbersome. Therefore, as Independent Financial Advisors, you need to invest time in educating people in an interesting and educative manner, so as to beat boredom of learning. Otherwise, you can be sure that the potential customer will continue to prefer the advice of the crowd rather than the advice you provide, even though you are more qualified and are offering a better product. Providing superior information by way of education and knowledge dissemination (not product information) is the only way in which you can change preconceived notions. Education should always be about the lives of customers and how their lives can become better. F

34 The Finapolis l AUGUST 2016

FACE TO FACE ‘Earnings at domestic businesses should grow faster than at exportoriented businesses in FY17’ Harsha Upadhyaya is Chief Investment Officer – Equities, at Kotak Mahindra AMC. He also heads the Kotak Select Focus Fund. He speaks to the Finapolis about the stock market, the outlook for the future, the India story, and the strategy his fund has used to successfully beat the benchmark and the category average across time frames and emerge an outperformer. We also get him to list the books he would recommend to investors. The last couple of months have seen markets scaling highs, but investors remaining edgy about the possible fallouts of Brexit, a Fed rate hike and other external factors. How well insulated is the India story from global headwinds? India has a large domestic market, which is quite robust compared to the global scenario. The Indian economy has been growing at the fastest pace amongst all comparable economies in the world today. Indian macroeconomic fundamentals have been at their best at this point of time. While any global shock will impact Indian financial markets, the India story is likely to remain intact to a large extent. Indian equities will also possibly experience volatility whenever there is a negative global event, however,

We expect the cement sector and select stocks from engineering/capital goods to do well on the back of renewed government focus on building infrastructure

AUGUST 2016 l The Finapolis

FACE TO FACE they are likely to perform much better than other comparables once the dust settles down. Kotak Select Focus has been an outperformer, beating the benchmark as well as the category average across timeframes. Tell us about your investment philosophy and stock selection process. Do you follow a top-down or a bottom-up approach? The investment philosophy of Kotak Select Focus is built on the premise that different sectors of the economy perform varyingly over different periods of economic cycle. The investment focus in the fund is to invest in select sectors that are likely to outperform broader market at various points of time. Once the sectors are selected through top-down analysis, the individual investment ideas within those sectors are picked up through a bottom-up approach. The fund generally maintains 4-9 sectors in its portfolio. So, while it is a concentrated strategy at the sector level (maximum exposure to a single sector can be 33% of the fund) we keep it diversified at stock level (generally around 50 stocks in the portfolio). Its investment mandate also provides flexibility to move across market capitalisation. Investments in mid/ small cap stocks can go up to 50% of the portfolio. Generally, the mid/small cap allocation in the fund has remained between 20% and 35%. The maximum cash level in the fund is restricted to 7.5% of the corpus. We try to look for businesses that have proven business models, which are scalable in nature, where capital efficiency is high and that have reasonable competitive edge in their respective areas of business. We also very keenly look at the management track record and its quality. The final filter is valuation in every case. Typically, we look for compounding characteristics of earnings growth at reasonable valuations, and build portfolio around that strategy. Over the years, we have stuck to investment philosophy and investment

Urban consumption is likely to be strong going forward given declining interest rates, positive impact of the Seventh Pay Commission and improving corporate wage growth. Auto and consumer durable sectors could be major beneficiaries of this trend. Even enablers such as banks focussing on retail business are likely to see better prospects. mandate of the fund irrespective of market phases. The investment focus has always remained long term, with relatively low portfolio turnover. These simple rules have enabled us to register outperformance through both sector allocation as well as stock selection. What are the key triggers that you are looking forward to with regard to the markets? Corporate earnings growth, progress of Monsoon as per estimates and likely passage of some key reforms in the ongoing parliament session are some of the positives that investors are currently looking at. Are there any particular sectors that you feel would benefit in the coming 2-3 years due to reforms by the government, for example, the GST Bill? Urban consumption is likely to be strong going forward given declining interest rates, positive impact of the Seventh Pay Commission and improving corporate wage growth. Auto and consumer durable sectors could be major beneficiaries of this trend. Even enablers such as banks focussing on retail business are likely to see better prospects. On the back of renewed government focus on building infrastructure we

expect the cement sector and select stocks from engineering/capital goods to do well. What are your expectations for corporate earnings this financial year? Given the return of the Monsoon and indications of a revival in urban demand, can we expect to FY17 to prove better than FY16 as a whole? We expect earnings growth in FY17 to be much better compared to that of previous year. During this financial year, it is expected that the corporate earnings growth rate will be in the midteens on year-on-year basis. Domestic oriented businesses in general are likely to have better earnings growth in FY17 compared with global/export oriented businesses in our opinion. What’s on your reading list right now and which investment books would you recommend to investors for developing the right mindset for investing in stocks? Currently, I am reading To the Brink and Back – India’s 1991 Story [by Jairam Ramesh]. For understanding the nuances of investing, I would recommend the all time classics — The Intelligent Investor by Benjamin Graham and One Up on Wall Street by Peter Lynch. F

36 The Finapolis l AUGUST 2016

SECTOR WATCH PHARMACEUTICALS

The Pills Should Get Sweeter

ey takeaways from the June quarter were the single-digit growth in sales of domestic formulations, on the back of NLEM 2015 and FDC (Fixed Dose Combination) directives, and the better performance in emerging markets (on QoQ basis) and better news flow from the US market. Domestic formulations witnessed 4.5% YoY growth during the Apr-Jun 2016 quarter (secondary data). Companies present in the space have largely outperformed industry growth, led by Abbott with 9.5% growth, Alembic Pharma with 8.8% and Lupin with 8.5%, followed by Unichem Labs (5.2%), Indoco Remedies (4.7%) and Sun Pharma (5.5%). GSK Pharma, Cadila Healthcare, Sanofi India, Dr Reddy’s Labs and Torrent Phar-

The pound appreciated by 3.0% YoY and depreciated 1.05% QoQ, whereas the real depreciated by 8.0% YoY and appreciated 9.7% QoQ. The depreciation of the yen is expected to have positive translation effect for Lupin.

ma were the exceptions.

quarterly results included the full quarterly results of Gavis, the US-based company it acquired during the March quarter, and Sun Pharma’s results included a full quarter of the sales of its Gleevec-equivalent drug. Better news flow from the US is seen having a positive impact on these companies.

Currency movements The dollar appreciated by 5.4% YoY and depreciated by 0.9% QoQ against the rupee. The yen depreciated 17.9% YoY and 5.4% QoQ, while the ruble appreciated 15.8% YoY and depreciated 11.4% QoQ.

US market Overall, Indian pharma companies picked up 24 ANDA approvals and 13 tentative approvals for the US market. Aurobindo Pharma and Sun Pharma (including Taro) got the most approvals at six each. ZydusCadila got four approvals, while Lupin got three. Alembic Pharma received one approval during the quarter. Traction in the key US market (prescription data) was seen for Nexium and Detrol LA for Torrent Pharma, and Nexium for Dr Reddy’s, while Lupin’s

Result Expectations Karvy Stock Broking expects 15.4% YoY improvement in revenues for Q1FY17 for companies under coverage. Revenue growth for Lupin is seen at 40.6% YoY, while that for Sun Pharma (merged entity) is seen growing 30% YoY. Revenue at Divis Lab is forecast to increase 14.8% YoY, while that of Indoco Remedies is estimated to gain 21.3% YoY, and that of Unichem Labs rise 14.7% YoY. Sectoral EBITDA margins are expected to grow by 356 bps YoY and 138 bps QoQ for the companies under coverage. Net profit is forecast to grow by 64.9% YoY for these companies.

Price Targets Karvy Stock Broking factors in a rupee rate of Rs 67 to the dollar, as against Rs 65 to the dollar earlier. Estimates for majority of the Indian companies have been upgraded. Top picks are Lupin, Cadila Healthcare and Torrent Pharma. Estimates for majority of the Indian companies have been upgraded. Top picks are Lupin, Cadila Healthcare and Torrent Pharma. F

AUGUST 2016 l The Finapolis

SECTOR WATCH POP THE RIGHT PILL: Select Stock Recommendations Sun Pharmaceutical Industries; TP: Rs 823

Lupin Ltd;TP: Rs 1,831

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Sales

87846

76342

67576

15.1

Sales

44,114

41,811

31,502

5.5

EBITDA

31927

25203

16140

97.8

26.7

EBITDA

12,841

13,674

8,166

57.3

-6.1

EBITDA margin (%)

36.83%

33.99%

24.75%

0.00%

EBITDA margin (%)

29.10%

32.70%

25.90%

PBT

29458

21325

13563

117.2

381

PBT

10,398

12,254

7,891

31.8

-15.1

PAT

22557

17137

4790

371

31.6

PAT

7,227

8,071

5,250

37.7

-10.4

1. Domestic formulations is expected to grow by 8% YoY while US business will grow by 59% YoY on back of Gleevec. 2. Taro would report decent growth and expected to increase by 34%. Margins expected to be higher by 1210 bps YoY due to better gross margins.

1. Domestic growth for Lupin will be at 10% YoY . US would grow by 77 % to Rs 21 bn. 2. Margins expected to be higher by 321 bps QoQ due to full impact of Gavis in current qtr. 3. Japan to grow by 25 % to Rs 3.1 bn on account of Yen depreciation.

Sanofi India; TP: Rs 4,552

GlaxoSmithKline Pharma; TP: Rs 3,506

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Sales

5,852

5,444

5,497

6.5

7.5

Sales

6,602

6,930

6,283

5.1

-4.7

EBITDA

1,515

1,291

1,214

24.8

17.4

EBITDA

1,248

1,289

1,100

13.4

-3.2

18.90%

18.60%

17.50%

EBITDA margin (%)

25.90%

23.70%

22.10%

PBT

1,338

1,245

1,028

30.2

7.5

PBT

1,415

1,463

1,450

-2.4

-3.3

PAT

883

806

642

37.6

9.6

PAT

998

1,060

933

-5.8

1. Net sales is expected to increase by 6.5% on a YoY basis. 2. Margins have increased by 380 bps supported by higher gross margins.

1. Glaxo sales to improve by 5.1% on a YoY basis, Y-o-Y basis . 2. Improvement in EBITDA due to lower staff costs. 3. PBT is expected to decline due to increase in Deprecation cost

Cadila Healthcare; TP: Rs 410

Dr Reddyâ&#x20AC;&#x2122;s Labs; TP: Rs 3,727

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Sales

25,031

24,491

25,007

0.1

2.2

Sales

37,955

37,562

37,578

EBITDA

6,042

5,814

6,015

0.5

3.9

EBITDA

9,302

8,104

9,981

-6.8

14.8

24.50%

21.60%

26.60%

EBITDA margin (%)

24.10%

23.70%

24.10%

PBT

5,306

5,172

5,353

-0.9

2.6

PBT

6,079

2,485

7,978

-23.8

144.6

PAT

4,211

3,887

3,534

19.2

8.3

PAT

4,803

746

6,257

-23.2

543.8

1. Topline is expected to be flat on YoY basis mainly due to muted domestic formulation growth 2. US expected to decline marginally to Rs 9.6 bn due to lower revenues in HCQS. 3. Similar margins as better gross margins being offset by higher staff costs

EBITDA margin (%)

1. Revenue is likely to grow by 1.0% YoY 2. Generics will be flat while PSAI is expected to grow by 5.5% YoY. 3. US generics market will witness better traction in Reclast and Zometa. and full impact of Nexium with increased market share. Margins expected to move up on Q-o-Q from 21.6 % to 24.5% due to lower SGA & R & D exps

38 The Finapolis l AUGUST 2016

SECTOR WATCH AUTOMOBILES & ANCILLARY

Your Mileage May Vary

The auto sector is a place for selective pickings discovers Team Finapolis

he automobile industry witnessed healthy volumes in Q1FY17, with high single digit growth from passenger vehicles and double-digit growth from all other segments like commercial vehicles, two-wheelers, tractors, etc. Improving sentiment in the rural market and new launches coupled with lower base were the key driving factors. Companies with higher global exposure witnessed sizable volume drag due to global turmoil in recent times.

sal of the price trend towards the end of Q4FY16. Due to the lag effect of one quarter, full impact of commodity price reversal would be seen from Q2FY17 onwards. Karvy Stock Broking expects YoY margin improvement for OEM companies when excluding Tata Motors, while the inclusion of Tata Motors is likely to show margin erosion for the companies under coverage. The ancillary universe too is expected to show margin improvement in Q1FY17. Tractor companies are expected to show positive YoY profitability

tractor sales should see a sharp rebound and strong outperformance to other segments over the same period. On YoY basis, auto OEMs are expected to post net profit growth between -24% and 42%, while auto ancillary companies are expected to show YoY PAT growth of -14% to 43% in Q1FY17. TVS Motor and Escorts are expected to show strong PAT growth of 41.8% and 42.4% YoY in Q1FY17, while Tata Motors is likely to show a fall of 24% YoY in net profit. Strong outperformance is ex-

Ancillary companies are expected to show benefit from OEM sales to some extent, although companies with a global OEM client base are likely to have faced some turbulence. Auto makers would benefit from low commodity prices, though the advantage would be offset to some extent by a rever-

after two years backed by improvement in tractor volumes. Volume recovery is expected by midFY17 across the segments amid a favourable monsoon benefitting rural India as well as the overall economy. The uptrend in commercial vehicles should continue for the next 2-3 quarters, while

pected in the bottom lines for Exide and Motherson Sumi, while Bharat Forge, Maruti Suzuki and Bajaj Auto are expected to deliver subdued performance.

VERDICT:

Investors should prefer select auto companies based on core business strength and valuation. F

AUGUST 2016 l The Finapolis

SECTOR WATCH TAKE THE RIGHT TURN: Select Stock Recommendations Maruti Suzuki (Standalone); TP: Rs 4,650

Bajaj AutoÂ (Standalone); TP: Rs 2,650

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Sales

148,569

134,249

153,057

10.7

-2.9

Sales

57,149

56,135

54,114

1.8

5.6

21,928

21,891

23,500

0.2

-6.7

EBITDA

11,589

11,397

11,515

1.7

0.6

20.3

21.3

EBITDA EBITDA margin (%)

EBITDA margin (%)

14.8

16.3

15.4

PBT

17,179

16,705

16,901

2.8

1.6

PBT

13,560

14,980

11,995

-9.5

PAT

12,369

11,929

11,336

3.7

9.1

PAT

9,221

10,116

7,824

-8.8

17.9

1. Margin contraction primarily on account of higher RM cost impacted by higher import cost on account of adverse currency. 2. Volume growth was at just 2% YoY. 3. Better product mix with higher contribution from top end models to have positive impact on realization but adverse currency to impact margins.

1. Domestic volume grew 16% YoY, while exports declined 22% YoY therefore overall volume fell 2% YoY. 2. Currency is favourable but lower export contribution to impact margins, down 100 bps QoQ. 3. In 3W exports, pricing under pressure due to increasing competition by TVS and Chinese players in African markets.

Escorts (Standalone) TP: Rs 290

Motherson Sumi (Consolidated); Rs 330

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Sales

10,715

9,777

8,047

9.6

33.2

Sales

111,475

93,848

102,349

18.8

8.9

749

575

388

30.2

EBITDA

11,826

8,384

10,643

41.1

11.1

10.6

8.9

10.4

EBITDA EBITDA margin (%)

EBITDA margin (%)

5.9

4.8

PBT

582

383

155

51.8

274.3

PBT

7,645

5,382

6,583

16.1

PAT

524

368

203

42.4

72.8

PAT

3,880

2,712

4,206

-7.7

1. Margins are expected to be benefitted from volume and improvement in construction equipment segment. 2. Cost Cutting initiative to benefit to some extent. 3. Expect strong recovery in construction equipment segment.

1. Expect healthy standalone performance with better domestic PV volumes during the quarter. 2. Strong performance of SMR and SMP with commencement of operation at new plants to drive consolidated profitability.

M&M + MVML (Standalone); TP: Rs 1,550

Tata Motors (Consolidated); TP: Rs 550 YoY (%)

QoQ (%)

806,844

0.8

-23.4

113,872

-12.2

-29.8

14.9

14.1

Rs mn

Q1FY17E

Q1FY16

Q4FY16

YoY (%)

QoQ (%)

Rs mn

Q1FY17E

Q1FY16

Q4FY16

Sales

111,354

94,371

101,602

9.6

Sales

617,847

613,021

EBITDA

79,945

91,088

12.9

EBITDA

14,782

13,530

12,694

9.3

16.4

13.3

14.3

12.5

PBT

12,934

11,488

9,367

12.6

38.1

PBT

28,993

43,587

65,611

-33.5

-55.8

PAT

9,183

8,311

6,622

10.5

38.7

PAT

21,529

28,436

46,975

-24.3

-54.2

EBITDA margin (%)

1. Average Selling Price improves, as M&HCVs grew by 19% YoY, while LCV growth is lower at 11% YoY. Hence M&HCVs contribution increases. 2. Lower interest expenses owing to lower debt and control on inventory linked working capital loan. 3. Lower discount to benefit on margins.

EBITDA margin (%)

1. JLR volumes grew by strong 17.4% YoY. We expect ASP to fall 2% YoY and estimate revenue growth of 7% amid price cut in few geographies and product mix. 2. Standalone performance would improve with better PV sales and healthy growth in CVs. 3. JLR margins to be under pressure.

40 The Finapolis l AUGUST 2016

EQUITY NUMBER GAME

Technical Analysis Our team of analysts pore through technical charts to offer some smart trading tips for the next couple of months By Team Finapolis

AXMIMACH was in a strong uptrend from 1721.95 in July 2013 to its all time high of 4503.95 in November 2014. The stock then retraced nearly 50% of the said rally in weekly line chart and bounced back to close above 38.2% retracement levels of the correction. The stock has broken above a sloping trend line 4000 3850 3700 3550 3400 3250 3100 Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Current Market Price Stop Loss Target Price 1, 2

Rs 3715.45 Rs 3330 Rs 4250, Rs 4500

drawn from its all time high with good volumes indicating the end of the correction and we expect the stock to start a fresh leg of rally from these levels to the said targets. Points of Observation XXOn the weekly charts, the stock is trading above all of its short term and long term moving averages, In daily chart the stock is trading above its 50/100/200 EMA levels indicating the bullish bias in the counter. XXAmong other leading indicators parabolic SAR is trading below the CMP in weekly chart and suggest a positive trend in the counter on weekly charts.

XXAmong the oscillators MACD is trading above the signal line with broadening bands in weekly charts suggest positive momentum in the counter. XXOn fundamental side, the company will be a major beneficiary of the new textile policy as it has 64% market share in the Indian textile machinery manufacturing. The company is also having strong cash inflows and good dividend history.

AUGUST 2016 l The Finapolis

EQUITY Current Market Price

SHOKLEY has announced its Q1 results on 21st July 2016, which has beaten streetâ&#x20AC;&#x2122;s estimates with strong margins. Riding on robust medium and heavy commercial vehicle sales, Hinduja group flagship Ashok Leyland saw a 101% jump in net profit. The company has posted a net profit of Rs. 2907.844 million for the quarter ended June 30, 2016 as compared to Rs. 1444.961 million for the quarter ended June 30, 2015. Points of Observation XX The stock is in secular uptrend and is in 110 103 96 89 82 75 68 Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Stop Loss Target Price 1, 2

1350 1275 1200 1125 1050 975 900 Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Rs 86 Rs 110, Rs 115

a cycle of higher highs and higher lows suggesting inherent strength in the counter. On weekly chart, the stock has retraced more than 23.80% from its all time high of 112.90 levels which was tested on 13-Apr-2016 to the low of 89.55 levels which was tested on 08-July-2016. Also, on the Bollinger band the stock has taken support near the lower band of Bollinger (20,2) placed around 90 level suggesting it to be a strong support for the stock in the coming trading week and the stock should sustain above the mentioned level. XX On daily charts, the stock has corrected more than 14% in past 2-3 months which dragged the counter towards the lower levels of 90-92. The stock later took support around its 61.8% retracement levels

Current Market Price

MAMILTD has seen a stellar run till it clocked a life high of 1365 levels last year on 5th August, post that the stock went into correction mode where it fell from the highs of 1365 levels towards 901 levels, falling more than 35% from the highs. The stock took support twice at exactly the same level i.e. 901 levels before forming a Double Bottom Pattern on the daily as well as weekly charts. The stock is likely to head towards previous highs once it surpasses

Rs 96.70

Rs 1131.95 Rs 990 Rs 1350, 1360

minor resistance placed around 1160 levels. Any decline in the stock towards 1070 levels can be used as a buying opportunity to accumulate the stock for the targets of 1350-1360 levels in the short to medium term. Points of Observation XXOn the daily as well as weekly charts, the stock is trading above most of its major moving averages namely 21/50/100/200 â&#x20AC;&#x201C;DEMA, indicating the inherent strength in the counter and the counter is likely to head northward towards 1350-1360 levels in the short to medium term. XXThe counter has given a falling trend line breakout on the weekly charts on closing basis drawn from the high all time levels of 1365 with notable trading

drawn from the swing corners of all time high (112.90) and 52 week low (77.70) levels on the daily charts. At the current juncture the stock is looking very attractive from the risk reward point of view and one may initiate long position in the counter. XXOn the other hand, the stock was able to regain its losses which pulled it well above its 200 DEMA suggesting bullishness to remain intact in the counter from short to medium term perspective. XXBuying interest was seen in the counter on the day of its Q1 earnings with notable trading volumes indicating strong hands may have started accumulating the stock around lower levels.

volumes and has also retested it. Going further, any breakout above 1160 levels in the stock may lead to more aggressive momentum in the counter. XXThe stock has seen accumulation around 1100 levels and it has been moving higher with decent volumes from the last 2-3 trading sessions after it witnessed a minor dip towards 1100 levels from 11551160 levels. The stock has a strong support around 1070 levels and is likely to head towards 1350-1360 levels. XXAmong oscillators, the 14-day RSI line has already given a positive crossover with 9-day signal line, indicating strength in the counter.

42 The Finapolis l AUGUST 2016

EQUITY Current Market Price

Rs 2515.10

Stop Loss

Rs 2300

Target Price 1 , 2

he stock is rising from 2402 levels with minor throwbacks indicating its bullishness on all major time frames. The stock witnessed breakout from “SYMMETRICAL TRANGLE PATTERN” levels on closing basis on daily chart. Historically, the stock has moved from 2115 level and made high of latest high of 2677.70 levels after that the stock was consolidated in a broad range between 2400-2700 levels and recently the stock has given fresh breakout from the said symmetrical pattern.

2725 2625 2525 2425 2325 2225 2125 Jul-15

Oct-15

Stop Loss Target Price 1, 2

Apr-16

Jul-16

Rs 267.45 Rs 230 Rs 320, Rs 330

the consolidation range breakout around 262 levels with notable volume on the weekly charts and closed well above the same. The price has retraced the 50% of retracement levels drawn from the high of 311.78 levels to the low of 223.30 levels. The stock found support around 231-236 levels and bounced back after taking support on multiple occasions which suggest strong base around 231- 236 levels. The recent bounce in the stock from the said levels has seen increase in delivery quantity to trade quantity which reflects strong hands are accumulating the stock at current levels.

304 290 276 262 248 234 220 Jul-15

Jan-16

Points of Observation XXThe stock is making higher highs and higher lows on all major time frames. Technically, the stock has formed “DOUBLE BOTTOM PATTERN” near 2410 levels on daily chart and has taken support from its 20 day EMA and started moving higher. XXThe stock witnessed sharp correction from its latest high of 2677.70 levels to 2403.50 levels which was also its 50 % Fibonacci retracement support level

Current Market Price

he stock is in structurally uptrend making higher highs and higher lows on weekly charts. The stock has posted its life time high around 312 levels during the month of October 2015. Thereafter, the stock has seen profit taking which dragged the stock towards the low of 223 levels. The stock has spent approximately five months in the consolidation range of 235-262 levels. However, the stock has given

Rs 2820, Rs 2950

Oct-15

Jan-16

Apr-16

Jul-16

Points of Observation XXOn the technical setup, the MACD has given the positive crossover with the signal line on weekly charts and has entered

(2396.35) drawn from low of 2115 to high of 2677.70. In last previous month, the stock has tested its said Fibonacci levels and confirmed after making a bullish candlestick formation at 2515 levels .On the other hand, the stock is trading above from its all short term and long term moving averages which shows that the stock has still potential to go further upside. XXAmong the oscillators, The RSI is trading in a bullish zone between 40-65 level and also the RSI line is trading above its signal line and currently there is no sign of any reversal or divergence in the counter. On weekly chart, Bollinger Band (20, 2) is also widening with positive bias and the stock has taken support from its middle band and started its journey toward its upper band. XXWe therefore recommend long term investors to go long in the stock on dips to 2510-2520, and average the long position on dips, if any, around the level of Rs.2420 for the mentioned target levels with a strict stop loss placed below the level of 2300 on a weekly closing basis. in the buy tertiary which enhances our bullish view in the stock. XXThe 14 period RSI is pointing northward and has given positive crossover with the 9-day signal line reflecting strength in the counter. XXThe parabolic SAR is trading below the price on the daily chart suggesting up trend in the stock will remain intact. XXThe recent development in the stock suggests that the stock is well placed to continue its up move for the targets of 320- 330 levels keeping stop loss of 230 levels for the time frame of 9- 12 months. F

AUGUST 2016 l The Finapolis

by invite

ADHIL SHETTY

Make the Most of Your Credit Card’s Rewards

ave you taken the time to understand all the features of your credit card? Used right, credit cards can bring you tonnes of discounts and conveniences. Just about every credit card comes loaded with features such as cash discounts, cash back and reward points. While cash offers are easier to understand, the reward points system is a trickier subject.

What are credit card reward points? Credit card companies have commercial tie-ups with merchants. You can check with your card provider to find out which business establishments — restaurants, movie theatres, shopping destinations, airliners, etc. — have tied up with them. When you transact with your credit card, and if that merchant has a tie-up with your card provider, you will be given reward points in your card account. Your reward points accumulate in your account till such time as they’re ready to be redeemed, or till a cut-off date after which they expire.

How many reward points you can earn? The more you use your credit card, the more points you’ll earn. Of course, there may be limits to rewards per transaction, or per billing cycle. For example, a petrol card offers 4 reward points per transaction of Rs 150, but caps the reward points at 267 (on a transaction of Rs 10,000), meaning that no matter what you spend, you would get no more than 267 points for that transaction. If you use a co-branded card such as a mall card, an airline card, restaurant card, or a petrol card, you’ll earn more points each time for transacting at the associated business establishment. Often, the number of points you earn per transaction depends on the type of your card. An entry level card, for example, would learn lesser points in

Adhil Shetty is the CEO of BankBazaar.com

Reward offers keep changing Most cards keep updating their reward policies, hence you need to keep a tab on them. It is important to check the validity of reward items on offer, and book them as soon as you reach the required points.

Reward points can expire comparison to standard or premium cards. The point system may also vary depending on ongoing schemes,or seasonal or festive offers.

Why do card companies reward you? You must be wondering that why credit card companies give you rewards when you use its card? The reason is the interchange fee. Each time you transact with your credit card, the card company charges the merchant a fee. (This is why you may have encountered merchants who want to charge you 2% extra if you want to pay your bill with a card.) Merchants having a tie-up with a card company pay a higher interchange fee. The card companies split the fee with card users, resulting in reward points, cash backs and other incentives.

Yes, you may not believe this, but it is true that the reward points you earn through consistent spending through your credit cards may expire as per the tenures decided by the card company. You may get a time limit of 1 to 3 years to use your accumulated points, depending on the card type and as per the card company’s policy. Therefore, it is wise to regularly redeem your points and not risk losing them via expiration.

One reward point is not equal to one rupee Many card users often wrongly believe that each reward point equals to one rupee. If you have earned 10,000 points, then you may not have earned 10,000 rupees. The value of each point may vary from Rs 0.10 to Re 1 depending on your card type and the bank’s policy.

A cautionary note

The reward points earned on a card account may be used in many different ways depending on the redemption policies of that particular card. You may convert the points into rupees and use them to settle a bill at a shopping destination selected by your card provider. You could use the points to buy gifts, clothes, perfumes, cosmetics,

Never use credit cards just to earn points. Always be aware of your spending limits – not just the limits on the card, but the limits to which you can spend without indebting yourself. If you go overboard with your card spending, you may end up with a bill that will stretch your finances, depleting your savings and hampering your overall financial health. Credit card debts are one of the most expensive debts you’ll

movie tickets, etc. Often, this shopping can be done through e-commerce platforms selected by the card provider. Additionally, some cards allow your points to be adjusted against the annual charges, or to be rolled back into the card statement as a cash back.

ever repay, therefore be careful to spend only up to the limits your income would normally allow. Select your card judiciously while analysing your point of use, frequency of use, annual charges, merchandise tie ups and reward point benefits. F F

What can you do with the reward points?

44 The Finapolis l AUGUST 2016

realty check

A. SHANKAR

The Comeback of Kochi

ochi hits a six to become the next highly preferred real estate destination in India. All potential drivers such as IT development for employment generation, Metro rail for intra-city connectivity, the Smart City tag for basic infrastructure, port-based development for industry and commercial growth, airport terminal for international connectivity and foreign investment and tourism for the hospitality industry are emphasised in Kochi. This will ultimately boost demand for housing and make it one of the next highly-preferred real estate destinations in India. The 6 reasons why this will happen shortly:

The city expects investments of Rs 2,076 crore for pan-city solutions as part of the Smart City initiative 1. Inclusion in the top 20 Smart Cities Recently, the Ministry of Urban Development, Government of India identified the top 20 candidates under the Smart City mission initiative through a competitive selection process. Kochi ranks fifth and expects an investment of Rs 2,076 crore for pan-city solutions and area-based

development. E-Governance and water management are focus areas as part of pan city solutions which will help Kochi to access improved and planned infrastructure with assured water and power supply, sanitation and solid waste management, efficient urban mobility and public transport, IT connectivity, etc. Kochi-Mattancherry-Central City, which is selected as the area for development, will witness intense development in the coming years. Numerous developers are trying to acquire land for real estate development in and around this area. The â&#x20AC;&#x2DC;Smart Cityâ&#x20AC;&#x2122; tag is expected to boost prices exponentially.

AUGUST 2016 l The Finapolis

REALTY CHECK 2. India’s first Tier-II city to a propose Metro Rail Metro rail connectivity in Kochi is under various stages of construction and is expected to be operational by 2017. In Phase I, the Kochi Metro Rail Corporation has proposed an elevated route spanning approximately 25.25 km from Aluva to Pettah. Once completed, the metro will improve connectivity and reduce travel time from Aluva to the key micro-markets of Kochi. Real estate will be greatly influenced once the metro becomes operational. Areas like Companypady, Ambattukavu, Kalamassery, Edapally, Palarivatom, Ernakulam South, Elamkulam, Vytilla, Panampilly Nagar and Kadavanthara will be the main beneficiaries and some of them have already started to witness increased development. The future expansion of the metro will also benefit areas like Menaka, Kakkanad and West Kochi. Metro rail stations exert influence up to a buffer of 1 km radius, with maximum influence in the areas within a 500 m radius. Land prices along metro rail corridors have increased by 10%-15% after announcement, and are expected to increase further after operations.

3. New international airport terminal Cochin International Airport Ltd (CIAL) is constructing a Rs 1,100 crore international terminal with a built-up space of 15,00,000 sq ft. It is designed to handle 4,000 passengers per hour and will be commissioned by 2016. Once operational, the new international terminal will have a very positive economic impact and uplift the real estate market in the whole region. The catchment will witness development of new retail and commercial spaces along with a good supply of residential and hospitality developments to cater to the increasing demand. The increased international connectivity will also pave the way for global companies and cargo-based businesses to deploy and expand operations nearby. The completion of the international terminal, along an operational metro, will give significantly boost the city’s real estate mar-

Once operational, the new international airport terminal will have a very positive economic impact and uplift the real estate market in the whole region. ket – and the catchment itself is expected to witness 15-20% rise in property prices.

4. Venue for one of our submarine cable landings Kochi is one of the venues for ‘SEAME-WE-3’ (South-East Asia – Middle East – Western Europe 3) and ‘SAFE’ submarine cable landings, and is the second Indian location along with Mumbai to have two submarine cable landings. This fact highlights Kochi as an important destination for IT enabled services. Presently, the Government of Kochi is keen on developing IT/ITeS, as the entire Kerala state is promoting this sector heavily. The major thrust on IT/ITeS development will eventually boost real estate development in the city, as it creates demand for residential properties, Grade A office spaces and retail developments.

5. Home to India’s first global hub terminal Kochi is among India’s leading cities for strong port infrastructure and has the largest (and India’s first) global hub terminal — the International Container Transshipment Terminal (ICTT) at Vallarpadam. This makes Kochi the

A. Shankar, National Director & Head of Operations – Strategic Consulting, JLL India

premier port gateway to South India. Warehouses and other port-based industrial developments will see growth in these areas and lead to vastly increased port-related activities.

6. Continued tourism growth Kochi is known for its high heritage value, and contributes significantly to Kerala’s tourism industry. It sees an annual tourism influx that equals about four times its population, of which 14% accounts for foreign tourists, and reflects an annual increase of about 6%. The city’s vision of transforming itself into a tourist hub paves the way for steadily increasing demand for the hospitality sector and its allied industries. In short, Kochi — which was earlier struggling to recover from an oversupply scenario — will see a massive revival due to creation of demand from these initiatives. Sustainable growth in real estate prices is now assured in the city, and this has incited new interests from numerous real estate developers from all over India who are keen to launch residential, commercial and hospitality projects there. F

46 The Finapolis l AUGUST 2016

CAREER SCOPE SELL YOURSELF

Do’s and Don’ts of an Elevator Pitch It’s really hard to condense all your experiences into a 30-60 seconds speech, but Margaret Buj shows you how

f you’re looking for a job, you might want to create an ‘elevator pitch.’ It is a brief explanation that summarises who you are, what you

do and why you’d be the perfect candidate – you’ll want to be able to reel off your pitch at any time, especially with people who might be able to help you get your dream job.

“Hi, I am Karen Smith. I am a Brand

seconds, your speech would be different

However, it can be really hard to con-

Marketing Manager with 10 years of

to when you have a couple of minutes.

dense all your experiences into a 30-60

experience in the travel industry – I’ve

Make sure you master a few key talk-

seconds speech! Here are some do’s and

worked for companies including Expedia

ing points and you can then tailor your

don’ts of writing a great elevator pitch:

and Thomas Cook – and I am looking for

speech for particular occasions.

1. Decide what kind of work you’re looking for

opportunities in London.” You’d then use the next several seconds

And what about the don’ts? Here they are:

Unless you can clearly explain to some-

to briefly mention some details about

one the type of a job you’re interested

what makes you stand out – and what

1. Don’t sound boring or make people wonder about what is it that you do

in, nobody will be able to help you find

your specific skills are that could help a

Ask yourself what problem you solve

it. You need to know what your goals are.

potential employer.

rather than what you DO. For example,

And if you’re looking for a job that is dif-

Also, focus on the needs of your audi-

instead of saying I am an interview

ferent to what you’re doing right now –

ence, not yours (just like in a job inter-

coach, I could say I help professionals

you need to tailor your pitch accordingly.

view). You’ll only be successful if the

get hired, promoted and paid more fast-

E.g. if you want to be a web designer, em-

person you’re talking to understands it.

er than they would on their own. You

phasise the web design work you’ve done,

So don’t use a lot of jargon when talking

might want to include some number and

rather than talking about your current

to someone from outside of your industry,

concrete details – this will make you

job which might have nothing to do with

but also, don’t explain simple terms to a

more memorable.

what you’re looking for.

professional in your industry.

complishments relevant to your target

3. Practice

2. Don’t undersell or oversell your skills or experience

position. Then delete everything that’s

It is important you read your pitch out

If you undersell yourself, people won’t

not relevant to what you’re looking for –

loud and practice. You want to sound

know how you can help them so they

be specific.

conversational, not like if you’ve memo-

won’t be able to recommend you to people

rised it by heart. Perform your pitch and

who might be able to offer you the job. On

ask someone for feedback. If your friends

the other hand, if you oversell yourself,

A good pitch (and this relates to your re-

don’t understand what your key points

people then won’t take you seriously.

sume and cover letter, too!) should answer

were, your speech still needs work.

Also, write down your skills and ac-

2. Structure your pitch and tailor it to the audience three questions: Who are you? What do

3. Don’t sound too salesy

you do? What are you looking for? Here

4. Prepare a few variations

is an example of what your pitch might

It is a good idea to prepare a few varia-

don’t want to sound like a typical used car

start with:

tions of the speech – if you only have 20

salesman. Hope these help! F

Margaret Buj is a qualified Personal Performance & Corporate and Executive Coach.

Yes, you want to sell yourself– but you

AUGUST 2016 l The Finapolis

CAREER SCOPE START UP

So You Want to be an Entrepreneur. Do You Have What it Takes? Not everyone is suited to starting and running his or her own business, says Dan Citrenbaum. Find out if you are

lmost everyone at one time or another contemplates starting a business, whether to escape from the frustrations of a corporate job or to finally find fulfillment for a creative self long trapped in stifling jobs. Of course, the failure rate for new businesses can seem a daunting barrier. The Small Business Administration in the US puts the survival rate of businesses at only 50% over five years. The good news is that the odds for survival improve the longer you’re in business. The toughest part is getting through the uncertainties of the startup period. The truth is not everyone is suited to starting and running his or her own business. And those who succeed learn how to capitalise on their strengths and gather as much preparation as possible before startup. You do not want to learn as you go or, before you know it, your money will run out. Fortunately there are many ways within easy reach to improve your odds. First, you must answer the most basic questions about whether you’ve got entrepreneurial talent and the right experience and skills for running a business.

were more likely to: • Clearly articulate their competitive advantage to their clients • Make decisions about pricing, product or service with their customers in mind, and • Spent much more time planning for growth and aligning employee responsibilities with goals In short, they were strategic in their

You might have the skills, knowledge and experience, accumulated after years in the workforce, to successfully manage a new business, especially if you have established backroom expertise to help you along the way. The best place to find added support is with a franchise, which comes with all the training and operating systems you

A recent Gallup survey of entrepreneurs found that “entrepreneurial talent significantly increased one’s odds of business success.” What separated these business owners? According to the 2014 Gallup study, they

management. Successful entrepreneurs have confidence, independence and determination, think creatively, can delegate, seek knowledge, and build lasting relationships, according to the study.

need to get started in a new business. So if you feel you may come up short on some of the qualities shared by entrepreneurs, you can rely on the time-tested experts that have helped thousands succeed as new business owners. F

Dan is a business coach with experience in helping people select and buy a franchise or existing business. Published by agreement with CAREEREALISM.com, a leading global jobs and advice website.

48 The Finapolis l AUGUST 2016

HOT WHEELS ROAD AHEAD

Will News of Tesla’s Fatal Crash put the Brakes on Driverless Technology? The car, a model S in self-driving mode, failed to detect a tractor trailer and crashed into it, killing its driver

ebate on the safety of autonomous vehicles was heightened after a Tesla car in self-driving mode failed to detect a tractor trailer and crashed into it in Williston, Florida, in May, killing its driver. While self-driving technology could potentially reduce human fatalities, regulatory consistency across US

states will boost innovation and thereby safety, said Wharton management professor John Paul MacDuffie. He is also director of Wharton’s Program on Vehicle and Mobility Innovation at the School’s Mack Institute for Innovation Management. MacDuffie discussed the emerging scenario for driverless cars with Knowledge@Wharton. Here are five key

takeaways from MacDuffie on the debate on driverless cars:

A rash of questions: Was Tesla Too Hasty? “Tesla, as they often have, pushed the envelope a bit in claiming that autopilot was ready for use by drivers,” said MacDuffie, while noting that the company also issued cautions about how that system

AUGUST 2016 l The Finapolis

HOT WHEELS was intended to be used. “Would one or more fatal accidents be … a Hindenburg Moment?” he wondered, referring to the 1937 crash of the Hindenburg airship in Manchester, New Jersey, which ended the prospects of the Zeppelin type of aircraft. Can these new technologies could do better than human drivers? “There are a lot of reasons to think ‘yes,’” he said. Another question is about “the public and regulatory tolerance for deaths” as this technology advances.

lation of driverless technologies, and have requested the US government to issue guidelines to make it easier for them to develop it, noted MacDuffie. That will build on the Silicon Valley approach to testing and fixing bugs, he added. “When Detroit meets Silicon Valley, will we get better and faster movement towards the open standards that allow innovation [and] yet support regulatory goals and rapid diffusion and testing of this technology?”

Adopting the Silicon Valley Approach

MacDuffie raised “a broader, strategic issue” on the debate about whether driverless cars ought to skip the phase that requires drivers to stay alert and move to a truly autonomous level. He referred to a five-level framework adopted by the US National Highway Traffic Safety Administration. In Level 3 of that system, drivers let their vehicles take control but must be ready to jump in at any time and take control. In Level 4, the vehicle is “truly

In Silicon Valley, “the way software gets better is you test it, find bugs and you fix the bugs,” said MacDuffie, advocating that approach for driverless technologies. “You are going to have bigger failings and smaller failings, but finding them is the key, so you can fix them.”

The need for regulatory consistency Car makers want consistency in the regu-

Which automation level should we aim for?

autonomous,” while Level 5 has to do with smart infrastructure that can communicate with vehicles, he added. Levels 1 and 2 deal with features like cruise control and alerts when cars stray off lanes. “There is a big debate out there about whether it is a good idea to aim for Level 3 at all, or to skip over it and go to Level 4,” he noted.

Will automakers and regulators work together? MacDuffie highlighted “the usual dance – or standoffs” — between the auto industry and regulators, noting that the former has resisted safety technology over the years, from seatbelts and airbags to compliance with the Clean Air Act. “[Will] there be a bit more confluence of interest [in driverless technologies] between car companies and regulators?” He hoped for that, given the “overwhelming public safety benefits” from such technology, and technology development for interoperability between different cars operating on the same software. F

50 The Finapolis l AUGUST 2016

BOOKMARK

Inside an Eclectic Mind If you were hoping for a sermon on advertising in Piyush Pandey’s tome, then you’re in for a surprise says S Vijaykrishnan

iyush Pandey on advertising, says the cover. Yet, if you pick up Pandeymonium expecting long theories and pontification on the subject, you are in for a surprise. This is a book on advertising and yet in many ways it is not. It is also about family, cricket, food, travel, memories, research, management, teamwork, recognition and not the least, passion. I believe the last word best describes the book’s underlying theme. It also explains how the author, in his inimitable showman style that brought us memorable ads, ties these words to his life, its successes and failures through multiple frames. As Mr Pandey states, “If you can read David Ogilvy or Bill Bernbach and every word that has been written by advertising greats, so can anyone else. However, one has to go beyond the reading.” For the author, advertising isn’t something that happened suddenly; his creative journey has been a lifelong one. This is evident in the way he describes his near and dear ones as a ‘creative factory’ (and his mother as the creative director), a personal ‘Google’ that he can always lean upon for inspiration, knowledge and trivia. Each incidence in the book begins with a lesson, or a statement for the reader, which is then elaborated through a series of small stories that hold forth

where images of an old couple in a toy store or an old man on a roller coaster help Mr Pandey make the now-famous campaigns for Cadbury. The mention of Cadbury brings me to another important theme in the book, that of developing lasting relationships with clients, in seeing their human side, to know them better so as to deliver even better. Mr Pandey also beautifully demolishes the myth that family-run businesses are boring. The book also holds forth beautiful lessons on themes such as teamwork, recognition, multiculturalism, belief in one’s own convictions, the need to be grounded to one’s roots, to learn from failure, to give back and so on (each explained with a wonderful experience the author had in the ad world). It is also of those little moments and stories that life takes us through. Lastly, the book is also in some ways an ode to O&M, the agency where Mr Pandey has been with throughout his career. This part of the book not only describes his experiences with advertising greats such as David Ogilvy and Sir Martin Sorrell, but also elaborates on the future of advertising in India and the emerging opportunities, most important social media. I rest my words with a rhyme

which the author equates to life and describes as his second-biggest inspiration after family and friends. Cricket brings him to travel, which has afforded the author a treasure trove of ideas and brainwaves for some of the best ads and moments Indian television, among them the Cadbury Dairy Milk ad (with a girl running onto the cricket pitch). Cricket also reminds the author that in adversity lies opportunity, an opportunity to hit a six every time if the passion and commitment endures. Another influence is music, as elucidated through ads made for Vodafone (“You & I in this beautiful world), Titan (a Mozart symphony), etc. This is a book about ideas, research and interactions. The author often describes his jaunts where everyone he meets, from a cobbler to a carpenter is an inspiration. The former set him on the famous ads for Fevikwik,

the ‘larger’ lesson. Take for instance the moment where Mr Pandey describes how he lost an elocution competition, after reciting a heavy, Hindi poem he had mugged-up. While the incident may seem odd by itself, it is a lesson in getting the audience’s pulse right. The book has much about cricket,

while the latter inspired that comes early on: Kasturi the well-known series Pandeymonium: Piyush kundal basey, mrig dhundhey on Fevicol (dum laga ke Pandey on Advertising van maahi. It describes the Author: Pandey Piyush haishaa). One thing stands quandary of the musk deer that Price: ` 799 clear: creativity isn’t an searches for a scent that it is armchair thing. The link between what there within. It is for us to seek within inspires and the subsequent results us, our passion, and then cause pande(y) could be surprising, as in instances monium out there! F

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DETAILS FOR NEFT

The Finapolis l AUGUST 2016

STAT DOSSIER All figures as on July 22, 2016

Indian Indices: Performance Close July 22, 2016

Close June 30, 2016

Return (%)

Return 6 M (%)

Return 12 M (%)

PE Ratio

27803.24

26999.72

2.98

13.55

-1.10

20.37

8541.20

8287.75

3.06

14.86

0.23

21.37

11420.35

11029.45

3.54

15.89

2.13

24.59

20646.30

19744.64

4.57

23.08

8.93

22.79

BSE Bankex

21377.46

20531.20

4.12

21.03

0.02

22.78

BSE Capital Goods

15549.72

14874.79

4.54

25.08

-14.26

34.91

BSE Consumer Durables

12099.97

11973.11

1.06

1.52

6.98

33.47

BSE Oil & Gas

10446.54

9720.95

7.46

15.41

2.87

12.52

BSE Metal

9434.82

8519.69

10.74

39.43

7.56

BSE Realty

1601.74

1532.82

4.50

34.66

18.45

86.44

BSE PSU

7100.32

6716.58

5.71

16.42

-8.27

22.61

BSE Power

2036.19

1996.05

2.01

14.88

-2.45

19.63

BSE Teck

5851.73

6068.82

-3.58

0.54

-5.63

18.72

Sensex Nifty BSE 500 BSE Auto

Global Indices: Performance Close July 22, 2016

Close June 30, 2016

Return (%)

Return 6 M (%)

Return 12 M (%)

PE Ratio

1706.97

1653.23

3.25

12.22

-2.21

21.60

432.76

414.33

4.45

16.24

-4.69

14.88

21964.27

20794.37

5.63

13.57

-12.59

10.93

Singapore Straits Times (STI)

2945.35

2840.93

3.68

14.04

-12.15

12.53

S. Korea

2010.34

1970.35

2.03

6.17

-1.74

16.93

Nikkei 225

16627.25

15575.92

6.75

-2.83

-19.07

19.93

18570.85

17929.99

3.57

16.91

5.71

17.81

S&P 500

2175.03

2098.86

3.63

15.87

4.59

20.21

NASDAQ

5100.16

4842.67

5.32

12.87

0.23

32.43

57002.08

51526.93

10.63

49.88

15.75

104.51

FTSE-100

6730.48

6504.33

3.48

14.52

2.29

52.37

DAX 30

10147.46

9680.09

4.83

4.22

-10.57

22.00

CAC 40

4381.10

4237.48

3.39

1.62

-13.37

23.82

MSCI World Index MSCI Asia Pacific Ex Japan ASIA Hang Seng

AMERICA Dow Jones

Brazil Bovespa EUROPE

AUGUST 2016 l The Finapolis

STAT DOSSIER All figures as on July 22, 2016

July International Commodity Futures Price Trends Close July 22, 2016

Close June 30, 2016

% Change

52 Week High

% Change from 52 Week High

52 Week Low

% Change from 52 Week Low

LME Lead 3 Month ($/t)

1842.00

1782.00

3.37%

1916.00

-3.86%

1551.50

18.72%

LME Zinc 3 Month ($/t)

2255.00

2105.00

7.13%

2294.50

-1.72%

1444.50

56.11%

10375.00

9420.00

10.14%

11405.00

-9.03%

7550.00

37.42%

19.69

18.80

4.76%

21.23

-7.23%

13.62

44.57%

4922.50

4850.50

1.48%

5440.50

-9.52%

4318.00

14.00%

44.26

48.40

-8.55%

51.67

-14.34%

26.05

69.90%

1611.00

1647.00

-2.19%

1703.00

-5.40%

1432.50

12.46%

19.62

20.35

-3.59%

21.22

-7.54%

10.13

93.68%

1330.10

1324.70

0.41%

1377.50

-3.44%

1045.40

27.23%

30.70

32.05

-4.21%

35.43

-13.35%

25.70

19.46%

ICE Coffee (cents/lb)

142.65

145.80

-2.16%

154.80

-7.85%

111.05

28.46%

ICE Cotton (cents/lb)

72.77

64.27

13.23%

75.00

-2.97%

54.53

33.45%

538.90

553.40

-2.62%

572.70

-5.90%

329.00

63.80%

2.78

2.93

-5.21%

3.00

-7.24%

1.61

72.63%

CBOT Soybean (cents/bushel)

989.00

1154.50

-14.34%

1186.25

-16.63%

844.25

17.15%

CBOT Corn (cents/bushel)

343.25

369.00

-6.98%

444.00

-22.69%

333.25

3.00%

CBOT CORN

343.25

369.00

-6.98%

444.00

-22.69%

333.25

3.00%

CBOT Soy Meal ($/t)

342.00

401.20

-14.76%

432.50

-20.92%

258.90

32.10%

CBOT Wheat (cents/bushel)

425.75

445.25

-4.38%

533.25

-20.16%

406.50

4.74%

LME Nickel 3 Month ($/t) Comex Silver (S.oz) LME Copper 3 Month ($/t) Nymex Crude Oil (S/bbl) LME Aluminium 3 Month ($/t) ICE Sugar (cents/lb) Comex Gold (S/oz) CBOT Soy Oil (cents/lb)

LIFFE Sugar (S/t) Nymex Natural Gas ($/mmbtu)

Commodities: July Gainers and Losers (%) MCX

NCDEX

Mentha Oil, 14.9% Cotton, 9.4% Nickel, 9.0%

Guar Gum 20.5%

Guar Seed 16.3%

Jeera, 7.9%

Cardamom, 8.0% Zinc, 6.3%

Sugar, 6.8% Cotton Seed Oil Cake, 6.2% Dhaniya, 5.9%

Silver, 4.4% Barley, 3.6%

Lead, 1.7% Copper, 0.9% Gold, 1.1% Aluminum, -3.5%

RM Seed, 2.2% Turmeric, 0.0% Maize, -0.1% Soybean, -1.4%

Natural Gas, -5.1% Crude Oil, -10.4%

Soy Oil, -1.5% Wheat, -3.0%

54 The Finapolis l AUGUST 2016

STAT DOSSIER All figures as on July 22, 2016

NIFTY TOP

Company

July 22, 2016

Cairn India

June 30, 2016

191.90

39.32

169.30

131.95

28.31

Tata Steel

365.45

321.95

13.51

Punjab National Bank

120.20

105.90

13.50

Hindalco Industries

136.00

122.85

10.70

July 22, 2016

June 30, 2016

(%) Change

Bharat Petroleum

583.20

1072.15

-45.60

ITC

249.85

368.40

-32.18

Infosys

1072.45

1170.80

-8.40

Wipro

537.75

556.96

-3.45

Bank of Baroda

150.70

153.95

-2.11

NIFTY MOVEMENT

NIFTY BOTTOM

CNX-MIDCAP MOVEMENT

8700 8400 8100 7800 7500 7200 6900

10%

14450 13950 13450 12950 12450 11950 11450 Oct-15

137.74

Vedanta

Company

Jul-15

(%) Change

Jan-16

Apr-16

Jul-16

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Loss in MCX Crude Oil.

BSE BANKEX

BSE CAPITAL GOODS 18800 17525 16250 14975 13700 12425 11150

22250 21100 19950 18800 17650 16500 15350 Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

DOW JONES

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Oct-15

Jan-16

Apr-16

Jul-16

HANG SENG

18550 18075 17600 17125 16650 16175 15700 Jul-15

Crude oil futures slumped on bleak demand outlook

26190 24875 23560 22245 20930 19615 18300 Oct-15

Jan-16

Apr-16

Jul-16

Jul-15

AUGUST 2016 l The Finapolis

STAT DOSSIER CURRENCY

ENERGY

Rupee Movement

Brent Crude (US$/bbl)

20%

66 60 54 48 42 36 30

68.8 67.9 66.9 66.0 65.1 64.1 63.2 Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

METALS Gold (US$/OZ)

Gain in NCDEX Guar Gum.

Silver (US$/OZ)

1365 1310 1255 1200 1145 1090 1035

Guar Gum futures rallied on export demand and expected decline in acreage

20.50 19.35 18.20 17.05 15.90 14.75 13.60

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

ECONOMY

7.4

7.2

7.9

FII

10-year bond yield (%)

Prior (%)

6.75 6.50

Jan-16

Apr-16

May-16

Jan-16

Feb-16

Dec-15

Mar-16

10600 7100 3600 100 -3400 -6900 -10400 -13900

DII (RHS)

Mentha oil futures surged on improved demand and restricted supplies

RBI Monetary Data

7.88 7.78 7.67 7.57 7.46 7.36 7.25 Oct-15

Oct-15

22500 14500 6500 -1500 -9500 -17500

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

Jul-15

Nov-15

FII vs. MF (Rs cr)

Gain in MCX Mentha oil.

Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16

7.0

Sep-15

Jul-15

Real GDP Growth

Aug-15

May-15

10 8 6 4 2 0 -2 -4 Jun-15

Jun-16

Apr-16

May-16

Feb-16

2.0 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0

6.1

15%

IIP (%) Mar-16

Jan-16

Nov-15

Dec-15

Sep-15

Oct-15

Aug-15

Jun-15

Jul-15

Inflation (%)

Jul-16

Repo

Latest (%)

5.75 6.00

Reverse Repo

21.25 21.00

4.00 4.00

Cash Reserve Ratio

SLR

All figures as on July 22, 2016

56 The Finapolis l AUGUST 2016

STAT DOSSIER Performance of Mutual Funds Equity Diversified Mutual Fund Scheme

ELSS NAV

1 yr 3 yr 5 yr

Mutual Fund Scheme

DSPBR Micro-Cap Fund-Reg(G)

48.70

15.8 46.9 24.6

Reliance Tax Saver (ELSS) Fund(G)

47.64

UTI Transportation & Logistics (G)

93.34

5.6 44.5 27.4

Escorts Tax(G)

Reliance Small Cap Fund(G)

27.96

9.3 44.2 22.5

HSBC Midcap Equity Fund(G)

43.64

6.5

SBI Small & Midcap Fund-Reg(G)

35.26

8.8 41.0 24.9

Sundaram S.M.I.L.E Fund(G)

76.13

41.1 16.4

4.5 40.6

19.1

NAV

1 yr 3 yr 5 yr 30.1

17.0

69.68

19.1 29.2

8.2

Axis LT Equity Fund(G)

32.47

3.1 28.7

20.1

Birla SL Tax Relief '96(G)

23.13

4.3

26.1

15.7

Birla SL Tax Relief'96 Fund- (ELSS U/S 80C of IT ACT)-(G)

23.13

4.3

26.1

15.7

5.3 25.4

15.0

Mirae Asset Emerg BlueChip-Reg(G)

34.86

11.2 39.8 24.5

ICICI Pru LT Equity Fund (Tax Saving)(G)

Canara Rob Emerg Eq Fund-Reg(G)

65.57

5.2 39.6 22.2

Birla SL Tax Plan(G)

29.13

3.8

Franklin India Smaller Cos Fund(G)

45.26

15.1 39.4 25.6

Invesco India Tax Plan(G)

37.51

1.3 24.8

15.4

SBI Magnum MidCap Fund-Reg(G)

67.33

9.2 38.8 23.5

DSPBR Tax Saver Fund-Reg(G)

35.79

6.7 24.7

16.1

UTI Mid Cap Fund(G)

86.03

4.1 38.0 21.3

Franklin India Taxshield(G)

455.11

2.9 24.3

16.4

Kotak Emerging Equity Scheme(G)

29.75

10.9 36.8 20.9

28.31

6.7 23.8

12.9

Birla SL Pure Value Fund(G)

43.19

9.0 36.6 20.1

Principal Tax Saving Fund

149.75

2.5 23.2

15.4

ICICI Pru Midcap Fund(G)

74.00

0.7 36.0 17.6

BNP Paribas LT Equity Fund(G)

31.00

-2.2

23.1

16.5

L&T Midcap Fund-Reg(G)

96.43

7.5 35.5 19.6

IDFC Tax Advt(ELSS) Fund-Reg(G)

40.36

-2.5 22.2

15.3

DSPBR Small & Mid Cap Fund-Reg(G)

41.64

8.7 35.0 17.4

Kotak Tax Saver Scheme(G)

32.69

0.9

21.9

12.2

Reliance Mid & Small Cap Fund(G)

36.56

5.8 34.5 18.4

12.11

-2.4

21.7

12.6

377.87

6.1 34.0 18.7

Birla SL Tax Savings Fund(G)

52.88

3.4

21.7

11.8

75.88

6.5 34.0 21.4

SBI Magnum TaxGain'93-Reg(G)

116.77

-1.2

21.4

14.2

JPMorgan India Mid & Sm Cap Reg(G) 20.49

1.9 33.9 20.5

398.85

-1.1

21.3 10.9

28.51

2.9

21.2

14.7

1 yr 3 yr

5 yr

10.0

27.7

17.7

1.1 22.0

12.1

Sundaram Select Midcap(G) Principal Emerging Bluechip Fund(G)

Escorts High Yield Eq(G)

29.49

12.2 33.6 14.6

41.71

8.9 33.5 20.1

28.83

14.7 33.4 18.7

ICICI Pru Value Discovery Fund(G)

122.65

4.3 33.2 19.7

Tata Mid Cap Growth Fund(G)

105.56

Franklin India Prima Fund(G)

749.74

9.0 32.6 22.0

Kotak Midcap Scheme(G)

59.26

9.8 32.4 17.9

L&T India Value Fund-Reg(G)

27.39

8.1 32.3 19.8

BNP Paribas Mid Cap Fund(G)

27.07

3.3 32.3 22.3

Invesco India Mid Cap Fund(G)

36.41

2.3

HDFC Mid-Cap Oppor Fund(G) Birla SL Small & Midcap Fund(G)

-0.3 33.0

19.1

31.4 19.0

L&T Tax Saver Fund(G)

JM Tax Gain Fund(G)

HDFC TaxSaver(G) HSBC Tax Saver Equity Fund(G)

289.98

-0.2

25.1 16.0

Equity (Banking) Mutual Fund Scheme

NAV

ICICI Pru Banking & Fin Serv (G)

42.63

Reliance Banking Fund(G)

186.81

Invesco India Banking Fund-Ret(G)

37.11

UTI Banking Sector Fund(G)

72.36

Sahara Banking & Financial Services Fund(G)

46.49

Source: karvyvalue.com; Note: All returns are annualized and expressed in percentage; all NAVs as on July 22, 2016

2.2

21.2

12.2

5.8 20.2

10.5

-2.0

17.6

8.6

AUGUST 2016 l The Finapolis

STAT DOSSIER Performance of Mutual Funds Equity (FMCG) Mutual Fund Scheme

Equity (Infrastructure) NAV

SBI FMCG Fund-Reg(G)

84.91

ICICI Pru FMCG Fund(G)

175.92

1 yr 3 yr 5 yr

Mutual Fund Scheme

NAV

1 yr

3 yr

5 yr

14.5 13.0

Kotak Infra & Eco Reform (G)

16.86

6.1

29.9

12.0

L&T Infrastructure Fund-Reg (G)

11.63

0.6

28.6

11.0

Birla SL Infrastructure Fund (G)

27.20

-0.4

26.2

10.8

Invesco India Infrastructure (G)

13.22

-7.4

26.2

9.6

HSBC Infra Equity Fund (G)

17.37

-11.7

24.9

7.6

HDFC Infrastructure Fund (G)

16.23

-3.1

24.8

6.8

Canara Rob Infra Fund-Reg (G)

39.67

0.2

24.8

11.8

Sundaram Infra Advt Fund (G)

26.27

-2.3

23.8

3.2

Taurus Infra Fund-Reg(G)

18.53

-3.6

22.7

7.3

SBI Infra Fund-Reg (G)

12.94

7.8

22.7

7.3

Sahara Infra Fund-Var Pricing (G)

22.26

2.8

22.3

7.0

Tata Infrastructure Fund(G)

45.94

2.2

22.2

7.5

ICICI Pru Infrastructure Fund (G)

41.51

-5.5

20.7

7.3

Sahara Infra Fund-Fix Pricing (G)

20.15

0.8

20.6

5.8

Escorts Infrastructure Fund(G)

6.78

-6.1

20.5

-0.9

9.6

12.4

17.2

Equity (Pharma) Mutual Fund Scheme

NAV

1 yr 3 yr 5 yr

SBI Pharma Fund-Reg(G)

143.27 -0.5 28.0 24.8

Reliance Pharma Fund(G)

141.06

UTI Pharma & Healthcare Fund(G)

94.33

1.4 24.7 19.0 -2.1 20.7

17.7

Equity (Tech) Mutual Fund Scheme

NAV

1 yr 2 yr 3 yr

ICICI Pru Technology Fund(G)

39.54 -4.5

21.5

SBI IT Fund-Reg(G)

45.81

-1.7

18.1

35.29

0.3

17.6

Birla SL New Millennium Fund(G)

17.1

13.1

Balanced Mutual Fund Scheme

MIP 1 yr 3 yr 5 yr

Mutual Fund Scheme

NAV

1 yr 3 yr 5 yr

8.8 25.7

13.8

SBI Magnum Children Benefit Plan

42.31

14.9

18.5

12.6

Escorts Balanced Fund(G)

110.44 10.0 24.8

11.4

SBI Magnum MIP(G)

33.80

10.8

12.0

10.5

HDFC Balanced Fund(G)

117.00

6.6 24.0

14.8

Kotak MIP(G)

26.06

10.8

12.5

10.3

21.05

6.4 22.6

15.4

Birla SL MIP II-Wealth 25(G)

32.89

10.8

16.2

12.4

Tata Balanced Fund (G)

179.75

3.7 22.6

16.1

Birla SL MIP II-Savings 5(G)

29.68 10.4

11.8

10.5

HDFC Prudence Fund (G)

397.98

3.5

22.1

12.5

ICICI Pru MIP 25(G)

33.74

9.8

13.8

11.0

Birla SL Balanced '95 Fund (G)

617.59

7.4

22.1 14.4

59.89

9.4

19.3

14.5

SBI Magnum Balanced Reg (G)

102.49

6.0

21.5

15.4

ICICI Pru Child Care Plan-Study Plan

Franklin India Balanced Fund (G)

98.51

5.4

21.3

14.8

Sundaram MIP-Cons Plan(G)

14.78

9.4

7.8

6.8

Reliance Reg Savings Fund-Balanced Plan(G)

ICICI Pru Regular Income Fund(G)

15.43

9.3

10.1

8.7

43.27

5.5

21.3

13.9

SBI Magnum MIP-Floater Plan(G)

22.80

9.3

12.8

10.8

ICICI Pru Balanced Fund (G)

100.12

6.4

21.3

15.4

Birla SL Monthly Income(G)

58.97

9.2

11.9

9.6

HDFC Children's Gift Fund-Invest

90.05

5.4 20.9

14.3

HDFC Equity Savings Fund(G)

28.77

9.0 10.9

9.2

HDFC Children's Gift Fund-Investment(Lock in)

90.05

5.4 20.9

14.3

BOI AXA Regular Return FundReg(G)

18.02

8.9

11.0

9.3

DSPBR Balanced Fund-Reg (G)

117.67

4.2

20.1

11.7

UTI MIS Adv Plan(G)

34.07

8.8

13.3 10.4

Canara Rob Bal Scheme-Reg (G)

118.80

2.2

19.8

13.7

Franklin India MIP(G)

47.91

8.7

12.6 10.9

ICICI Pru Child Care Plan-Gift Plan

L&T India Prudence Fund-Reg (G)

NAV 112.61

Source: karvyvalue.com; Note: All returns are annualized and expressed in percentage; all NAVs as on July 22, 2016

58 The Finapolis l AUGUST 2016

FUND REPORT CARD L&T Equity Fund-Reg (G)

Scheme Performance as on Jul 22, 2016 Period

Fund Objective/Mission To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities.

Returns

B'mark

Rank

3 Months

10.08

8.96

115/(275)

6 Months

15.35

16.19

175/(271)

1 Year

Fund House Details AMC Name: Website:

L&T Investment Management www.lntmf.com

0.41

0.66 198/(259)

3 Years

20.24

14.93

108/(164)

5 Years

12.56

9.41

97/(154)

Since Inception

18.16

13.71

SIP Details: Invested Rs 5000 Every Month

Financial Details

Period

AUM As On (June 30, 2016) NAV As On (July 22, 2016) Min Investment (in Rs.) Lumpsum SIP NAV (52WeekHigh){August 06, 2015} NAV (52WeekLow){February 29, 2016}

3001.30 64.732 5000 500 64.67 51.99

Total Invest (`)

Scheme (`)

1 Year

Investment Information

60,000

62.670

63,153

3 Years

1,80,000

2,17,174

2,06,630

5 Years

3,00,000

4,32,518

3,99,089

10 Years

6,00,000

1,99,851

9,83,331

Fund Structure

Scheme

Open ended scheme

Launch Date

May 16, 2005

Fund Manager

Soumendra Nath Lahiri

Bench Mark

S&P BSE 200

Max.Entry Load(%)

Max.Exit Load(%)

1.00

Total Stocks

Total Sectors

P/E Ratio

28.31

P/B Ratio

5.74

Avg. Market Cap Rs. On (Jun-2016)

Top 10 Companies Name

Bench mark

1,26,438.11

Volatility Measures Fama

Beta

0.91

Std Dev

0.99

Sharpe

-0.01

Top 10 Sector Wise Holding (%)

Industry Name

(%)

Infosys

6.5



Bank - Private

18.2



HDFC Bank

6.3



IT - Software

10.3



ICICI Bank

5.8



Cement & Construction Materials

9.7



ITC

4.3



Pharmaceuticals & Drugs

7.2



Tata Consultancy Services

3.5



Engineering - Construction

5.1



Larsen & Toubro

3.3



Refineries

5.1



IndusInd Bank

3.2



Cigarettes/Tobacco

4.3



Kotak Mahindra Bank

2.9



Household & Personal Products

3.9



Hindustan Unilever

2.5



Automobile Two & Three Wheelers

3.7



LIC Housing Finance

2.4



Finance - Housing

3.4



5 Years History Financial Year

2015-16

2014-15

2013-14

2012-13

2011-12

NAV in ` (as on 31st March)

57.84

63.38

42.76

35.27

34.10

Net Assets (` Crores.) (as on 31st March)

2783

2876

2044

2186

3315

Returns(%)

-9.75

48.32

20.87

2.97

-6.32

CNX NIFTY Returns(%)

-9.87

26.33

17.53

6.86

-9.11

207/(289)

98/(274)

79/(218)

130/(204)

117/(207)

Category Rank Latest As on 31 March, 16

*Absolute Returns

Source: ACEMF

AUGUST 2016 l The Finapolis

FUND REPORT CARD Birla SL Advantage Fund (G)

Scheme Performance as on July 22, 2016 Period

Fund Objective/Mission To achieve long-term growth at relatively moderate levels of risk through a diversified investment approach, investing 70% in equities and the remaining in debt and money market instrument.

B'mark

Rank

3 Months

11.87

8.96

51/(275)

6 Months

20.93

16.19

39/(271)

1 Year

Fund House Details AMC Name: Website:

Returns

Birla Sunlife Asset Management Company www.birlasunlife.com

7.88

0.66

59/(259)

3 Years

29.55

14.93

40/(164)

5 Years

15.91

9.41

51/(154)

19.09

11.10

Since Inception

SIP Details: Invested Rs 5000 Every Month

Financial Details

Period

AUM As On (June 30, 2016) NAV As On (July 22, 2016) Min Investment (in Rs.) Lumpsum SIP NAV (52WeekHigh){August 19, 2015} NAV (52WeekLow){February 25, 2016}

1256.52 328.76 1000 1000 314.86 252.92

Total Invest (`)

1 Year

Investment Information

Scheme (`)

60,000

64,465

63,153

3 Years

1,80,000

2,40,316

2,06,630

5 Years

3,00,000

4,98,691

3,99,089

10 Years

6,00,000

12,34,428

9,83,331

Fund Structure

Scheme

Open ended scheme

Launch Date

February 24, 1995

Fund Manager

Satyabrata Mohanty

Bench Mark

S&P BSE 200

Max.Entry Load(%)

Max.Exit Load(%)

1.00

Bench mark

Total Stocks

Total Sectors

P/E Ratio

32.90

P/B Ratio

5.56

Avg. Market Cap Rs. On (June-2016)

Top 10 Companies

74,255.21

Volatility Measures Fama

0.03

Beta

0.93

Std Dev

1.07

Sharpe

0.02

Top 10 Sector Wise Holding

Name

(%)

Industry Name

(%)

Yes Bank

6.3

HDFC Bank

5.7



Bank - Private

17.5



Pharmaceuticals & Drugs

8.9



Infosys

5.1



Finance - NBFC

8.4



Hindustan Petroleum Corporation

4.2



Automobile Two & Three Wheelers

8.0



State Bank Of India

4.0



Cement & Construction Materials

8.0



Clearing Corporation Of India

3.5



IT - Software

5.5



Eicher Motors

3.4



Finance - Investment

4.9



Larsen & Toubro

3.4



Refineries

4.2



Natco Pharma

3.3



Bank - Public

4.0



IndusInd Bank

3.3



Miscellaneous

3.9



5 Years History Financial Year

2015-16

2014-15

2013-14

2012-13

2011-12

340.02

355.79

228.20

177.09

170.55

Net Assets (` Crores.) (as on 31st March)

1028

447

310

281

299

Returns(%)

-6.07

56.75

28.71

2.95

-10.63

CNX NIFTY Returns(%)

-9.87

26.33

17.53

6.86

-9.11

112/(289)

62/(274)

20/(218)

131/(203)

190/(214)

NAV in ` (as on 31st March)

Category Rank Latest As on 31 March, 16

*Absolute Returns

Source: ACEMF

60 The Finapolis l AUGUST 2016

ETCETERA Expression Becomes Innovative Emoticons, or emojis are creeping into formal missives as nonverbal communication becomes more prevalent. Two experts discuss the trend

mojis, those little pictographic cartoons that express emotions, have become such an integral part of modern communication that the word itself was officially added to the Merriam-Webster and Oxford dictionaries in 2015. In fact, Oxford Dictionaries chose the emoji of a face crying tears of joy as its word of the year because judges said the symbol “best reflected the ethos, mood and preoccupations of 2015.” Beyond the entertainment factor of sending someone a tiny picture of a cat’s face with heart eyes, emojis are creeping into formal missives as nonverbal communication becomes more prevalent. To discuss this trend, Wharton marketing professor Americus Reed, Luke Stark, a media historian who looks at digital communication and psychology, and Jen Golbeck, director of the Social Intelligence Lab at the University of Maryland, joined the Knowledge@ Wharton show. An edited transcript of the conversation follows.

Knowledge@Wharton:

Can you talk about the importance of emojis to technology companies?

Luke Stark: This is going to be something that you’re going to see even more of in the next five to 10 years. There’s a real interest in collecting emotional data by companies from their users across all sorts of social media platforms — Facebook is one of them. I think you’re going to see lots of new ways to get these symbols into expression.

Knowledge@Wharton:

In some respects, emojis seem like a generational thing. If

you’re under 30, you probably use emojis a lot more than people over 30. But some of the older generations are starting to adopt this more.

Stark: For

sure. I think you’ll remember

those famous smiley-face buttons in the 1970s. I think you can trace a pretty direct line from that graphic to these digital smiley faces. So, it shouldn’t be so unfamiliar to some of the older generation. Just think of that “Have a Nice Day” but-

AUGUST 2016 l The Finapolis

ETCETERA ton. It’s kind of that, but extended out to the world of smartphones.

Knowledge@Wharton:

It is interesting that this becomes such an important business element to a lot of companies in the tech realm.

Jen Golbeck: On one hand, emojis are great

Oxford Dictionaries chose the emoji of a face crying tears of joy as its word of the year because judges said the symbol ‘best reflected the ethos, mood and preoccupations of 2015’

for people in businesses because they allow you to put some emotion and whimsy and clarification into texts that can otherwise be a little ambiguous. If you put a laughing face or a smiley face after some text, it can really convey an emotion that

might otherwise be a little bit vague. Of course, it’s whimsical and kind of funny and wonderful. And when companies do it well, it’s great and it’s a way to connect, especially in social media where people want to feel like they’re having a personal connection. On the other hand, when they do it wrong, it’s just kind of embarrassing and cringe-worthy. If you get someone who’s not really well-versed in that space managing your social media and using them poorly, they can get you some ridicule.

Knowledge@Wharton:

How often are they not being used properly?

Golbeck:

The clearest example was the Hillary Clinton campaign, which probably a year ago [now] sent out a tweet that said, “Explain your student loan debt to us in three emojis or less.” They weren’t actually using them there, but they were calling for them. It just felt like this terrible, fake way of trying to connect with young people that really got her in trouble. All of the responses were ridiculing emojis. If you’re sticking to the smiley face ones, businesses tend to [use them] OK. The real risk comes from mixed meanings. There are studies that show a very large percentage of people have different interpretations of what’s conveyed by emojis. I know I had this problem. There’s one emoji with three green cylinders of different heights that have this kind of almond-shaped yellow thing at the top and some dirt at the bottom. I always thought it was a zombie hand coming out of the ground. It’s actually a Japanese ornamental celebratory plant. I was using it every time I was talking about zombies. I don’t think I offended anybody there, but I’ve seen it used a bunch of times and lots of people agreed with me. If you’re in a business marketing your latest zombie movie and you’re putting Japanese celebratory plants in there, you can be conveying a message that might offend some people or just make you look clueless.

Stark:

I’ll use a certain emoji with my friends in a very different way than I

would maybe with my partner, maybe with my mother — if my mother had a mobile phone. I think some of that is a good feature of this form of communication. But it does make it difficult for businesses to get it right.

Americus Reed: Is there a standardised emoji dictionary that you can go to and have very clear understanding of what these things mean across contexts?

Golbeck: There

are certainly dictionaries online that will give you all the emojis. You can copy and paste them, and it tells you what they are. I was trying to search for the zombie-hand emoji and couldn’t find it. But there’s a lot of them to go through, right? So, you want to make sure if you’re a business that you’ve read that and understand what it is that you’re tweeting. But I don’t think that gets to the interpretation issue.

Stark:

The interpretation is more to do with fonts. Emojis are just characters. Apple has one emoji font. Android has another emoji font. A lot of the miscommunication comes through different fonts for different emojis. Some of them do look quite different. You can have vastly different interpretations of that zombie plant, so it’s hard to tell what it is.

Reed: What

are some examples of excellent uses of emojis in business? And what does the research or data show about what that actually does for the company? Does it simply signal that you’re in the know and can talk to a younger audience? Or does that matter in how people react to the brand, the company, the organisation?

Golbeck: I’ve seen it used well by a range of surprising organisations. I think the one that people have talked about the most is Domino’s where you can tweet them the pizza emoji. You link your account to your phone, you tweet the pizza emoji, you order it. I think that’s just a beautiful use of emojis because it’s fun and funny. At the same time, it lets you do a task. I order Domino’s pizza pretty regularly, and I

62 The Finapolis l AUGUST 2016

ETCETERA have that preset order. If I go to the website, I click two buttons. I’ve used the pizza emoji to tweet at them or message them. NPR [US National Public Radio] does a really good job using emojis. Whoever they have doing their social media on Twitter is clearly someone who uses them a lot. And they use them in the right way. They did a story about how certain biomes that come out in your poop can indicate [the state of] your health. They used the smiling poop emoji, which I didn’t think any business could effectively use.

Knowledge@Wharton: Playing off

what you said about Domino’s, I could see grocery stores using online emoji ordering. The new emojis include bacon, eggs and bread. You could pick up your order by sending emojis to the grocery store, right?

done poorly. Chevrolet has a campaign right now for some car that they’ve just sort of tacked the emoji onto the posters. I agree with Jen that if they’re used well and in context, they can be a really effective marketing tool. But I think if you’re just going to stick them on something, it kind of falls flat. It doesn’t convey the whole context of what those symbols convey.

Knowledge@ Wharton: The non-profit Unicode

That’s right. There’s a lot of fruit and we’re getting a new pancake emoji, so you could definitely order breakfast.

that we’re going a little too far with this?

Stark: Well, you’re never going to be able to order everything through emoji. You’d have too many characters.

Knowledge@Wharton: It seems like a lot of our conversation now is in emoji. Don’t we lose something in terms of not having that face-to-face conversation?

Stark: We definitely do. A lot of

the diversity of conversations on social media are now happening through things with all emojis. They’re happening through these little animated GIFs or other pop-culture savvy technologies that are now in some ways replacing emoji. Emoji is hitting the mainstream, but in terms of the cutting edge of where emotional expression is happening online, they’re actually a little bit passé. I just want to jump on Jen’s point about emoji done well. I’ve seen a lot of emoji

Knowledge@Wharton:

I’ve read there’s going to be an app coming out that will react to the words that you put in a text message. It will read certain words and suggest an emoji for the word. Is that the next level of development?

Stark: It sure is. In fact, some of those technologies have been used by East Asian messaging services like Line It’s a very popular messaging service in Japan and Korea, and they’ve been doing that for a few years now. That’s well underway.

Golbeck:

Knowledge@Wharton: But doesn’t it seem

line. When they make a decision like that, which probably was the right decision given current events, it definitely makes you think about how much impact those companies have on the symbols we use to express ourselves.

The point of emojis is to be Golbeck: That you can tap the word basketquirky and show your ball or pizza and replace it with an emoji creativity. If it’s highlights the risks that come with the corporatised or automated, ‘corporatisation’ of emojis and animated GIFs, which are the more expressive counyou lose that terpart of this that we also see a lot of. Consortium just released 72 new emojis. I don’t know if there was a sense of social awareness within the development of these emojis, but one that they thought about putting out and didn’t was a rifle. This was around the time of the mass shooting at a nightclub in Orlando, Florida, USA.

Stark: They’ve got a handgun and all sorts of weaponry in there, so they might want to take those out. But I think you raise a good point, which is that tech companies like Apple, Facebook and the ones that are part of this consortium have a big impact on the ways we can express ourselves on-

The point of emojis is to be quirky and show your creativity. If it’s corporatised or automated, you lose that. If we go back to the GIFs that Luke brought up, because I think that’s an important element of this conversation, part of the joy of putting an animated GIF as a response to something is showing how creative you can be. But if you’re pulling from Twitter’s preloaded library of animated GIFs, you’re not being very creative. If you’re using some corporately engineered emoji, you’re not really being that creative. And if you just type the word nervous and Apple replaces it with the nervous emoji, you’re not really participating in the creative part of that, which is why we like to use these.

AUGUST 2016 l The Finapolis

ETCETERA So, I think that you’re right. We can carry it too far. Now, there are certainly places where it would be useful, especially if you’re in a character-limited environment where you may want to be replacing words with emojis just for brevity’s sake. But I think that it doesn’t really embrace the spirit of why people love emojis and the animated GIFs so much.

them, she’s going to be part of that culture. I certainly wouldn’t use it. I’m not a fan of the Kardashian media empire, but I could see it working. On the other hand, is that a generalisable business model? I don’t know. I think she works because her brand, her whole persona is social media. If you were to get a media company, whether it’s Disney or whoever, to come along, certainly people would use it. But you’re going to run into a risk of feeling very corporate in an environment that’s designed to feel very personal and authentic. I think that’s kind of risky.

Reed: I am a digital immigrant, so none of this makes any sense to me whatsoever. But this seems to me like a one-trick pony. Once you get through, “OK, we can be kind of whimsical,” there are only so many iterations that you can come up with. Luke was saying look for the next five to 10 years, and I just can’t imagine why this is interesting to people. Of course, I’m not in this target market.

Knowledge@Wharton:

What would be the investment case for making your own set of emojis?

Golbeck: The way I think we’re seeing how

Golbeck: I think that’s a great point. You’re right in a sense. There’s only so much you can do with emojis. I have a good time finding creative ways to use emojis to try to convey some meaning and make a little puzzle out of it, but there’s only so much … you can do.

Stark: People are always going to want to communicate, right? This is the whole point of social media. Part of the genesis of emoji in the first place was about character limits. It was Japanese telephone companies giving their customers, young people who didn’t have a lot of money for their phone bills, a way to communicate more efficiently via pager. You’d buy a pager and have these cute little symbols. I think anything that lets folks communicate their emotions and other things socially is going to do it.

Kim Kardashian has an entire of series of ‘Kimojis’ which have various physical attributes which has 10 characters, with a basketball emoji, you’re giving yourself quite a bit of Twitter real estate in that space. In text messages, where you’re not limited in the number of characters you can use, you do get [to express more] emotions or other cues. If I’m texting my nieces or my husband, I’ll put little heart emojis in there.

Reed:

Jen, when you’re writing a text to somebody and you put an emoji in there, what does that save you in terms of the characters within that text?

What are your thoughts on the branding of celebrities through emojis? I was reading online that Kim Kardashian has an entire of series of ‘Kimojis’, and apparently these are little characters that have various physical attributes.

Golbeck: I was thinking especially on Twit-

Golbeck: On one hand, Kim Kardashian is

ter, where you have [a limit of] 140 characters. If you replace the word basketball,

certainly of social media, right? If anyone is going to have their own emojis and use

Knowledge@Wharton:

businesses are going to use it is something that Twitter is doing now, where they’re allowing custom emojis to go with brands. “The Walking Dead” has this. “Ghostbusters” just had one where if you would type ‘#ghostbusters,’ you’d get their little emoji ghost with the slash through it, which I just thought was brilliant. “Game of Thrones” has this. A lot of shows have it. Getting a little icon to come up alongside it makes your tweet a little bit prettier, and that’s a nice way for companies to engage where they get that one great emoji in there for people who want to use it. It doesn’t feel over-corporatised or forced on you and it is much lighter weight. I suspect that’s the way we’re going to see this go.

Knowledge@Wharton:

Luke, will we see more corporations come out with emojis? Will we see a McDonald’s emoji with the arches in the near future?

Stark: You just might. I think where you’re going to see it is on an app like Snapchat, where companies are already giving you filters so you can make your face into a dog or some other kind of emoji-like form. I think you’re going to see a lot more of that. F

Republished with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.

64 The Finapolis l AUGUST 2016

PERSONAL FINANCE

advisor Every month, the Finapolis connects you with Col. Sanjiv Govila (retd), a personal finance expert who answers your queries related to the world of investments, taxation and financial management. The advisor will diagnose the health of your portfolio and offer advice to improve your finances or solve your problems. Write in to feedback@thefinapolis.com I regularly invest in NSC. However, now I am transferred to North India and people in my hometown are saying that NSC can only be redeemed at same post office from which it is bought. I will not be here for five years. Will I face problem during redemption if I buy now? Please guide. – Kaushal Thomas, Faridabad

Col. Sanjeev Govila (retd) is a Certified Financial Planner and a SEBI Registered Investment Advisor. He is CEO, Hum Fauji Initiatives.

National Savings Certificates (NSCs) need to be submitted to the post office from where they were issued in order to receive the payment due. However, in case the person holding these certificates shifts residence, it may become inconvenient to approach the old post office to collect maturity proceeds. It is a good idea to transfer the certificates to a post office close to the new place of residence. Form NC -32 is the prescribed form using which the investor has to apply for transfer of NSCs from one post office to another. This

form can be downloaded from the India Post website www.indiapost.gov.in. On submission of this form to the post master of the original post office, he will verify the details and send the form to the new post office for transfer of records. Please note that the procedure of transfer of NSCs from one post office to another can be done only if the certificates have not matured. The NSC holder may choose not to transfer the post office, in which case the proceeds may be obtained by him at the new post office but it may take about 1-1.5 months. I am starting family soon. For the child we have already planned that we will have PPF and small SIP plans for child’s education, wedding, and as gift. Is there any other item you can tell for which we should make similar SIP plan? – Reema, Srinagar When investment planning has to be done for a child, typically it is long-term investment generally spanning more than 15 years. While PPF is a good and safe investment which is tax free, the amount that can be invested there is limited at present to Rs 1.5 lakh. The returns are also quite muted. I would recommend you to go in for equity mutual funds since they are ideal investments for the long term. Though they are subject to market risks, in the long term the risks get mitigated and you can get very good tax-free returns. They are also very flexible, in the sense that you can invest a bulk amount or regular SIPs (Systematic Investment Plans) as per your convenience and the amounts can be varied as required. Withdrawal (redemptions) are also very convenient. I would recommend you to take the help of a good financial planner for this

AUGUST 2016 l The Finapolis

PERSONAL FINANCE ADVISOR

purpose who can plan such investments and monitor at regular intervals to give you the best benefits. I am retired and thinking of taking a reverse mortgage. Which banks are good? – Dharampal, Bhagalpur Reverse mortgage is offered by almost every major bank with the PSU banks like PNB, SBI, Union Bank, IDBI, Bank of Baroda, Canara Bank etc being more active in this field. Since the interest rates and terms and conditions keep varying with time, you will have to do a personal research to see which bank’s offering is best suited to you in terms of interest rate, amount being offered, loan period and other terms of the mortgage as of now. For more details, you may see Page 65 of the February 2016 issue of this magazine where the reverse mortgage concept has been discussed in more detail. I applied for loan but the banker says my CIBIL score is less. How to increase this? – Rajshekhar, Hyderabad A full-fledged article on this topic had appeared in this magazine on Page 34 in the February 2016 issue. CIBIL score is based on the past history of the loans taken and the repayment pattern in relation to them. Many people get stuck with a bad credit score/ report due to irregular repayments or credit card company’s mistakes. In order to improve your CIBIL score, a bal-

ance is required to be maintained in your expenses and loan repayments, and it is a continuous process which should be included in your habit. There are seven golden rules to increase your CIBIL score: Repay your loan EMIs on time; Stop applying for fresh credit till your CIBIL score improves so as not to aggravate the problem; Balance out your Debt Portfolio by reducing unsecured loans like credit card and personal loans; Keep a tab on your credit usage; Don’t be a guarantor without a thought; and do a proper final settlement of your previous loan before applying for fresh credit. Please remember that improving CIBIL score is a long-term process and there are no short cuts to it. As a credit history builds up over time, the past excesses also take time to be wiped out. I am salaried employee and every month paying some money into EPF account according to my company. However, my friend who is having EPF is saying he has PPF and NPS also. Now I am confused between PPF and EPF and NPS. Can you please explain which product is working good for me? – Kailash Sane, Kanpur There is no need to be confused between the three products. PPF (Public Provident Fund) and EPF (Employees Provident Fund) serve almost the same purpose. PPF is a Post Office product which is also available through many banks and caters for

all the citizens of the country. It is individually managed. EPF is administered by EPFO (EPF Organisation), a Ministry of Labour, Government of India organisation and is a contributory provident fund (employee as also employer contribute to it) for the workforce engaged in the organised sector of factories, other establishments and offices. EPF also has a small component of pension and insurance investment. Hence, typically, there is no real need for you to have a PPF account if you already have an EPF account. Earlier, managing an EPF account was very difficult but with automation and many investor-friendly features brought in recent times, it has become easy to manage it now. On the other hand, National Pension Scheme (NPS) is a scheme designed to cater only to the pension requirements of citizens from the age of 60 years onwards. It could be a sole-standing scheme where the individual contributes to it completely or could also be used as a contributory scheme by the employee and the employer, if the individual is working in a company or a factory. NPS gives good flexibility to an individual to tailor his portfolio and includes equity (maximum 50%) and debt combination. I suggest you to continue with your EPF and also start with NPS for retirement pension. If your employer agrees to contribute to your NPS account, both get mutually benefitted as both of you get tax benefits for it. F

66 The Finapolis l AUGUST 2016

LEARNING CURVE We all come across issues and ideas related to the world of finance that sound Greek and Latin. Worry not. We are here to guide you through the maze

Mergers & Acquisitions

merger involves the combination of two companies or a case where one entity absorbs the other. An acquisition refers to the complete takeover of one company by another. Indian laws term mergers as amalgamations. However, there is a slight difference. An amalgamation involves dissolving all the companies involved to create a new entity, while in a merger some (usually the smaller ones) lose their identity. Prominent examples that can be recalled include: Satyam Computer Services’ acquisition and subsequent merger by Tech Mahindra for $14 billion in 2009; IDFC Bank’s acquisition of Grama Vidiyal Microfinance. In the first example a pure merger happens after acquisition and formation of a new company. In the above instances, while the first is an acquisition that eventually led to a merger (Satyam was re-branded as Mahindra Satyam), IDFC’s purchase of Grama Vidiyal last month was a pure-play acquisition, wherein the acquired entity becomes a subsidiary of the acquirer; the former does not lose its existence completely.

Besides number crunching, any merger or acquisition also requires the nod of several parties: the board of directors (of all companies involved in the deal), stock exchanges, shareholders, regulators (including the CCI) and a sanction by the High Court.

Impact of M&A deals kets, product lines and raw material and labour resources. ff Eliminating competition. Though regulatory agencies (the Competition Commission in India) strictly control any possibility of a monopoly as a result of an M&A deal, this is always a shadow reason. In recent times, the acquisition of United Spirits Ltd by Diageo Plc. is one of the instances where the Competition Commission took a tough look on such possibilities.

The M&A process?

Some major factors incentivising an M&A deal are: ff Synergies either with respect to marketing, product portfolio, or to rationalise production costs through economies of scale. A classic example is the merger of

Going in for a merger/ acquisition involves intense planning, scanning (potential M&A candidates) and financial evaluation. Valuation may be based on multiple approaches such as: discounted cash flow (to assess the present value of future cash flows), or an earnings-based approach involving indicators such as the target company’s enterprise value, earnings before interest, depreciation, taxes and amortisation (EBIDTA), price—to-earnings ratio and most importantly the company’s earnings per share.

Reliance Petroleum Ltd (RPL) with Reliance Industries Ltd (RIL) (that occurred twice over in 2002 and in 2009). ff Growth for companies not wanting to spend time and resources on capacity expansions or new projects. M&As are a cost-effective option as it gives the controlling company access to newer mar-

Another indicator that is critical for shareholders, especially during a merger, is the swap ratio (exchange ratio). The swap ratio is essential in incentivising shareholders of the target company. In the RIL-RPL merger in 2009, RIL issued 69.2 million new shares to shareholders of RPL in a buyback.

The logic behind M&A

A merger or an acquisition has a multifold impact: on the companies involved, the shareholders, employees, the markets, the economy at large and several others. Of these, shareholders tend to keep an eye on the share prices. While in the run-up to the deal, shareholders of the acquired company benefit from a rise in its stock prices, those belonging to the acquired company make a take a hit in the initial days after the deal as share prices drop. Employees (of the acquired firm) form another constituency that takes an immediate hit post an M&A deal. While those in senior positions may be retained or given greater responsibilities, most junior-level managers and executives may face the pink slip. Lastly, comes the consumer Prima facie, a consumer is not affected much after an M&A deal.

When does an M&A fail? While the objective of any merger or acquisition is long-term success, some may turn out to be bad alliances. Major reasons include lack of interest from owners; resultant financial burdens; poor postdeal valuations, cultural issues, external business environment costly legal impacts (as in the case of Daiichi-Sankyo, which sold out hot potato Ranbaxy to Sun Pharma, unable to handle US FDA sanctions on the former). F

Published on 1st August 2016 Total No. of pages 68, including cover pages

Karvy The Finapolis

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